Contracting Strategy

Contracting strategy is among the highest value-added work performed by BDC Advisors. It involves the optimal positioning of an institution in a health plan market place, given the ongoing evolution of healthcare financing trends, the structure of the local market, and our client’s competitive position. This work often leads to the realignment of contract relationships and can have very significant revenue impact. In addition to maximizing near term opportunities, we take a long view in thinking about contracting strategy – specifically, what competitive strategies can be employed today to enhance a client's long-term contracting opportunity.

Contracting strategy can involve a number of key study questions:

• How will consumer decision-making change in the next 3-5 years?
• How will employer purchasing decisions shift in the next 3-5 years?
• How will the payer market evolve in the next 3-5 years?
• How will the provider market evolve?
• What is the current position of our client organization in the managed care market?
  - Price performance of existing contract relationships
  - Competitive position vs. other providers
• What “game-changing” strategies could mitigate threats/strengthen our client’s position with payers?
• How should our client evolve its relationships with major contractors?
• How can our client deal with underpayment by government payers?

Examples:

East Coast Academic Health System

BDC Advisors developed a strategic response for an academic health system in Massachusetts upon a major health plan going into receivership. Results of the payer strategy achieved better payer / provider relationships, over $60 million in incremental revenue to the health system, and new long-term contractual terms.

New England Academic Health System

BDC Advisors helped a seven hospital integrated academic health system restructure its contract relationship with its most important payer, leading to revenue increases of $45 million over two years. The engagement began with a detailed understanding of the contract’s price realization, and led to an analysis of performance failures and decision to cancel the contract for performance. The consequent arbitration resulted in a settlement in our client’s favor and led to restructuring and reinstatement of the contract on much more favorable terms.

West Coast State University Health System

We undertook a comprehensive evaluation of contracting strategy for this complex state university hospital system, encompassing five academic medical center campuses. The project required a careful balancing of the needs and market positions of individual campuses with the state-wide opportunities across the system. Key strategic opportunities involved system-wide efforts to help consolidate and better balance a fragmented payer market.