Contract Negotiation Tactics Used by Health Plans That Undermine Value-based Payment Contracts for Mental and Behavioral Health Services
A Discussion Paper
During contract negotiations between health plans and provider groups, certain negotiation tactics commonly employed to secure favorable terms may eliminate provider leverage. The strategies exploit contractual ambiguity, administrative burdens, and information asymmetry.
Tactics which allow health plans to maximize control while unfairly restricting providers' ability to negotiate effectively include: Take-It-or-Leave-It Contracts, Strategic Ambiguity, Contractual Ratcheting, Network Secrecy, Withheld Information, Unfunded Mandates, and Failure to Provide Reliable, Valid, Useful Definitions. Identifying these strategies can help providers anticipate potential risks and advocate for fairer contract terms during negotiation. Six key tactics used by health plans are outlined below:
1. Take-It-or-Leave-It Contracts
Tactic Description: Health plans present contracts with non-negotiable terms labeled as "industry standard" or "compliance driven." Providers must either accept these terms or face exclusion from the network.
Example: Providers are mandated to use a proprietary data platform, absorbing its administrative costs without reimbursement. When providers request contract modifications to cover platform expenses, the health plan dismisses their requests as "non-negotiable" and threaten exclusion from the network, leaving providers with no viable alternatives if they want the contract.
2. Strategic Ambiguity
Tactic Description: Health plans offer vague or incomplete terms during contract negotiation, leaving critical details undefined. This allows them to assert control later when providers have limited renegotiation options.
Example: A provider group raises concerns about ownership of patient data. The health plan assures the group it is not claiming ownership andresists defining data ownership in the contract. Despite agreement to clarify the issue, the health plan does not follow up. Providers eventually face restrictions when the health plan imposes new data-sharing policies required as “operational updates,” creating confusion and limiting providers' ability to manage their practices effectively.
3. Contract Ratcheting (Progressive Demands)
Tactic Description: After securing providers’ initial participation, health plans introduce more administrative demands by amendments or policy changes, exploiting providers’ dependence on the contract.
Example: Providers are required to submit new performance metrics or comply with stricter reporting standards after signing the contract A health plan initially requires quarterly patient outcome reports and later increases that to patient outcome reports. The administrative burdens, imposed without additional reimbursement, divertes providers' focus from patient care and creates significant operational stress.
4. Network Secrecy (Hidden Provider Lists)
Tactic Description: Health plans refuse to disclose their full list of participating providers, preventing providers from assessing network size, workload expectations, and collaboration opportunities.
Example: Providers unknowingly sign contracts assuming a broad referral network, only to discover later that the network is limited. This results in increased patient loads and unmanageable service demands. Despite repeated inquiries, the health plan cites confidentiality concerns, and blocks providers from collaborating or adjusting their practice strategies.
5. Withholding Information
Tactic Description: Health plans deliberately withhold critical information, such as contract conditions, policy updates, or network expectations, making it difficult for providers to make informed decisions.
Example: During negotiations, a health plan promises to clarify reimbursement terms but delays responses. Once providers are locked into enforceable contracts, they discover unfavorable payment structures and restrictive clauses. With no room for renegotiation, they are forced to comply or face financial penalties.
6. Unfunded Mandates
Tactic Description: A health plan imposes administrative or operational tasks on providers without providing appropriate reimbursement or the necessary resources. Such behavior forces providers to absorb the costs of compliance while the health plan benefits from the generated data and service improvements.
Example: A health plan requires providers to collect and report patient data through a proprietary platform and refuses to reimburse providers for data entry, analysis, or technical support. Providers are expected to manage these tasks at their own expense. This practice diverts staff from clinical duties, increases operational costs, and reduces time available for patient care.
Providers also encounter undefined terms like "timely submissions," "adequate care," or "reasonable compliance." Terminology like these lack of clarity and enables the health plan to reinterpret terms at will, creating shifting compliance targets that force providers to operate defensively, draining time and resources.
7. Failure to Provide Reliable, Valid, and Useful Definitions
Tactic Description: Health plan uses vague and/or poorly defined terms in their contracts, making compliance difficult and allowing them to interpret terms in their own favor.
Example: A contract requires providers to meet "quality benchmarks," but the health plan does not define specific metrics. When providers request clarification, the health plan retroactively imposes rigid definitions and performance standards, using its newly defined criteria to deny bonus payments or to enforce penalties.
DISCLAIMER and PURPOSE: This discussion document is intended for training, educational, legislative, and or research purposes only. The information contained herein is based on the data and perspectives available at the time of writing. It is subject to revision as new information and viewpoints emerge.
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