Abby Burns (00:02): From Advisory Board, we are bringing you a Radio Advisory, your weekly download on how to untangle healthcare's most pressing challenges. I'm Abby Burns. (00:10): The relationship between payers and providers has always included an element of friction. Even though both stakeholders have the same moral end goal of improving people's health, their incentives in a lot of cases are diametrically opposed, and that's by design. It's one of healthcare's versions of checks and balances. Friction isn't necessarily bad, but lately it seems like the friction is escalating more toward conflict and it's impacting the way these stakeholders run their businesses, which in turn impacts everyone else. (00:42): To unpack why this is happening and start to uncover ways both payers and providers can take steps to mend their relationships, I've invited Advisory Board experts, Max Hakanson and Eileen Fennell. Max, Eileen, good morning. Max Hakanson (00:55): Good morning. Eileen Fennell (00:55): Good morning. Abby Burns (00:56): You two are here to talk about kind of a touchy subject, so I want to thank you for being here. I also want to thank you for representing your larger teams who seem to have offered the two of you up on a platter to talk about one of the challenges in healthcare that feels stickiest, and that's this issue of persistent increasingly antagonistic friction between payers and providers. (01:22): I should also say from the get-go that each of you are here with a different stakeholder hat on. So, Advisory Board is nonpartisan by all definitions and we work with and we serve both payers and providers, amongst others. Can you share which teams are you coming from? Which hats are you wearing today? Eileen Fennell (01:39): I am wearing our provider hat, so I'm going to be talking about all of the things that providers want in a payer partner and some of the problems why they're not getting it. Max Hakanson (01:49): And I'll be wearing the plan hat today as I work with health plans across the country. So, that is my main stakeholder to represent. Abby Burns (01:56): Awesome. I'm glad you could both be here for the conversation. I'm glad we're representing both perspectives equally. (02:02): So, this relationship tension that we're talking about, it isn't new by any stretch, but on average, it does feel like it's been getting meaningfully worse over the past 6, 12, 18 months or so. Is that just me? Is that perception accurate? Why does it feel like this? Max Hakanson (02:22): Abby, I'm glad you called out that this is not a new problem, because frictions between plans and providers are a longstanding issue and really at the heart of the problem is misaligned incentives. But you're right, things are worse now, full stop. Public contracting disputes increased 69% between 2022 and 2023. Abby Burns (02:43): Whoa. Max Hakanson (02:43): And I've really never seen this much tension between the two stakeholders. But let's talk a little bit about why it's such a problem in this very moment. Abby Burns (02:52): Yeah. Max Hakanson (02:53): Both sides are going to point fingers at each other and when we've talked to them, they certainly do, but there's not one single cause of these elevated tensions. Really, the true cause of the greater abrasion is a confluence of factors really impacting providers right now. I'd specifically say COVID disruptions, staffing shortages, squeezed margins, and then a changing payer mix, while at the same time health plans continue to use the same utilization management tools they've been using. (03:25): For example, we're seeing a lot of staff turnover at health systems right now, so there's newer, less experienced folks who are in charge of submitting claims and attaching all the correct medical documentation, which is leading to a lot more initial errors and a lot more claims being denied due to missing information. Abby Burns (03:41): Yeah. Eileen Fennell (03:43): Yeah. And Abby, I want to double down on how a lot of those factors Max mentioned are impacting providers a lot more than plans. There's a very clear asymmetry, a lopsidedness in the urgency to fix these abrasions. It's really hitting providers' bottom lines. It's a little more complicated to have payers see what the urgency to act here is. Abby Burns (04:06): I'm also mindful that we are speaking in generalities, right? Providers feel X, plans think Y or Z. How broad a brush can we realistically paint here and how do we know? Eileen Fennell (04:21): So, I will say this is a bigger national trend. I think we've all seen a lot of new headlines over the past year on contract disputes and that can be a sign of those frictions, but there are some nuances. It may hit some smaller regional plans a little bit harder than bigger national plans, just because those smaller plans tend to stake a lot of their reputation on having a good relationship with their providers. Abby Burns (04:49): So, it's not necessarily one universal experience, and I think this is where some of your research comes in, right? Which is trying to understand what is the variable experience? Why? What can we do to make it better? Max, where do you start with something like that? Max Hakanson (05:03): Yeah, that's a great question and as most of our audience probably knows Advisory Board's primary way of doing research, our primary research methodology is qualitative interviews with all the different stakeholders we're talking about. Thus far, we've spoken to about 20 different plans, providers, and rev cycle leaders to really better understand what the frictions are that they're dealing with and how we can address some of them. (05:27): I want to start with the first question we're asking on every call, and that is to grade the relationship you have with the other party from A to F. So, for providers, we're asking them to put a letter grade on their plan partners and for plans we're asking them to put a letter grade on their provider partners. Abby Burns (05:44): I love that methodology. What are you hearing at this point? Max Hakanson (05:50): It's almost like clockwork. Every time we're talking to providers, they say something along the lines of, "Well, it depends on which plan you're talking about. I'd give my local Blues plan maybe an A-minus or a B-plus, but I'd give," insert large national plan here, "a D or an F." But when they give an overall average, if they have to, it's probably around a C. Where plans on the other hand, when you ask them to give their providers an overall grade, it tends to be a little bit higher, more in that B range, but they say it varies from provider to provider as well. Abby Burns (06:26): Okay. So, there is nuance even within a given organization in terms of the different plans or providers that they work with. I do want to dig into some of the specific factors that might push organizations toward A or toward F in a little bit, but you mentioned this idea of national versus local. Are there any other overarching factors that distinguish partners that rate out high or rate out low? Eileen Fennell (06:50): Honestly, the biggest thing that we've heard is that it's about effort. There hasn't really been anything besides, "I have a problem and I really want you to listen to it." Or, "Just tell me you understand." Or, "You may not have a solution, but at least you're listening to me and you're not scheduling time that you don't have any new information for me, but it's just a waste of time." Max Hakanson (07:16): One thing to add there, it seems like providers just want to be heard. They want to feel like their plan partners are listening to them, understanding their challenges. It reminds me of the old saying, we've probably all heard when we were kids, it's the thought that counts. Abby Burns (07:30): Yeah. Max Hakanson (07:30): I'm sure around the holiday season we all got a pair of ugly socks from your aunt and your parents said, "Well, it's the thought that counts." That same message here applies and it's something that plans can take away and really start doing immediately right after they listen to this podcast. Just call your plan partners, listen to them, understand their challenges. Even if you can't address them immediately, just knowing that you're listening to them makes them feel better about the relationship with you. Abby Burns (07:57): I have to say, I'm surprised by how soft that factor feels, and maybe I shouldn't be because it's almost conventional wisdom at this point that doctors that are nicer, doctors that spend more time talking to their patients are less likely to get sued. So, it makes sense that the same fundamental psychology applies when we look at an organizational level. (08:20): Okay. So, we have a pretty good grip on status quo. Right? Relationships are definitely tense. They are becoming more contentious over time. We're not imagining that. But not every payer-provider relationship is the exact same. There are a few topics though that even someone just casually reading the headlines would say at least seem to be common flash points here. What rises to the top of that list for you? Eileen Fennell (08:47): Yeah. I think one of the big ones Max mentioned earlier, it's that payer shift from traditional Medicare to Medicare Advantage. Abby Burns (08:53): That's exactly where my head went. Eileen Fennell (08:54): Yeah. MA requires a lot more administrative work for providers to get paid than traditional Medicare with its very regimented payment structure. And as more and more of these older adults which continue to age into Medicare, are choosing Medicare Advantage, it's just adding more and more administrative burden for providers. Abby Burns (09:18): I think it's worth pointing out, that is detrimental to the payer-provider relationship. It's also having a direct impact on patients. Right? Because I think it's over a dozen at this point, hospitals or health systems, have gone out of network with at least one MA plan, if not all MA plans in their market. Is that right? Eileen Fennell (09:35): Yeah. It is very difficult and a lot of times providers are caught in the middle because they want to be able to care for their patients and they want to be able to be that advocate for them. But if they're really not having that great relationship and do end up terminating or letting a contract expire, then they are going to hear about it. Abby Burns (09:54): Okay. So, that feels like a pretty macro level, market level challenge. That's actually pretty difficult to get our hands around. MA is also relatively newer to this list of flashpoints between payers and providers. I think for a lot of people, they could fairly assume that payer-provider attention actually just starts and ends with claims denials in prior auth. I think that's one we've been hearing about for a really long time. Max, what's your read here? Is that another one? Max Hakanson (10:23): Oh, no question about it. You can't have a phone call with providers these days and not hear about claims denials in prior auth. Eileen Fennell (10:29): Every time. Every time. Max Hakanson (10:31): Absolutely one of their biggest challenges these days and pain points they point to, and there's good reason. We know denials rose to 11% of all claims in 2022. Abby Burns (10:40): Wow. Max Hakanson (10:41): Which was up three percentage points from 2021. And even though the admin costs of handling prior authing claims is greater for providers, we know both parties do have money on the line here. Optum conducted a survey in the summer of 2023 of both plan execs and provider execs, and they found that claims denials cost providers $79 on average per denied claim and cost plans on average $62 per denied claims. (11:11): So, it is costing both sides money and if they work together to reduce this administrative burden associated with denials, then both sides would have resources freed up to say, make investments in clinical programs or make investments in tech to better support the members and patients they serve. So, they both have money on the line here. Abby Burns (11:31): It's also interesting to hear those numbers, Max, $79, $62. When you think about a provider might be submitting a claim to be reimbursed less than, for less than $79. So, you could end up net losing money in addition to the denial. Max Hakanson (11:46): And it's worth pointing out that you don't have to deny everything. They aren't denying every claim that comes in. If it is denied, there are buckets of money that they are probably losing out on because they don't want to go through that cost of submitting that claim again and potentially getting denied. Abby Burns (12:03): Yep. Eileen Fennell (12:05): Or, they just don't have the staff to support that, which is another thing we hear a lot. Abby Burns (12:09): Right. Usually when we're talking about workforce shortages or workforce crisis, we're thinking of nurses, we're thinking of maybe even physicians, but we're seeing the same trends extend to something like rev cycle. (12:20): I do think it seems like there's a lot of activity around trying to streamline the prior auth process. We've seen headlines from pretty much every large national payer at this point, touting an effort to improve prior auth. It also seems like a place where AI and generative AI is leaning in to try and address the problem. Max Hakanson (12:41): Absolutely. We know AI is a huge concern right now and is obviously in the public eye. It's not really where we're taking this research at the moment because it is such a large category and we don't have the resources to necessarily focus on it right now, but we do have other teams at Advisory Board really digging into that at the moment. Abby Burns (13:00): Let's see if we can get our director of digital health research on the line. Ty, are you there? Ty Aderhold (13:10): Yes. Hey, Abby. Glad to talk. Abby Burns (13:12): Ty, we're talking about the role of claims denials in prior auth in contributing to abrasion between payers and providers. And it strikes me that there are literally thousands of digital health companies in the market that are aiming to use AI and generative AI to solve both problems. (13:30): We wanted to get your take as director of digital health research for Advisory Board. Are these tools going to be the great mitigators of claims denials in prior auth? Ty Aderhold (13:42): It's a good question, Abby. I think, right now I would say we are seeing these tools be helpful to providers and to plans without really solving any of the tensions that exist, any of those fundamental tensions. The reason being is they're much more likely to use this technology to solve their own respective problems rather than the abrasion issues. Abby Burns (14:11): It makes sense when you think about it, right? Because you think about who's actually purchasing the technology. It would be the plan purchasing the technology to address their challenges, the provider doing the same thing, rather than an altruistic third party that is empowered to somehow solve the abrasion points between them. Ty Aderhold (14:29): We're seeing vendors pop up that are offering tools that help providers interact with specific plan partners. So, you're seeing these very specific detailed offerings designed to, and the pitch is that we can increase your revenue by 10, 20% just because we know how to work with this specific plan that you're interacting with, and improve your coding, reduce your denials, all those factors. (15:01): So, it's very targeted use of these tools, but you can see how the use of a tool like that isn't necessarily solving the fundamental tensions here. It's just helping one side or the other side have a little bit better financial performance or solve their own individual challenges. Abby Burns (15:20): Yeah. I also imagine if a given provider works with 10, 15 plans, do they need a point solution for every single plan they work with? It starts to feel a little bit unrealistic, including where is the money coming from to purchase those solutions? (15:34): So, if we actually risk exacerbating the problem rather than alleviating it, is the right answer for the industry to stop using AI here or are there still some benefits? Ty Aderhold (15:47): I think there's two reasons, I would say, we can still look to AI as a potential solution here. The first is that in the short term, this is solving some of those overhead challenges. I know Max probably touched on those challenges earlier, but there is a real cost for both providers and for plans in just the staff and the time that it takes to go through a dispute. And so, if you can speed up that process, that's a short-term benefit. (16:20): I think where my mind goes, and I think the real reason we should still be looking to AI here is that there is a long-term future where something like precision medicine and other predictive analytics gets us to a point where perhaps there's data and outcomes connected data that plans and providers can agree on, that reduce the number of medical disputes that are happening, reduce the amount of the tension that exists between whether something is medically necessary or not. Abby Burns (17:01): Got it. So, some short-term gains, some long-term gains. It's not going to solve all of our problems. It's not going to eliminate payer-provider abrasion, but there are still reasons for optimism, essentially. Ty Aderhold (17:12): I would definitely say reasons for optimism, but I think if we think about 2024, there is not going to be a significant solving of these tensions with AI technology. Abby Burns (17:26): Thanks, Ty. (18:35): Max, Eileen, as we've been talking, there's another topic that has been floating around my mind as a potential opportunity to improve alignment between payers and providers. (18:46): I'm guessing you know where I'm going with this, especially you, Eileen, based on your research. Prior auth feels like a fee-for-service challenge. One of the main reasons VBC, value-based care, is attractive is that at least in theory, it aligns incentives across payers and providers. Should organizations be looking at value-based care as a solution here? Eileen Fennell (19:08): Abby, that is a great question and one that we have been asking on our interviews. And our hypothesis was absolutely VBC is a shared goal. It should get people at least to gather to maybe group around ... Just have something to talk about that could maybe help to ease frictions. Abby Burns (19:28): Yep. Eileen Fennell (19:29): But what we found is actually no, not really. Abby Burns (19:34): Interesting. Okay, why not? Eileen Fennell (19:36): So, I think part of it is that not every provider is in the same place in the transition to VBC, and that's totally fine. Not everyone wants to or should make that push towards more risk, but I think also it's such an individual thing. Fee-for-service and VBC are both payment mechanisms. You're both still working with a variety of payers. It's just a different way of paying for care. So, it actually doesn't have as much of an impact as we thought it was going to. Abby Burns (20:15): Okay, so no silver bullet on the value-based care front either? Eileen Fennell (20:19): No, unfortunately, no silver bullet there. Abby Burns (20:22): Okay. So, we have hit some of the key flashpoints, MA, prior auth claim denials. We know that we are not likely to find sweeping end all, be all solutions. What that tells me is we're going to be looking for a little bit more incremental progress here, right? It does mean individual organization's behaviors are really consequential in improving this issue of payer-provider abrasion, which brings us back to your research methodology of having payers and providers rate their partners out on a scale of A to F. (20:56): What have you learned from interviewees about what makes for a better payer or provider partner and some of the tactical ways that organizations can act differently to move closer toward A? Eileen Fennell (21:08): Yeah. So, I can start with the what providers want angle. And I will also say that what we've been asking in our interviews is, what makes an ideal partner? So, in an ideal world, which doesn't necessarily exist, but there's always compromise somewhere, but in an ideal world, I think the first thing that providers want involves contracting, good rates basically are table stakes, but they feel like the goalposts are constantly moving. So, even in a contract that they think has good rates, there's medical policy changes that come into play that impact how they're doing. Something that providers say they want is mutual accountability for performance, and financial consistency. They want payers to be graded like a scorecard, like they do for quality. Abby Burns (22:06): So, they want, essentially, contracts that evaluate payer and provider performance a little bit more equally? Eileen Fennell (22:12): Yeah. Absolutely. Abby Burns (22:14): All right. Contracts. What else? Eileen Fennell (22:16): The second thing is submitting claims. One of the things that I know Max will probably talk about is that payers will want claims submitted correctly. Providers want to know how they can submit those claims correctly. They feel like there's so many things that are changing, so many different pieces they need to include when they submit their claims, that they're really not able to keep up with it. They also, we've talked about already, there's a workforce shortage. There's a lot of turnover. It's very difficult for them to understand the requirements of a claim submission. Abby Burns (22:51): Yeah. Introducing the experience complexity gap into rev cycle, essentially. Eileen Fennell (22:56): Yes, exactly. Abby Burns (22:57): Okay. We've got contracts, claim submissions. Are there other big categories where providers want plans to act differently? Eileen Fennell (23:05): Yes, there's a couple more. I think one of the big ones that we haven't quite touched on yet is data sharing. Abby Burns (23:10): I was waiting for you to say that. Eileen Fennell (23:12): Yeah. So, a lot of times, data from payers to providers is often months behind and they get data from payers, we've heard, in Excel or even on paper, if you can believe it. Abby Burns (23:24): The fax machine. Eileen Fennell (23:25): Which makes it very difficult for them to go through and analyze and pull out insights from their data to see where they can improve, what do they need to change for quality metrics or anything. Even if they do find it from all of that big chunk of Excel sheet, sometimes they get it too late to even do anything about it. (23:46): And then the last piece is something that we've already touched on. Max was talking about it earlier. It's the thought that counts. Providers often feel like they're a means to an end rather than a partner, and they want their concerns heard. Again, even if there's not a solution to that, they just want to be heard. Abby Burns (24:04): This is a two-way street, right? It seems like providers are feeling the brunt of the challenges here, but they do still need to play an active role in improving the state of their relationships with plans. So Max, what do payers want to see in their provider partners? Max Hakanson (24:22): And before we jump into that, I want to add something to that value-based care conversation. Abby Burns (24:27): Sure. Max Hakanson (24:28): Once providers have dollars on the line, they quickly start to realize the value of a lot of the utilization management tools plans have been utilizing. So, I think it's a common misconception that providers that take on risk would no longer need these tools. That's simply not the case. A lot of these things like prior auth are necessary. Abby Burns (24:48): It feels similar to what Eileen was saying about providers want to feel like they are understood and respected by their plan partners. It feels like the corollary to that. What else do payers want to see from their provider partners? Max Hakanson (25:02): Yeah. Let's start with a big one. Plans want providers that submit claims accurately and in a timely manner. We already talked about the administrative costs of claims denials for both parties, but one thing this is really going to help plans with is getting member data back quicker. Rather than having to wait three or six months if claims are submitted late, they're going to get that member data back much faster. This is also going to help providers though as well. (25:30): Now, I know it's easier said than done to submit claims accurately and in a timely manner, but one way providers can think about improving on this is by making those investments in new staff or existing staff development. We know that tight budgets have really constricted organizations' ability to fund these administrative roles over the last few years. However, the ROI on these staffing efforts is really worth the investment when you think about collecting claims dollars for the services you provide is really your main source of revenue as a provider. Abby Burns (26:04): I'm going to jump in for a second. We know that across the last few weeks due to the attacks on Change Healthcare systems, organizations are experiencing some major outages affecting claim submissions and adjudications. We're not going to get into it in this episode, but if you want more information about what's happening, including the latest updates, I've included a link in the show notes. (26:24): It strikes me that the answers you all both just gave, there's actually a lot of overlap across them. You're talking about making it easier to submit claims and you're talking about submitting claims accurately. Are there any others? Max Hakanson (26:35): There are definitely several other things, but one big one is data infrastructure and having processes in place to share close to real-time data back to the payer. This is absolutely something plans want. It's going to help them close those member care gaps, but it's also going to make providers lives easier as well, such as making the claims approval process easier and faster. And this can be a shared area of investment because we know both plans and providers have so much to gain from this. Abby Burns (27:04): Right. It's another area of overlap. Max Hakanson (27:07): Absolutely. Abby Burns (27:08): So, we've hit some of the tactical things that plans and providers can do, but habits are really born out of mindsets. What I'm hearing from you all is we want payers, we want providers to be approaching their relationships a little bit differently. (27:22): To be honest, it does seem like payers hold more of the cards in this relationship. Eileen, how do we want them to think differently? What is your message to the health plan leaders listening right now? Eileen Fennell (27:34): Yeah, you're absolutely right, the urgency for payers to act here is lopsided, but I think there's also a lot of important reasons that they should change and really prioritize payer-provider relationships. There's first the goodwill argument where if it's in your mission statement, you should probably do it. But I think also as time goes on, providers will have more choice in who they want to work with. We've seen this already with contracting disputes. They'll create a preferred list of who they want to work with, and you don't want to be caught on the outside. Right? (28:12): There's also the added benefit of if you do have a good relationship, you can work more on your strategic goals like value-based care or care management, things like that. Abby Burns (28:21): Max, what about the providers listening, how should they think differently here? Max Hakanson (28:25): The big thing we want providers to take away from this research is that they have more agency to create change than they realize. Some of the providers we talked with make it seem like there's really little they can do to improve their relationship with plans, and they really just point fingers at the plans as the ones to fix things. And while I'm not saying plans don't have a large role to play here, providers do have tools at their disposal to drive change. They have the carrot or the stick approach. Those are really the two options for them. (28:55): The carrot approach would be give plans what they want and you'll get something in return. The stick approach would be finding your underutilized leverage, such as payer network adequacy requirements, and use those to drive change through your contracting. Abby Burns (29:10): Okay. So, payers should feel urgency. Providers should feel agency. With that as a foundation, what is next for your research? Eileen Fennell (29:22): We really next want to dive into what are some solutions here? How can these relationships be improved on both sides? So, we're going to look into the future of utilization management, diving deeper into how payers and providers can reduce those common friction points. Abby Burns (29:40): Excellent. So, lots more to come from the payer and provider research teams. Eileen Fennell (29:44): Oh, yes. Keep an eye out. Abby Burns (29:45): Awesome. Max, Eileen, thank you for coming on Radio Advisory. Max Hakanson (29:49): Thanks for having us. Eileen Fennell (29:50): Thanks for having us. Abby Burns (29:57): The friction between payers and providers is not going to magically disappear. Even though the flashpoints that we talked about today are fanning the flames here, the rise in temperature really comes from the disconnect between providers and payers experiences in the wake of the pandemic. (30:12): The abrasion is happening on both sides, which means both sides have to make compromises, find shared areas of value, which do in fact exist. Be willing to share data and be transparent, and sometimes even doing something as simple as listening can help move the needle. This is hard. Remember, as always, we're here to help. (30:49): If you like Radio Advisory, please share it with your networks, subscribe wherever you get your podcasts and leave a rating and a review. Radio Advisory is a production of Advisory Board. (30:57): This episode was produced by me, Abby Burns, as well as Rae Woods, Kristin Myers, and Atticus Raasch. The episode was edited by Katy Anderson with technical support provided by Dan Tayag, Chris Phelps, and Joe Shrum. Additional support was provided by Carson Sisk, Leanne Elston, and Erin Collins. We'll see you next week.