1. 1 DEVELOPING PAYER RELATIONS August 14, 2013 William J (Bill)TenHoor AHP Healthcare Solutions

2. Objective Gain a better understanding of payers and the process of making them your clients long term 2

3. Telling the Payer Relations Story 1. Beginning 2. Middle 3. End 3

4. Why Focus on Payer Relations Now? 4 The ACA implements an insurance based payment system – many payers are now your potential clients Reliance on grants is increasingly less feasible Paradigm shift is occurring rapidly From MH & SA to Behavioral Health to a Health Specialty (Behavioral Medicine?) Care coordination, primary care integration and quality measures are essential components of care delivery Population health and wellness are key parts of delivery systems Payment models are shifting from fee-for-service to pay-for-performance to risk models like shared savings and related types of capitation Insurers and providers are integrating within ACOs, creating the opportunity for more friction free health systems Behavioral health has greater legitimacy and visibility (parity) to leverage – one of the 10 Essential Benefits Tempest Fugit!

5. Beginning Steps 1. Prepare 2. Understand the payer 3. Define your value equation 4. Engage in a systematic sales process 5. Formalize your agreements in a contract 6. Sustain your success – learn from (and be prepared for) setbacks along the way 5

6. 1. Prepare DEFINITIONS 1. It’s a journey 2. It’s a process 3. It’s a relationship 6

7. 2. Understand Healthcare Payers What are the types? Commercial/Private For-profit (stock and mutual) and non-profits Public HMOs, PPOs, Indemnity Plans Why and when formed and how they have evolved Experience of the Blues and the depression Discover their values, brand, how regulated, PR, operations, personnel 7

8. Health Insurance Is Not a Human Service 8 Characteristics 1.Pooling of losses 2.Payment for random losses 3.Risk transfer 4.Indemnification for illness Insurer charges individual $250. to cover the risk of extreme illness and/or potential bankruptcy (Anticipated care cost ($200) + risk & overhead charge ($50) = premium) 1 2 3

9. The Payer Pie: Market Segments Public Sector Medicaid and SCHIP Medicare SAMHSA/VA/DOD/HRSA State and Local Govt. Also mention third (MBHO) parties and MSO/ASO entities Private Sector Commercial and non- profit Insurers Large and small group Individual Self-Insured Employers Individual Out-of-Pocket 9

10. The Payer Pie: Health & BH Spending 10 What our market research tells us: MH/SA = 5.1% of Private Health Spending MH/SA is 9.9% of Public Sector Health Spending Conclusion: Target Public Sector Payers First Source: (SAMHSA 2010; Kaiser Report, 2011)

11. US BH Spending: $135 B 11

12. The Payer Pie: Public BH Spending 12 What our market research tells us : Medicaid is the dominant payer segment at 43% State/Local Govt. is important at 34% State/Local Govt. is very impt. for SA at 38% SAMHSA contributes only modestly to pie Conclusion: Funding from 4 public sector segments enables diversification SA-only providers may want/need MH services also

13. ACOs as Payer Prospects Important as new ACA models (several hundred in operation) Combine payer and provider features Are being encouraged and incentivized Iowa is encouraging (cannot mandate) Medicaid Expansion members to join ACOs What makes one a good prospect? Has status in the community Already has enrollment or may be new to the state Needs your services You have an opportunity for preference and even exclusivity References www.accountablecarenews.com http://www.ncsl.org/issues-research/health/accountable-care-organizations-health-costs.aspx 13

14. 3. Define Your Value Proposition The promise of the value to be derived from your services by a customer (both insurer and individual consumer) Is the customer satisfied? What is the “proof” of the customer experience? Requires ability to communicate the offering and the associated features and benefits Differentiates the organization - positions it against competition Who uses the value proposition The organization, internally, to ensure communication consistency Customers, partners, employees, other stakeholders 14

15. Proposition: Comorbidity & Chronic Conditions Source: Wyatt Matas, 2013

16. 4. Engage in a Systematic Sales Process Don’t simply accept the perfunctory provider contract route - Alternative Sales Process – Must be customized 1) Identify opportunities in the markets 2) Define best prospective clients (payer, ACO, hospital, FQHC, etc.) 3) Pre qualify and focus on the most qualified client first 1) Internet, phone, face to face meeting (but this is not selling – see next slide) 4) Contact prospective payers to ensure interest and need 5) Make a sales presentation 6) Prepare and submit the proposal 7) Proposal follow-up 8) Close/Negotiate Adapted from Pete Frye’s “The Complete Selling System” 16

17. Example: Qualification and Pre-Qualification Following pleasantries, make a value statement – “We have care coordination services that ensure people with substance use disorders regularly act on their problematic physical health conditions as well as their substance issues” Reconfirm the value issues Does this prospect need our solution, want to do something about it, and can we determine what we have to do to make the sale? Establish buying criteria, using and reconfirming informational and knock-off questions Providers must be accredited, licensed, etc. Gain appropriate commitments Establish a written agenda (what has to happen to make the sale) Identify a coach (an internal source for land mines, risks, etc.) Identify the next step and its objective 17

18. 5. Formalizing the Agreement 18 Agreements (contracts) consummate the deal Aspire to more than a traditional provider contract They are in many parts Key aspects of a contract Memorializes intention to create a legal obligation Mutual assent Involves offer and acceptance Remember, contracts represent large portion of asset value of a service business, deserving appropriate attention

19. Many Important Parts Definitions – ensuring clarity Scope of covered (and non-covered) services Full capabilities of the provider, such as prevention/wellness Scope of license of providers Covered products (both Medicaid and commercial?) Compensation and payment processing Term, termination, post-termination, severability New AQCs are 3-5 year contracts UR/UM, QA, clinical coordination practices, guidelines and standards (medical necessity) Privacy, reporting and recordkeeping Member eligibility, enrollment & disenrollment Procedures – negotiate greater MCO responsibility Verification (and risk of error) and effective date 19

20. Negotiation is a Key Part of Contracting The process of reaching agreement that meets your interests better than your best “no deal” option “The art of letting the other party have your way” Daniele Vare Good DealNo DealBad Deal Many FACTORS affect your interest in and the shape of a deal, such as price, timing, scope, operational considerations, value perceptions, exclusivity, competitor impacts, territory/place, etc. 20

21. 6. Structure and Manage for Success Build a Team - One person cannot handle all functions Business Development Developing and executing the strategy for the organization Leading growth and change Sales (and account services) Ensuring the growth plans of the organization are achieved by winning new business, serving existing clients well and growing their business Marketing and Product Development Creating, communicating & delivering goods and services of value Producing the intelligence and research to support organizational strategy Shaping and conveying the brand of the organization to all stakeholders Public/Governmental Relations Maintaining good faith and reputation with communities & regulators Enables reactive capability, a “must have” when highly public 21

22. The Middle - Now I’m In. What Next? Provide Account Management/Client Services Ensure successful use of your services, particularly start-up (model office & cut-over) Recommend new services or upgrades Maintain ongoing relationships with all key decision makers Gain leads, references, service development intelligence Develop and maintain account records 22

23. Other Account Management Practices Assign the right person for managing the client and the business relationship Require project management skills/experience Require interpersonal skills necessary for relationship building/management Document and operate by pre-defining expected practices Make course corrections as necessary Raising and resolving problems Act on client problems 23

24. The End One view: there is no end, only the opportunity for improvement How will you know when exit is the right next step? ACO headlines 7/16 Seven Medicare Pioneer ACOs that didn't produce savings in the first year … have told the CMS they will leave the Pioneer program and enter the Medicare Shared Savings Program model, while another two participants have indicated they will leave Medicare ACO entirely 24

25. Questions & Discussion Bill TenHoor bill@tenhoor.com © 2012 by Advocates for Human Potential – Healthcare Solutions. All rights reserved. No part of this document may be reproduced or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of AHP. 25