Jackie Selby Featured in “COVID-19 and Payer Contract Negotiations: 5 Trends to Watch”Becker’s Hospital CFO Report May 19, 2020
Jackie Selby, Member of the Firm in the Health Care & Life Sciences practice, in the firm’s New York office, was quoted in Becker’s Hospital CFO Report, in “COVID-19 and Payer Contract Negotiations: 5 Trends to Watch,” by Morgan Haefner. The article features Ms. Selby’s analysis of COVID-19’s possible effects on payer-provider contract negotiations.
Following is an excerpt:
When commercial payers and providers come to the negotiating table this year, they will do so during a pandemic. The unprecedented financial and public health challenges payers and providers face will, in turn, affect the types of agreements they strike. …
Here are five trends that may affect payer-provider contract negotiations given the COVID-19 pandemic:
1. New contracts may be seen as a way for providers to shore up lost revenue. Though it’s a case-by-case basis, providers so far are bearing the brunt of financial pressure brought on by COVID-19. In comparison, first-quarter results from large national insurers indicate COVID-19 isn’t having a significant material effect on finances as claims for elective and preventive services drop. To make up lost revenue, providers may be looking to improve their financial footing through their negotiated contracts with payers, according to Ms. Selby.
2. “Force majeure clauses” and other protections could be a part of talks. Force majeure clauses are an old legal concept saying a party or both parties in a contract may be excused from performing obligations outlined in the contract if an unforeseen circumstance makes it impossible or impractical to do so. Force majeure clauses only work when events are unforeseen, and wouldn’t apply to COVID-19 in current negotiations. However, Ms. Selby said providers may give more thought to how to protect themselves in the future. Some may address pandemics directly and outline that in the case of a future pandemic, a payer must expedite payments or waive prior authorizations, for example.
3. Greater protections around shared savings may make their way into value-based agreements. In upside-only risk payment arrangements, providers get to share in savings if spending comes in below a threshold. Providers in upside-only risk agreements may actually see a bigger payout this year because of how many services COVID-19 deferred.
However, most shared savings contracts have quality thresholds that have to be met before a provider can share in the savings. Quality thresholds may include meeting a certain amount of cancer screenings or preventive services for a population. But because most of these services have been delayed due to COVID-19, providers may have trouble demonstrating they’ve met the quality thresholds necessary to share in savings, Ms. Selby said. CMS has waived quality reporting requirements for some shared savings models during the COVID-19 emergency, but it’s not a standard across the national payer landscape.
“If I were a large health system or any provider that could be seeing real savings opportunities, I would ask [payers] to waive quality reporting and thresholds during this emergency period. That seems like a fair ask,” Ms. Selby said.
4. Downside risk waivers could be coming. In downside risk or loss sharing payment agreements, providers get to share in savings if spending comes in below a threshold, but have to pay a health plan if spending goes above that target. CMS has said providers in downside risk agreements like ACOs and alternative payment models won’t be responsible for COVID-19-related claims, but some providers don’t think that stipulation goes far enough.
Ms. Selby said waivers could come that would waive downside risk altogether in this year’s contracts. Still, Ms. Selby said providers may not see much downside risk to share in this year, as most agreements seem to be seeing overall medical cost savings due to deferred services.
5. Providers will have to prepare for reimbursement shifts from commercial to government and exchange plans. The shift from commercial insurance to government insurance will significantly affect future payer arrangements. As Americans deal with rising unemployment and lost employer-sponsored health plans, many will end up on Medicaid, the ACA exchange or become uninsured. This will cause a big shift from higher reimbursement contracts to lower reimbursement arrangements and affect future agreements for years, Ms. Selby said.