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Amid Obamacare turmoil, payers and providers must mend fences and collaborate


Guest post from Rita Numerof, Ph.D., president of healthcare management consulting firm Numerof & Associates

In the healthcare industry, the relationship between payers and providers has long been adversarial--and it's become counterproductively so.

Financially unsustainable Affordable Care Act exchanges and CO-OPs are collapsing all over the country (seven since Oct. 1 alone). Major player UnitedHealth Group is threatening to withdraw from the marketplaces entirely in 2017, citing half a billion dollars in losses. Goldman Sachs analyzed state filings for 30 not-for-profit Blue Cross and Blue Shield insurers and projected they will post aggregate losses for 2015.

That's not what "nonprofit" is supposed to mean.

The reasons for these losses are myriad, but one major roadblock standing in the way of profitable changes to payer and provider business models is the longstanding distrust between the two parties. In an increasingly connected world, payers and providers must put aside their differences and find ways to work together.

In the traditional fee-for-service model, when providers do more, they earn more, including getting paid to rectify mistakes made the first time. Wary of this incentive and also of the practice of "upcoding" to obtain greater reimbursement, payers have long focused on saying "no," putting in place prior authorization and other stipulations before treatments can begin. The mega-mergers on both sides are in many ways an arms race to improve negotiating leverage through scale.

The incentives and conflict rooted in fee-for-service hamper efforts to improve care on both sides.

Providers attempting to innovate and deliver higher value for patients become frustrated when payers won't break from existing reimbursement systems to reward their efforts. Payers, believing most providers focus only on services they can bill for rather than what's going to reduce total cost of care, have built their own apparatus for coordination of care and management of complex diseases--difficult efforts for a player often mistrusted by providers and patients.

In short, the interests of payer organizations are more often than not tangential to, rather than congruent with, those of the providers. Not only are both locked into a system for processing claims that dates back to at least the 1980s, there are only a precious few that are actively focused on engaging collaboratively to achieve better outcomes, provide transparency and deliver greater value.

For the good of the entire industry, it's time for an armistice between these two historical adversaries.

The two sides first must realize there's enough blame to go around. The sniping and finger-pointing don't help; it's better to find a path forward that is in everyone's best interests--their own, as well as those of patients, consumers, policy-holders, employers, health plan sponsors and other stakeholders. They must also recognize that "that's the way it's always been done" is no longer a satisfactory answer, if it ever was.

To do that, payers and providers alike should set aside the "zero-sum" mentality--that is, the notion that if the other side wins, they necessarily lose--and find common ground. Both need to understand that each will do better through collaboration and make it a priority to find areas they can agree on, with the aim of better health outcomes at lower cost.

It won't happen overnight, because the process is hard to change. It's never easy to develop trust in any sort of relationship when you've been burned before. But the way to approach it is to recognize that "we'll both do better if we collaborate."

History proves that former adversaries can indeed become allies.

At their own times in history once-mortal enemies of the United States--England, France and Germany--are now among our strongest friends and partners in common goals of security and prosperity. If former mortal combatants on the global stage can find rapprochement, healthcare providers and payers should be able to, as well.

It's long past time for providers and payers to sit down together and work out their differences, for the benefit of all concerned.