5 Tips for Negotiating a VBR Contract

Mastering Value-Based Reimbursement: Negotiation Strategies for Behavioral Healthcare Agencies

Value Based Reimbursement (VBR) includes financial risk to the behavioral healthcare agency because payment is tied to performance outcomes. Value based care is measured on how well the agency delivers care (measured by the outcomes) and how well it reduces costs by such actions as reducing the higher cost services like emergency department visits and hospital stays. The National Council for Mental Well Being said in an article, “The impending shift to value-based reimbursement (VBR) and managed care in the health and human services industry has become a driving force across both public and private sector organizations, not only forcing new operating models and systems, but pushing providers to develop new partnerships with payers and to prepare for population health management.” (“Managed Care and Value based Reimbursement Archives- OPEN MINDS”)

When considering a VBR contract, knowing the population you serve, including the acuity mix as well as the cost of achieving the expected outcome measures, is key to understanding the true costs of delivering services under such a contract. But what about the reimbursement rates? You have the power to also impact your reimbursement rate through skillful contract negotiation with the payor or managed care organization. Before signing the contract, you want to be sure you can survive under it.

Contract negotiation is a skill taught in business school, but it is overlooked in medical school, nursing school, or the school for social work. Unfortunately, the behavioral healthcare professional has most likely never had formal education or training in contract negotiation or the business of healthcare overall. Hospitals and healthcare facilities are places of safety and healing, holding a higher station than other architecture and infrastructure. But at their heart, all healthcare facilities are businesses that must break-even to generate more profits than expenses. When it comes to contract negotiation, especially in a value based risk enhanced contract, behavioral healthcare agencies must negotiate like a business.

Qualifacts wants to share with you five important tips to use when given the opportunity to negotiate a value based reimbursement contract.

  1. The Right Negotiator: VBR contract negotiating is more of a science than an art. It is a learned and developed skill. Be sure the person you select to take lead on negotiating your contract with the payor, MCO, state/federal government is a sophisticated communicator, experienced in contract negotiation, and confident in the terms of the contract. They should be prepared with confirmed metrics on the cost of delivering services and meeting required outcomes as well as metrics on the quality of the services you deliver.  They do not want to overcommit on your commitments or tentatively agree on commercial terms that weren’t previously pre-approved and should be clear to the payor on any payor requests that they need to be vetted with others in the organization.
  2. The Value of Volume: As part of your contract negotiations, what volumes the payor can commit to matters materially in what discounts from your rack rates that you can provide.  Payors need to earn better rates only after showing you the additional volume.  As an alternative, take this opportunity to negotiate a rate for minimum served or minimum number of visits and request at certain volume points, you get reimbursed at a higher rate.
  3. Vet the Templates Carefully: Some payors, MCOs, or state/federal payors may require you to use a standardized VBR contract template. It is important that you have these templates well vetted by your counsel before agreeing to use them. If you don’t have a counselor skilled in contract review and negotiation, find one and at times it’s very helpful to obtain referrals from your trade associations. If the payor is non-negotiable on the use of their templates, ask about their tolerance for an amendment or rider so that the contract can be customized to fit your agency’s needs specifically.  It is generally preferred and beneficial to have a summary or pre-prepared rider that you can send to the payor that identifies certain terms that you need to have included in whatever contract you move forward with such as payment timing, indemnification, limitation of liability and exclusion of certain warranties.  Ask your legal counsel to opine on this or prepare the rider.
  4. No room for Desperation: Regardless of how much you may want this VBR contract or how much your agency needs the added volume or to renegotiate your reimbursement rates, never present yourself or the agency as desperate. You want to always try to negotiate from a position of power if you have any hopes of getting the best rates and terms for your agency. This is particularly important when negotiating cost based reimbursement contracts or value based reimbursement.
  5. Non-Disclosures: Early on in the process, before you have any meaningful conversations with the payor, MCO, or state/feds, be sure to have a non-disclosure agreement in place. Although you’ll want your counsel’s opinion on antitrust laws regarding what you can and cannot do, you generally want to ensure that your payor is prohibited from sharing your contract or the commercial terms within your contract (such as discount rates) with others unless legally required.

You want to negotiate your VBR contract from a position of strength. The contract should be a “win win” for both the agency and the payor. Following these five tips should greatly increase your ability to get a VBR contract you can live with.

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