Enhancing the payer-provider partnership

Driving value-based care solution strategies

In brief

• The regulatory impact on cost containment is shifting rapidly.
• Operational success hinges on a streamlined provider management approach backed by Gen AI solutions.
• The future of healthcare depends on the strength of the payer-provider partnership and the ability to innovate in a rapidly changing landscape.

In today’s constantly shifting healthcare landscape, payers face increasing pressure to manage costs while maintaining or improving the quality of care. This balancing act has become more difficult due to rising system costs, regulatory changes, and shifting patient expectations. The key to success lies in building a robust provider cost-containment strategy that optimizes the payer-provider partnership. By implementing provider network management, payers can drive cost efficiencies while enhancing collaboration with the provider community.

Rising healthcare costs and regulatory pressures

Healthcare costs are rising at alarming rates. The national health expenditure (NHE) is projected to grow by 5.4% annually from 2022 to 2031, reaching $7.1 trillion by 2031. The percentage of hospitals ending 2022 with negative operations surged to 53-68%, compared to just 34% in 2019. This crisis is amplified by staffing shortages and clinician burnout, which drive up the cost of resources. Adding to the burden, regulatory activity has increased 8% year-over-year due to new mandates like the No Surprises Act and Price Transparency Act.

In 2023 alone, payers faced over $50 million in federal penalties due to legal arbitrations and payment disputes. The price transparency rule has also caused a spike in out-of-network provider payments, which further challenges payers to control costs while ensuring access to care. These developments highlight the urgent need for effective cost-containment strategies that support regulatory compliance while maintaining high-quality care.

The need for provider cost-containment strategies

Payers must navigate complex challenges to control escalating healthcare costs. Rising costs for medical services, pharmaceuticals, and advanced technologies place a significant financial burden on health plans. To maintain competitive health plans while managing costs, payers need to focus on three key areas: controlling costs, meeting regulatory requirements, and managing member expectations.

Key strategic levers:

1. Optimize network management:

• Payers face several challenges in provider contracting, including acquiring and maintaining accurate provider data, which is imperative for negotiating complex agreements that balance cost control with fair compensation. Regulatory compliance and setting clear performance measures metrics can also add complexity, especially in a fast changing market. To address these challenges, payers need to take a thoughtful approach, using data and working closely with providers to find solutions.
• Payers should negotiate value-based contracts that share risk, aligning provider incentives with cost control and improved quality outcomes.
• Implementing tiered networks can help direct member traffic toward high-value providers.
• Ensuring that provider networks maintain both adequate access and cost control is essential to balancing member satisfaction and cost management.

2. Streamline utilization management

• Enhanced pre-authorization: Implementing pre-authorization requirements for high-cost services helps ensure medical necessity while containing costs.
• Leverage AI: AI can generate numerous data points and establish a precise scoring range for utilization management. The threshold for approval can be collaboratively determined by both payer and provider thereby reducing administrative costs.

3. Transition into value-based care models

• Improved care: Payers face significant challenges in transitioning to a value-based care model, including data management, risk adjustment, and provider engagement. Accurately measuring outcomes and balancing cost with quality care are also critical concerns. By addressing these issues through effective strategies like shared saving programs, payers can enhance collaboration with providers and ultimately improve patient care.

4. Data analytics and reporting

• Next-gen analytics: Generative AI can significantly optimize provider data management by automating data validation and ensuring accuracy across multiple systems. Gen AI can identify inconsistencies, outdated information, and duplicate entries, improving data quality and reducing manual efforts. Additionally, AI-driven analytics can predict provider trends, helping payers proactively manage provider networks and streamline processes such as onboarding, credentialing, and contract management.

5. Fraud, waste, and abuse prevention

• Advanced predictive modeling: Real-time systems can generate a high volume of false positives, overwhelming investigative teams and increasing administrative burdens. Advanced analytics and AI can identify unusual billing patterns and detect potential fraud early through predictive models that flag outliers, such as upcoding, unbundling, or duplicate billing.
• Provider education: Educating providers on effective billing practices reduces errors and minimizes the risk of fraud waste and abuse

6. Improve member engagement

• Transparency: Providing clear, easy-to-understand information on cost-sharing and quality ratings helps members make informed decisions about their care.
• Incentives: Offering incentives for preventive care encourages members to engage with high-value providers and reduces the long-term costs associated with avoidable conditions

Key takeaways for payers

There are a few strategic priorities for payers to bear in mind. First, continuously assess the cost-effectiveness of covered services using data-driven insights to ensure financial sustainability. Additionally, technology such as advanced data analytics, AI-powered predictive models, and automation can optimize operations, enhance care coordination, speed up claim processing, and improve the management of patient outcomes. Collaborating with providers in value-based care models and shared savings programs is key to aligning incentives and enhancing the quality of care. Finally, integrating clinical and financial data allows for a deeper understanding of cost drivers and the development of targeted strategies, ensuring operations are both efficient and effective.

By adopting a forward-thinking, data-driven approach, payers can lead the way in transforming healthcare delivery while effectively managing costs. The future of healthcare depends on the strength of the payer-provider partnership and the ability to innovate in a rapidly changing landscape.