Written by Steve Selbst, CEO and Co-Owner, Healthcents Inc.
It seems like every week the headlines are replete with news of pending mergers of major health insurance companies: “Anthem buys Cigna for $54.2B“, “Aetna buys Humana for $37B“, “United Health has approached Aetna about a takeover“, “Centene announces a $6.8B deal to buy Health Net”.
These are just a few of the recent headlines about possible payer mergers. Consider the impact of the Anthem acquisition of Cigna. If approved by the FTC and various regulation agencies, this merger, alone, will result in over 51 million members being insured by a single commercial payer. That is almost 1 out of every 6 people across the USA!
These mergers not only affect the competitive landscape for beneficiaries and employers but they have potentially major impacts on your payer contracts and provider reimbursement rates. The question is, given the merger news in the headlines, what should you do now about your payer contracts?
First and foremost, do not do nothing! The reason that it is important to be proactive is that, independent of whether or not and when some or all of these mergers are finalized, clearly consolidation is the clear trend among payers. From your standpoint, as a practice, it is important to build certainty into your provider reimbursement rates and terms and reduce risk. It is reasonable to assume that if / when a major merger consummates, the payer will seek business process simplification and streamlining. This means the payer is very likely to consolidate multiple contracts with the same entity / practice into a single payer contract. The timing of this change will be dependent on how quickly the payer modifies its contracts and the duration of the terms of existing contracts. The following 3 steps are recommended immediately:
- Take a complete inventory of your current contracts and identify:
a. Term and termination without cause clauses and notification periods and whether or not those notification periods are anchored to be effective on anniversary dates
b. The payer’s notification requirements with regard to material changes to the contract
c. Benchmark (compare your top revenue-producing codes across your agreements to local Medicare rates and the provider reimbursement rates from all of your other top insurance payers) the term of the agreement
- Identify any agreements which renew in the next 12 months or which may be cancelled or changed in the next 12 months
- Commence payer contracts negotiations to both increase rates on your top codes and, very important, extend the term of the new agreement to be a minimum of 3 years with built-in cost of living increases and, if possible, additional performance bonuses.
It is important to not wait for a merger to happen. Once the merger happens, the payer will likely do its own comparison of agreements and, where possible, terminate the higher provider reimbursement agreement(s) and offer to merge the contracts into the lower reimbursement agreement. By locking in long-term, multiple year, agreements, you will create a steady and predictable revenue stream from your current agreements and, in the future, put yourself in a better position to merge your payer agreements at higher provider reimbursement rates. Also, by waiting, you increase the risk that the payers who are merging will “freeze” negotiations until the merger completes, once the merger and transition is underway. Complacency will not be rewarded in this environment.
In this rapidly evolving reimbursement landscape, you will have taken the positive steps to increase revenue from your current agreements and establish predictable revenue streams to weather the changes ahead. So, why not get started today?
If your practice is being affected by mergers and consolidation in the health insurance industry, contact me for a no-cost 30-minute consultation to review your contracts. You can phone me at 800-499-4970 or sign up online by clicking here. You can also connect with me on LinkedIn by going to www.healthcents.com/steve.