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5 Things to Know About Payer-Provider Financial Equity and Auditing

Payer-provider relationships have long been marked by tension and challenges. As payers hold the purse strings, providers often find themselves constrained by rules that influence their ability to secure timely payments.  


Providers are now grappling with rising compliance costs and administrative burdens. For example, an alarming 78 percent of providers, according to the American Hospital Association, believe their payer relationships are deteriorating. Moreover, the burden of compliance is taking a toll, with 84 percent reporting an increase in costs and a staggering 95 percent indicating a surge in staff time dedicated to obtaining prior authorizations.  

With this dynamic becoming increasingly unsustainable, a new approach is needed to establish a more harmonious and efficient payer-provider relationship. 

On that note, below, we highlight key takeaways from SAI360’s on-demand webinar—Payer Line-Item Audits Gone Wildwith Day Egusquiza, Founder and President of AR Systems, and Chris Loftin, System Director of the Regional Business Office for Baptist Memorial Health Care Corporation. 

Five Key Takeaways 

1. Payers Divide, Providers Pay: Unbundling Has Costly Consequences

Payers are employing a strategic maneuver known as “unbundling” to deny payments for various healthcare services. This involves dissecting a single service into smaller components and subsequently rejecting payment for certain elements, leaving providers to shoulder the financial burden.  

For example, payers might refuse payment for a chest X-ray when billed separately from a related evaluation and management (E/M) service. The core issue here lies in the payer’s ability to define what qualifies as “medically necessary,” affording them the discretion to cherry-pick which services they reimburse.  

This practice proves beneficial for payers but unjustly imposes financial hardships on providers who are left to defend their claims and patients who may face unexpected out-of-pocket costs. 

2. Rural Hospitals Face Financial Crunch: New Subsidy Struggles Emerge

As the COVID-19 public health emergency was lifted, a staggering 300 rural hospitals were left teetering on the brink of closure due to abrupt subsidy cuts. Although inflation has appeared to subside and prices are dipping on a national scale, hospitals continue to grapple with mounting debts and persistent high costs. This complex puzzle is largely rooted in payer practices, underscoring a disconnect between their profitability and hospitals’ ability to deliver care effectively. 

3. Fair Payments in Question: Unbundling and Delayed Reimbursement Struggles Demand Addressing

Innovative strategies are emerging to guide healthcare stakeholders through uncertainty. One prominent approach involves denial rulings and the concept of “unbundling,” empowering providers to advocate for equitable reimbursements.  

However, the road ahead is not without obstacles. Cost containment vendors, engaged by insurance companies, play a crucial role in this landscape. Their involvement extends to conducting forensic audits before claim adjudication, with the aim of minimizing or altogether avoiding outlier payments. The tactic rests on delaying payment during audits, with the expectation that providers may not contest these actions. 

4. Transformation Demands Teamwork: Provider-Insurance Collaboration is Necessary

Amid the intricacies of payer-provider dynamics, strategies have emerged to counter these tactics. Collaborative negotiations between providers and insurance companies to modify contracts offer a potential solution.  

By eliminating or limiting forensic audits through contractual amendments, a cooperative approach seeks to foster a more balanced relationship. Alternatively, a more assertive stance involves considering contract termination, labeled the “nuclear option,” as a response to undue audit burdens. 

5. Bottom Lines are Balancing Acts: Navigation Needed Around Healthcare Costs and Payments

As the complexities of healthcare financing continue to unfold, the landscape reveals supply costs are soaring, even as insurance payments remain unyielding due to pre-existing contracts.  

This juxtaposition raises financial concerns, especially when payers propose eliminating certain charges. Stripping these charges could disrupt the cost ratio, possibly leading to inflated payments that may not align with the actual costs. To counterbalance this, providers may consider innovative alternatives, such as incorporating charges within room and board fees to ensure necessary payments are upheld. 

Final Thoughts 

The intricate tapestry of payer-provider interactions weaves a narrative of challenges and potential solutions.  

As providers and payers strive to collaborate and navigate this complex terrain, the importance of equitable reimbursements, fair practices, and transparent communication becomes increasingly evident.  

By addressing these issues head-on and exploring innovative strategies, stakeholders can collectively work towards an improved system. 

For more information about these key takeaways, watch our full on-demand webinar here: Payer Line-item Audits Gone Wild 

To learn more about how SAI360 Integrated GRC solution can help your organization, set up a virtual coffee chat with one of our team members: https://www.sai360.com/request-demo  

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