According to the 2022 American Hospital Association survey, 84% of hospitals report that the cost of complying with insurer policies is increasing.1 Managed care payors are developing more creative strategies to influence the delivery of healthcare. Providers are challenged to keep up with the sheer volume of new policies and frequent policy changes—all of which generally fall outside the scope of the payor-provider contract. The market has also seen a rise in benefit plan designs that include cost-containment requirements. These programs typically focus on a particular service or service line, for which providers must meet a price point—as defined by the payor—to avoid steerage and claim denials. With payors influencing the delivery of care from outside the payor-provider contract, providers must prioritize developing and executing a managed care strategy that positions the organization for sustainable financial health.
The Policy Approach
Providers are all too familiar with the administrative costs of varying policies and processes unique to each managed care payor. Prior authorization requirements, eligibility verification, denial rates, and claims reconciliation can all impact a provider’s bottom line. Payors release policy updates as frequently as monthly. For example, Cigna released over 60 new or modified policies in January 2023—spanning coverage, administration, and payment.2
Unsurprisingly, there is a growing trend in payor policies aimed at steering patient volumes to specific sites of care. However, the details of how these programs operate are not always published information. For example, this year United Healthcare issued a medical policy that greatly restricts Medical Necessity requirements for screening colonoscopies in the hospital outpatient setting.3 The policy document indicates that ambulatory surgery centers are preferred locations for this service unless medical necessity requirements are met for a hospital outpatient setting. In another example, Aetna’s drug infusion site of care policy requires that certain medications be administered in non-hospital outpatient or home care settings rather than hospital outpatient departments.4 In these examples, the specific site of care settings may be approved based on certain criteria; however, they will require specific documentation and prior authorization. In some circumstances, payors are willing and able to negotiate around these established programs.
Benefit Plan Design
Another route payors are taking to circumvent contracted provider networks is to work directly with employers to design benefit plans, aiming to lower costs and steering volumes. Increasingly, there has been a growing trend in payors creating service line-specific programs that overlay existing broad networks. For example, several national payors—Anthem, Cigna, and United Healthcare, to name a few—have developed specialty pharmacy programs that some employers can opt into, requiring patients to obtain certain specialty drugs through a list of select pharmacies to receive medication coverage. Payors typically have protective language in their contracts granting their right to “carve out” services from the broader network with discretion. United Healthcare has further developed the “Designated Diagnostic Provider” program for services like labs and imaging, structured as an overlay on the existing PPO network. Depending on whether an employer group is fully or self-funded, they may choose to utilize these programs as a part of their benefit plans. The programs require providers to apply and meet specified price thresholds; thus, they exist distinctly from the existing contracted networks. In other words, the payor-provider contract is not always enough to be considered an in-network provider. As a result, providers can experience substantial steerage of patient volumes and/or increased claims denials.
A Strategic Response
Payors will continually innovate ways to drive care to lower-cost providers that offer higher value to the health plan. In today’s landscape, healthcare providers must develop both offensive and defensive strategies to protect and increase managed care revenue. Specifically:
- Professionals who manage third-party contracts should be in regular communication with their business office regarding trends in authorizations, claims denials, etc.
- Consideration of participating in these payor programs requires financial modeling to confirm the price parameters and volume shifts result in a favorable financial impact on your organization.
- A proactive managed care strategy is critical to a healthcare organization’s financial health, particularly in today’s inflationary environment.
How FORVIS Can Help
FORVIS’ dedicated payor strategies team helps providers develop a strategic pricing plan for payor contracting focused on key revenue drivers and commoditized services. Support can include rate benchmarking against competitors in the market, the pursuit of value- and risk-based contracts, as well as a managed care assessment.
- 1“Survey: Commercial Health Insurance Practices that Delay Care, Increase Costs Infographic,” aha.org, February 2022.
- 2“Policy Updates January 2023,” cigna.com, effective January 15, 2023.
- 3“Screening Colonoscopy Procedures – Site of Service,” uhcprovider.com, effective January 1, 2023
- 4“Drug Infusion/Injection Site of Care Policy,” aetna.com, as of February 7, 2023.