The post The New Reality Of Hospital-Payer Contracts: How Baptist Health Negotiated With Florida Blue appeared first on Above the Law.
Healthcare providers and insurers have long had a tense, often adversarial relationship — and the contract negotiation process between these two players has grown more complex than ever before, according to one health system CEO.
Michael Mayo — CEO of Jacksonville, Florida-based Baptist Health — spoke about how his health system navigated a recent protracted negotiation with Florida Blue during an interview last week at the ViVE conference in Nashville. The process required months of preparation, external consultants, and even a task force of board members, he said.
The final result was a successful deal — but the journey to get there underscored just how much the dynamics between hospitals and insurers have shifted.
Starting near the beginning of 2024, Baptist began drawing up preliminary financial assessments of what things would look like five years down the road based on Florida Blue’s reimbursement rates at the time, Mayo explained.
Shortly after this work began, Baptist knew it had to hire an external consulting firm to come up with a plan, he said.
“We looked at how they were reimbursing facilities in the other part of the state, and we determined that our system was reimbursed almost 40% below the lowest in our market. So we also hired an outside professional communications firm. And that’s all they do — work on behalf of the providers in these negotiations,” he declared.
To be successful in its contract negotiation process, Baptist had to assemble a dedicated team, Mayo stated. This also included a “task force” of board members that helped Baptist build its case to bring to the table with Florida Blue, he said.
With that team in place, Baptist began structuring its case for higher rates. The health system notified Florida Blue “well in advance” about its intention to go-out-of-network if certain requirements could not be met, Mayo remarked.
This couldn’t have been much of a surprise for Florida Blue, he noted. In the past few years, Baptist had dropped Florida Blue as its pharmacy benefit manager and third-party administrator, Mayo stated.
“That was kind of a prelude. I mean, you can’t say, ‘I didn’t see this coming,’ because we just had to take a stand and do better for our health system — for our survivability in the future. But I do think what we all learned is we have to talk more early on, and we’ve got to find where the places are that we can agree on something that will deliver a better product to the consumer,” he declared.
Overall, Mayo said the whole negotiation process took about eight months, with the two entities settling on an agreement in September.
The process was long but fruitful in his eyes.
“It was a challenging event to say the least. Fortunately, I give credit to their CEO for coming to the table. We had a good discussion — we made some concessions, they made some concessions, and we got to a point that improved our financial position, with also caveats around how denials will be handled. The thing we both want is to move towards more value-based care. In fact, part of our reconciliation was working on particular value-based initiatives with a segment of their population,” Mayo explained.
Every member of the healthcare ecosystem has a responsibility to make care more affordable and accessible, a spokesperson for Florida Blue wrote in an email to MedCity News.
“Driven by our mission of helping people and communities achieve better health, one of the ways that Florida Blue advocates to preserve affordability each and every day is by negotiating with provider systems — to ensure high-quality care is within reach for our members and the communities we serve. We are pleased that we were able to reach an agreement with partners at Baptist Health Jacksonville as part of our shared commitment to Northeast Florida,” the spokesperson wrote.
The negotiation process didn’t always require so much preparation, Mayo stated. In other words, a decade or two ago, hospitals didn’t need to bring on external consultants and dedicate months to their negotiation strategy.
And in some states, hospitals don’t even have the option to battle it out at the negotiation table because certain insurers have such a strong hold of the market, Mayo pointed out.
“I’m from Alabama, and I used to work in Alabama. The Blues in Alabama control about 85% of the market, so you really don’t negotiate. You take what they give,” he declared.
Blue Shield of Alabama did not respond to MedCity News’ requests for comments by the time this article was published.
Mayo also noted that providers and payers face similar demands.
Providers deal with cost pressures, as do payers — but the two parties have different strategies for addressing their respective financial challenges, Mayo said.
“There’s a lot of similarities that we’re all going through, but at the end of the day, the insurers are trying to say, ‘We’re bringing value and representing our constituents or subscribers,’ when in reality, they’re just collecting premiums and paying claims. And one of the tactics is just to deny claims. And that’s out, that’s been revealed in the press, and that’s a big sticking point right now with a lot of the carriers,” he remarked.
These circumstances are part of what makes provider-payer relationships so antagonistic.
“It’s a different day and a different time in a lot of ways,” Mayo noted.
While providers and payers are certainly “not chummy,” successful negotiations between the two are still possible, Mayo noted.
“If you can gain a mutual respect for one another and find common ground that you are trying to resolve, you can get there,” he said.
Photo: fizkes, Getty Images
