Skip to content Skip to footer

Loading Results

Quick Q&A on how payers are aiding struggling providers

Start adding items to your reading lists:
Save this item to:
This item has been saved to your reading list.

May 28, 2020

Many providers continue to grapple with the financial stresses of the pandemic (see HRI’s report on the liquidity crisis). Hospitals and other providers have laid off and furloughed staff, mandated pay cuts and taken other steps to reduce expenses in the wake of dramatic drops in volume. HRI spoke with PwC experts James Gargas, Dr. Diarra Lamar, Jinn Lin, Claire Love and Derek Skoog about how the nation’s payers, recognizing the importance of maintaining strong provider networks, are addressing this issue.

PwC Health Research Institute (HRI)

What do you see as the payers’ role in supporting providers in this situation?

Dr. Diarra Lamar, PwC Principal

Payers are fielding quite a lot of calls and requests for financial support from providers. Some see this as an opportunity to create value for their members. They could provide support that secures competitive advantage within the market.

For example, medical specialty practice acquisition could provide an avenue to make progress in the higher-cost areas. Considering that the cost of entry for practice acquisition may have temporarily changed, some are asking how to take advantage of these dynamics and opportunity. What role could direct ownership play in increasing the chances for the practice’s success? 

If you’re an independent practice, you’re often independent for a reason. These practices really are in distress to approach payers for relief given their past choices to remain independent. From a network adequacy perspective, payers need to see those providers healthy and providing quality care to their members. It would seem to be an improved alignment of incentives.

Claire Love, PwC Principal

It would be an absolute travesty to lose our primary care infrastructure. I would predict you would see some buyouts of practices, whether it involves private equity or others, where there are struggling practices and COVID is the thing that sends them over the edge.

With the integrated model, payers have done a lot of deals in these spaces. They may try to take on more of that to become an integrated player when primary care providers are cheap because of what they’re experiencing with COVID.

It would be an absolute travesty to lose our primary care infrastructure. I would predict you would see some buyouts of practices, whether it involves private equity or others, where there are struggling practices and COVID is the thing that sends them over the edge.

HRI: How would a provider acquisition affect payers financially and in the long term?

Dr. Diarra Lamar: Payers’ acquisition of providers creates an opportunity to reinvest rate growth in the business―price, salaries or margin. This industrial logic is quite strong when you have a provider who is high cost―e.g., because of success at past rate negotiations.

As a payer, I have claims data but I am unlikely to have a full view of the medical record. If you own the provider, you have theoretically better access to more information on the clinical side and can do a better job at risk stratification, individual patient interventions, primary care and population health. These levers have the potential to improve payer performance.

Many payers are trying to get their head around how they can know that the current uncertainty has resolved enough to make a move consistent with their risk appetite. And that’s a difficult question.

HRI: What are other ways you are seeing payers support providers during this unprecedented time?

James Gargas, PwC Partner

On the well-being side, we’ve seen a number of payers that are doing some innovative things to look after providers, such as getting them access to emotional wellness apps for free.

Notably, many are waiving all cost sharing, and that is streamlining providers’ billing processes and expediting collections. In some cases, payers are prepaying, in lump sum, anticipated revenues for months to come and recovering the advances from future billings. One payer developed a partnership with mostly smaller independent physician practices to provide temporary access to a telehealth platform, so they don’t have to figure out their own platforms.

Another payer created a provider support program to bring together under one umbrella information about support potentially available to the providers, such as SBA loans and the Paycheck Protection Program, so smaller providers in particular can more easily digest.

Overall, many payers are providing network-agnostic support to providers writ large, which is encouraging to see. They’re thinking about providers as true business partners, even more today than they were in the past.

HRI: From a regulatory perspective, how does it impact payers to take steps to boost struggling providers?

Jinn Lin, PwC Principal

Payers can enhance their RBC position by starting or continuing to have providers take on more value-based or risk-sharing contracts. As a result of medical loss ratio (MLR) rebate requirements, payers could also have the claim payments go to the providers who are really hurting right now as an option to provide funding to providers.

Payers also can step in and help the provider community with advance payments and value-based contracting. They may look more toward value-based care so providers can have a guaranteed cash flow coming in, rather than completely based on the volume of care provided.

Derek Skoog, PwC Director

If most payers are sitting on capital, they may be feeling more pressure to draw those levels down, so an acquisition or a provider payment arrangement that helps lower reported Q2 or Q3 capital could mitigate that scrutiny in the short term. And in the longer term, shifting to value-based care can make capital management a lot easier.

Limiting your MLR rebates for 2020 and going forward is generally preferred, as annually insurers can face challenging headlines for having to rebate premiums to customers. Replacing unstable fee-for-service claims with something more stable could mitigate MLR concerns for 2020 going forward. There are also potential tax implications for certain health plans when surplus and MLR breach key thresholds.

HRI: Will the COVID-19 experience change the provider-payer relationship going forward?

Derek Skoog: The providers we speak to who are least financially stressed are the ones who are under capitation arrangements or in shared or global risk deals where they are mostly unmoved or in a better position financially than they were pre-COVID.

This may be the impetus needed for real provider risk sharing in the future outside of California and Florida. In many geographies, I don’t think providers saw the value of risk-bearing payer contracts. In a COVID world, capitated or risk deals keep cash coming in regardless of the volume of services rendered or the number of members seen.

Given how dire the situation is for some independent physicians or small physician groups, there is an urgency that payers need to act on, or they may wake up in six months and find their local provider landscape is even further consolidated.

Read our research

Contact us

Diarra Lamar

Principal, PwC US

Follow us