Our Client
An underperforming, $500 million net patient revenue community hospital that initially engaged with Warbird for performance improvement and turnaround.
Warbird Successfully Negotiates Commercial Contract, Nets 3% Operating Margin Impact
A Warbird Healthcare Advisors client partner – the sole hospital for its community in the Southeast – had been offered unacceptable, non-sustainably low Medicaid rates for participation in the payor’s commercial plan through the Health Insurance Exchange.
The payor held the dominant commercial market share, generating 20% of health system revenue across all lines of payor business, including commercial, Affordable Care Act and Medicare Advantage plans. Notably, the payor had never experienced resistance or substantive negotiation from the health system in previous contracting.
This time, the health system was advised by Warbird to reject the offer and embark upon a negotiation to move the rates into an appropriate commercial plan range. Warbird led the negotiation and, with approval from health system leadership, crafted and implemented an effective strategy.
Areas of Focus
Negotiated hospital contracts and owned physician enterprise agreements simultaneously
Examined payor payment performance history and payment avoidance trends
Found agreement in commercial market rate targets, with the client using additional partner data and market knowledge
Updated contract terms to reflect protection from payor payment avoidance
Results
The healthcare provider and payor reached a three-year initial agreement term for both the health system and physician enterprise:
Acute Care
Rate:
Progressed from the initial terms of Medicaid rates, to traditional commercial plan rates in line with the highest-market ACA plans.
The new rates calculate an economic loss avoidance of more than $10.1 million, vs. the original payor offer.
Total revenue improvement expected over the three-year contract term: $5.3 million
Terms:
Achieved a three-year moratorium preventing the use of AI payment avoidance tools
No post-payment audits
Governance management:
Instituted a Quarterly Joint Operating Committee staffed with senior executives of the payor and the health system organization, to cultivate opportunities for strategic and ongoing operations alignment
Developed a monthly Accounts Receivable workgroup to serve as a point of escalation for exploring revenue cycle collections, enabling rapid response and process optimization
Physician Enterprise
Agreed to refresh a multi-product, multi-line of business rates and terms for commercial, Health Insurance Marketplace and Medicare Advantage plans
Moved all rates to market levels in Year One, with rate escalations in Years Two and Three
Conclusion
The Warbird-led negotiations were favorable to both the healthcare provider and payor.
For the health system, the enhanced rates are producing much-needed incremental revenue. Plus, the three-year agreement term will improve revenue predictability and organizational stability, while granting the system additional time to improve revenue cycle performance and implement financial systems and processes capable of addressing underpayments.
For the payor, the negotiation process was an opportunity to reset its relationship with a community’s sole hospital and potentially strengthen its ability to ensure area residents’ access to care.
Seasoned Operators, Proven Results
While insurance companies’ profits soar, health organizations struggle. Major hits to cash reserves and operating margins have frayed the bottom line, and with it, they risk systems’ solvency and viability – and potentially lead to the loss of crucial healthcare services and access.
The situation is undeniably urgent.
But that’s where the expert practitioners of Warbird Healthcare Advisors can step in.
Our teams include experienced healthcare executives who have run managed care functions, negotiated payor contracts and delivered measurable financial results. We bring both the strategy and the operating expertise required to move quickly – from analysis to negotiation to results.
Contact Us Today
C. Ryan Sprinkle, JD
Senior Managing Director | Practice Leader
Strategy & Performance Improvement
