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 The Essentials Of Hospital Negotiating

An experienced CEO offers some rules of the road for navigating through health care reform realities.

 Sponsored by American HealthTech

Contracts with hospitals are today’s new reality. Already commonplace in markets such as California, they are sweeping across the country as Accountable Care Organizations (ACOs), bundled payment pilots, and capitated Medicaid programs take hold.
 
They spring from a fundamental culture change in long term care: The Medicare world of “more is more” has been replaced with the managed care world of “less is more,” with an expectation of even better financial and clinical outcomes.
 
Hospitals, ACOs, and managed care companies are increasingly contracting with post-acute partners who bring attractive, data-driven outcomes to the table. After these contracts are signed, these partners remain accountable for delivering competitive outcomes such as return to acute care, average length of stay, mortality rates, delivering a continuum of services, and better coordinated care. But opportunities—and competitive advantage—start with getting a contract on the table.
 
Let’s look at how long term and post-acute care operations can best put the odds in their favor.

First: Start With Value

Perhaps the most important guideline is to think beyond metrics and outcomes, into the broader value argument. The real goal is to provide value that would be expensive and time-consuming for networks to create on their own, in areas such as convenience, economies of scale, quality outcomes, and cost containment.
 
Doing this well requires fresh thinking and a service mindset. This does not mean that data aren’t important; to the contrary, they are more important than ever today to own one’s own data story. The market is more competitive and more analytically driven than ever.

ACOs have often done a surprising amount of due diligence on metrics such as length of stay, readmissions, and Five-Star data, and contracts routinely hinge on metrics-driven performance. And, on occasion, their information is incorrect.
 
Get in front of this story by providing more granularity than partners can obtain from public sources, and consider portals and dashboards to share up-to-the-minute metrics with acute care partners.
 
Today, some of the better long term care providers are starting to resemble logistics companies that happen to be in the health care business, with a broad range of services, new technology, a team of doctors on the ground, care transition coaches, and intake teams that can facilitate the full continuum of care.
 
To build a value equation, be prepared to stretch, try things, and make mistakes.

Second: Adapt To A Brave New World

The equation for profitable long term and post-acute care is quickly shifting from one of price to one of volume. This means that one of the biggest challenges is revenue compression, particularly due to downward pressures on length of stay. Adapting to this new environment—and convincing hospitals, networks, and ACOs to contract with a provider—is a multifaceted process that involves several factors, such as:

■ Proactively reducing average lengths of stay through better disease management;

■ Leveraging technology to work more efficiently, including selecting the right partners in areas such as electronic medical records and outcomes reporting;

■ Protecting revenue by defining acceptable admissions processes and parameters up front;

■ Creating a competitive advantage in getting patients home sooner and keeping them home longer;

■ Managing a continuum of care rather than a silo of care; and

■ Focusing on effective management-of-care transitions.
 
This latter point has become an emerging, important metric, as care transition programs are increasing from 30 days toward 12 months. They are moving from isolated silos like acute or skilled nursing facility (SNF) environments to flat horizontal models focused on integration and efficiency of quality outcomes.
 
A good future model for both the patient and a revenue-focused holistic approach will include coordinated services for a lifetime.

Another important part of this brave new world is optimizing the use of physicians: While people talk about health care reform being about patient-centered care, it often feels more like physician-centric care.
 
Patients follow their physicians, and as a result, the health care networks increasingly want their physicians and brands in the long term care partner’s building. It may make sense to rethink the traditional medical director model and evolve toward more of a “congress of resources” with managed care partners, competing specialists, SNFists, hospitalists, and more to promote dialogue among stakeholders.

Third: Protect Your Interests

In a new world of contracting, providers need to look out for themselves before and after signing a contract, particularly in these three areas:

■ Expertise. Steve Rodgers, chief executive officer (CEO) of AccentCare, a home health and hospice care company, said at the LTC100 Leadership Conference, “You must have some really good contracting people in your organization. Pick your partners well.”
In a world where the people across the negotiating table can afford top talent, and often negotiate very big deals with much bigger partners, it makes sense to hire a contracting expert—and to get the best expertise available.

■ Transparency. Providers are increasingly seen as a cost center nowadays, but long term and post-acute care operators need to know how their hospital partners control their costs, too, as part of a team that is dependent on each other to achieve bonus payments. Transparency is key across the network from a cost perspective; get agreements in writing, and hold partners accountable. Don’t assume there is mutual understanding and agreement about definitions for measurements, and providers should know their own cost structures in the moment.

■ Holistic communications. Just because the hospital CEO signs a contract doesn’t mean that discharge planners always follow suit. One can deliver superior return-to-hospital rates, mortality rates, and length-of-stay and admissions numbers and yet find discharge planners who don’t understand why senior leadership is involved in the referral process.

Bridge this internal communication gap by having clinical liaisons who can coordinate with hospital staff to facilitate referrals.

Integrating technologies early will dramatically improve communications and help secure a provider’s place at the table as a partner.

Contracts Are Here To Stay

There is lots of talk today about contracting strategies and positioning. Becoming a partner with acute-care stakeholders requires a balance of new ideas, new technology, and traditional values, such as providers that are direct with expectations and needs, clear about capabilities and weaknesses, transparent in sharing strategically important data, and, above all, trustworthy.
 
The bottom line is that adverse selection is here to stay. While providers will be welcomed as partners at the negotiating table, they should offer value, plan to adapt to change, and protect their business interests before inking a deal. Referrals, revenue, expense levels, and reputation depend on it.
 
Kenneth Lund is chief executive officer of Shea Family, a San Diego-based firm that provides comprehensive administrative services to senior care and rehabilitation businesses. Lund has 30 years of experience in industries ranging from banking and commercial real estate to nationwide distribution and has spent the last 15 years revitalizing senior living and skilled nursing companies using lifestyle and service-based approaches.
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