In a constantly changing healthcare reimbursement landscape, practice leaders seek strategies to navigate a managed care environment with a growing national focus on price transparency and cost containment. Managed care negotiations are no longer solely focused on fee-for-service adjustments; they center around publicly available reimbursement terms, quality of care, and perceived market value to drive justifiable rate adjustments. The availability of negotiated pricing data necessitates an increased focus on defensible pricing and a well-defined managed care strategy for care providers.
When paired with structured tax planning, price transparency data and utilization can help achieve competitive market rates, improved financial sustainability, and accurate tax reporting and compliance measures. It is important to note that while price transparency can help drive a higher profit margin on operating activities, the personal tax implications of a higher bottom line must also be considered.
Introduction to Price Transparency
CMS has required the posting of hospital pricing data starting in 2021, and federal law later required payors to publish pricing with all provider types for all services. This includes physician fee schedules that have been negotiated with each payor. Despite the wealth of information available that would render price transparency and provide organizations with key insights to better understand negotiated pricing relative to peers and within their markets, there have been significant challenges with accessing the published payor files for physicians, such as:
- Massive data files
- Economies of scale
- Lack of payor standardization
- Subject matter knowledge
Why Price Transparency Data Matters
Since releasing the payor price transparency files, payors have been actively mining the data to evaluate their network spending compared to peer health plans. Armed with an understanding of their position in the market, payors are utilizing the data to assist with employer benefit conversations and design and identifying and validating price variation among plans that can assist with physician group negotiations. Now that payors are presenting pricing details to many midsize and large physician groups during recent negotiations, provider organizations need to engage with the data to proactively define a payor strategy prior to those discussions.
In addition, using this data can offer physician leaders valuable insights when considering areas of market and specialty-based growth. By better understanding how payors value and price certain services, and the variation among markets, organizational leaders can compare markets of interest and better plan for return on investment (ROI) when considering expansion.
Success with negotiating reimbursement rates may allow a practice to realize increased revenue, allowing them to more easily consider growth, expansion, or large equipment purchases without relying on outside debt. However, keep in mind that borrowing funds to pursue these business ventures still may make the most sense. Some lenders require personal guarantees, so having a more robust cash flow may eliminate this need.
Moreover, with higher revenue, practices can afford to compensate their providers more, which can help boost their success with physician recruitment. Additional revenue generally means more tax, but proper planning could allow the practice to implement tax-saving strategies to limit liability, such as accelerated depreciation methods, bonus payroll, and retirement funding, to name a few.
Alternatively, available data may shed light on areas of risk. If a practice identifies getting paid more from a specific payor than its peers in the same market and specialty, practice leaders can plan for a potential clawback, which can help limit the impact on their cash flow.
In the end, having access to price transparency data and utilizing it to the practice’s benefit can allow physicians to continue doing what they do best—helping people—while helping to ensure they are reimbursed for it at a fair rate.
What’s Next
Physician practices should be prepared to:
- Answer these key questions:
- When was the last time we evaluated our managed care agreements?
- How does my organization’s payor pricing compare to peers?
- Have I evaluated any opportunities or risks associated with my payor agreements?
- Have I developed a proactive payor contracting strategy?
- Navigate market pressures through the development of defensible pricing strategies.
- Evaluate organizational ability to enter value-focused reimbursement models requiring differentiation to earn improved revenue opportunities through a combination of quality metrics, price, patient satisfaction, and outcomes.
If your practice has questions or needs assistance with any of these next steps, please contact a professional at Forvis Mazars.