Tough Talk With Hospitals Ends In Missing Person Report


By Molly Mulebriar

Recently I was asked to assist a speaker in preparing for a talk to be given to an audience of hospital administrators at their annual convention. The topic was “Why You Should Be Prepared For Direct Contracting with Local Employers.” So I wrote the following advice:

The first thing the audience needs to understand is that contracts with providers are unnecessary from a payer’s perspective (especially if you are not allowed to see the contract as is the case with PPO network access agreements). You don’t contract with your local grocery store for food do you? Then why on earth would you do so with a hospital? After all, don’t they list their prices too?

With a market movement away from managed care contracts, more and more employers are benchmarking claims off Medicare rates on a take it or leave it basis. This market phenomenon is growing. 

This statement will be shocking to the audience. They will be dumbfounded, confused, but interested in learning more from the lunatic in front of them. You have hooked them. It’s entertainment time!

This topic (direct contracting) is going to be hard to instill in the minds of the audience after more than 30 years of “managed care.”  They have never left their Ivory Tower. They still wear coats and ties to work. They are completely out of touch with the payer world.

Hospitals need to understand the current mindset of plan sponsors who are more savvy than ever before. Many have done their homework before negotiations even begin. They have a powerful financial incentive to stay in business which means they now realize the cost of health insurance is a major threat to survival. Employers have had enough and are not about to take it anymore.

Direct contracts are beneficial only if the terms are superior to commercial managed care contracts. These direct contracts must include unhindered right of audit, elimination of stop loss outliers, elimination of annual escalator clauses replaced with  multi-year rate guarantees, removal of evergreen clauses, elimination of discounts off egregious chargemaster rates, etc. 

Plan sponsors will want to start the discussion first with “Here is what is on the table, and here is what is not.”  I can assure you this will cut out all the typical bullshit and speed up the discussion either to a very quick ending or a productive result. 

You might want to tell the audience “Here is what won’t work anymore: “You are too small to earn a better deal than we give Blue Cross”……..”Give us your claim history so we can study it”………”We can’t give you better rates than our commercial payers because we were stupid enough to sign Favored Nation Contracts,” ………….”We will give you 65% discount off billed charges!”……..”If you don’t use an existing managed care contract, or if you refuse to accept our offer of a direct agreement, we will not agree to treat your employees and we will go after them for balance billing!”………..

They may hear in response “Ok, that’s fine with me. If you can squeeze the balance of the bill from Joe Sixpack I will run naked through your admissions office with Joe and his seven kids while chanting “How Sweet it is.”

I have not heard back from my friend. The convention ended more than a month ago. His wife is concerned and has filed a missing persons report.