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The Impact of Payer-Provider Relationships: A Comprehensive Guide

The Impact of Payer-Provider Relationships: A Comprehensive Guide

Over the last decade, healthcare delivery has changed significantly in the U.S., shifting from a fee-for-service model—reimbursement based on the number of services delivered—to a value-based care model—reimbursement based on quality of care and patient health outcomes. This shift has significantly changed both healthcare delivery and reimbursement.

The evolving relationship between payers and providers and its impacts on the healthcare delivery system, are core focus areas for Veradigm. That’s why we have compiled this comprehensive guide to payer-provider relationships, including their effects on patient care, how they’re influenced by value-based care, relationship improvement strategies, and more.

What are the roles of payers and providers in the healthcare system?

Healthcare providers are the individuals or organizations that deliver healthcare services to patients. Payers, on the other hand, are organizations such as Medicare, Medicaid, and private insurance companies that process and pay provider claims.

Because they are receiving claims from various providers, payers often have access to a more comprehensive picture of the care a patient receives. In this changing healthcare environment, payers are often responsible for the coordination of patient care.

The payer’s role has evolved to include balancing the costs of care with care quality in order to achieve the most successful patient outcomes with the least associated expense. Payers represent the start of the healthcare journey for many patients, frequently providing services such as tools for provider selection or tools to create a more personalized member care experience. Payers also offer a consistent touchpoint throughout the member care experience. As a result, payers have become a valuable patient resource, able to engage members with health and wellness information that reinforces communications from their healthcare providers and can aid in health-related decision-making.

How do payer-provider relationships impact patient care?

As the U.S. healthcare system transitions to value-based care, the need for greater payer-provider alignment has become increasingly evident. Payers and providers share the common goals of lowering healthcare costs while improving patient outcomes. If U.S. healthcare is going to achieve high-quality, affordable care, then payers and providers must be able to collaborate on these common goals.

Payer-provider collaboration enables payers and providers to leverage their common goals while taking advantage of each other’s unique strengths in advancing the patient-member experience. For instance, payers can encourage collaboration with physicians by sharing clinical, quality, and cost-related data. By giving physicians access to the bigger clinical picture for their patients, payers help providers to deliver higher-quality care. Data sharing also enables collaborative accountability: Coordinating quality and outcomes goals encourages payers and providers to adopt mutually agreed-upon strategies for improvement.

Payer-provider collaboration can help physicians reduce their administrative load, benefiting both patients and providers. Streamlining prior authorizations and referrals helps patients access the care they need more quickly while simultaneously giving physicians more time and energy to focus on patient care and improving patient outcomes.

When providers are free to focus on their patients’ individual needs, the entire population benefits—and a healthy population spends less time seeking medical care. This, in turn, reduces the cost burden for payers, helping to create a more effective and efficient healthcare system.

Ultimately, a stronger payer-provider relationship enables a more patient-centric focus, resulting in improved patient outcomes at a lower cost.

What challenges do healthcare providers face in their relationships with payers?

Despite the shared goals of improving patient outcomes while managing costs, the road to collaboration is not always smooth. Payer-provider relations often become strained over issues related to payment and quality of care. Payers are sometimes held responsible for negative patient experiences related to financial challenges caused by provider operational issues; while providers, and the prices they charge, are sometimes blamed for the skyrocketing healthcare costs facing payers.

Lack of trust

One key obstacle to establishing a collaborative payer-provider relationship has been physician distrust of payers—the result of decades operating under a system that set the financial interests of payers and providers against one another. A beneficial payer-provider relationship requires physicians and payers to transition from their prior roles to working as partners.

The lack of trust can only be overcome if the insurer actively works to earn providers’ trust. Payers have a wealth of resources they can share with physicians. They can provide data and analytical insights that support the physician’s care strategy; they can offer timely, actionable, and relevant data analytics to help providers to manage patient risk. Timely sharing of patient-level data and information is key to transforming the payer-provider dynamic and creating a collaborative partnership with the goal of advancing patient-member care.

Varied quality reporting requirements among payers and lack of data standardization

Another common challenge is the lack of standardization in data collected, formats, systems used, and more.

For instance, CMS, private insurers, and other payers have varied requirements for reporting quality data, which makes reporting quality measures a costly, time-consuming process for healthcare practices. This problem is exacerbated by the need for more standardization among the data elements used for quality measurement and reporting requirements.

Limitations on EHR reporting capabilities

Electronic health record (EHR) systems need to be more capable of collecting, aggregating, and correctly formatting data to suit the varying quality reporting requirements. These challenges include accommodating different data formats, analyzing unique populations, and accessing data in disparate storage modalities. Individual risk-adjustment reviews may also require the collection and analysis of specific data elements.

How can improved payer-provider collaboration benefit patient outcomes?

One of the benefits of value-based healthcare is that it provides an environment that encourages payers and providers to establish a mutually supportive and beneficial relationship. This improved payer-provider relationship benefits patient outcomes by enabling providers to focus on addressing patients’ needs. This helps the population as a whole—and a healthier population spends less time seeking care, reducing the overall cost burden on payers and creating a more efficient and effective system overall.

Successful payer-provider collaboration also benefits patient outcomes because most such collaborations involve the use of data analytics tools. This is because data are essential for identifying things such as areas where more preventative care is needed.

What strategies can healthcare providers use to negotiate with payers effectively?

Improving payer-provider collaboration can clearly benefit both parties, but navigating the path to an effective relationship can be challenging. These 2 strategies can help payers and providers improve their ability to collaborate on shared goals.

#1. Develop mutual understanding of the other parties’ missions

Although both payers and providers operate in the healthcare industry, each frequently has misconceptions about the other’s unique roles, goals, and the pressures they face. Identifying your common goals—such as improving patient health outcomes and controlling costs—can be a starting point. It’s also helpful to identify strengths that each brings to the relationship, as well as weaknesses that the other can help to support. Finding these leverage points can help to build mutual trust.

#2. Develop a data-sharing strategy

Sharing clinical and patient information is vital for both payers and providers. Payers require this data to meet their objectives; providers require timely and accurate clinical data in order to deliver the best care to their patients.

However, many health plans currently share patient data using their plan-specific formatting, forcing the provider group to organize and aggregate data from multiple payers or, alternatively, to work with disparate, disjointed data sets. By proactively negotiating with payers, providers can encourage more efficient and effective data sharing. For instance, payers can import data into the provider’s existing data analytics engine. This eliminates the administrative burden of working with multiple data sets or manually aggregating data into a usable format.

Alternatively, providers can negotiate for the use of a payer-agnostic interoperability solution that enables both sides to upload data to a single shared system. By incorporating payer access to patient medical records through a bidirectional interoperability solution, providers can significantly reduce or eliminate the administrative burden associated with sharing patient charts.

Data analytics are a vital component of any data sharing plan, as data analytics are key for measuring the impact of any changes implemented. By negotiating the use of meaningful quality metrics, providers and payers can identify areas of successful change as well as areas potentially needing revision, thus supporting financial sustainability in your relationship.

What are common issues in payer-provider contracts and how can they be addressed?

Common issues in payer-provider contracts

Providers face significant challenges in adopting value-based care contracts with payers. One common issue is simply practice size, as the majority of primary care physicians work in small physician-owned practices. A recent National Ambulatory Medical Care Survey showed that:

  • 44% of primary care physician visits are conducted by solo practitioners (accounting for more than 457,000 annual primary care visits of about 1 million total annual primary care visits)
  • 21% of primary care visits were conducted in practices of 3 to 5 physicians (220,000 primary care physician visits per year)
  • 18% were conducted in practices of 6 to 10 physicians (189,000 visits per year)
  • Only 8% took place in practices with 11 or more physicians (85,000 visits per year)

In other words, 65% of primary care visits annually were at small primary care practices with 5 or fewer practitioners.

However, smaller practices frequently lack the resources and/or experience required to effectively implement a value-based care practice model. In a recent survey of solo and smaller group medical practices, respondents listed numerous obstacles to adopting value-based care contracts, such as:

  • An excessive administrative burden required to administer the contracts
  • Overly complex payer requirements
  • Financial penalties for non-compliant patients
  • Lack of the technology and/or electronic health record (EHR) capabilities needed for required performance target reporting
  • Lack of capital required to cover contract items such as patient care coordination and population health capabilities

So how can providers—especially providers in smaller medical practices—address these issues? First and most importantly, with preparation. Here are 3 key areas to make sure you prepare before entering negotiations.

#1. Collect critical practice data.

Prior to contract negotiations, it’s essential to collect key practice data and financial information. For instance, know the rates charged for your practice’s most commonly billed services. Identify which procedures were most often claimed for reimbursement with each payer and the associated reimbursement rates.

It’s also important to review current payer contracts to better understand which payers currently have the most favorable terms. Some questions to consider include:

  • Which payer offers the highest reimbursement rates?
  • Which payer covers the highest percentage of your patients?
  • Are there any payers you’d like to drop? Payers with whom you would like to renegotiate?

#2. Familiarize yourself with terms commonly used in value-based care contracts—including potentially confusing legalese to watch for.

It’s critical to familiarize yourself with terms commonly used in value-based care contracts, such as:

  • List of covered services
  • Reimbursement rates for covered services
  • Number of days you have to submit claims after providing services
  • Number of days the payer has to provide reimbursement for covered services after claim submission
  • Method for negotiating claim denials
  • Contract expiration date, renewal processes, and termination options

It’s essential to familiarize yourself with potentially confusing legal language that sometimes appears in payer contracts, such as:

  • “Industry-accepted”: This is a nonspecific phrase payers sometimes use when describing reimbursement; if this wording appears, instead push for a specific reimbursement rate
  • “Except as otherwise indicated”: This phrase suggests that the contract somewhere includes an exception to the point under discussion; if such an exception exists, push for the payer to identify the exception precisely, where it is most relevant
  • “Hold harmless patient member”: Note that this phrase could make it impossible for your practice to bill the patient for monies not covered by the payer; however, if the payer does not provide reimbursement, the patient should ideally take responsibility for any unpaid amounts
  • “Unilateral amendment”: These two words give the payer power to change the contract without your permission—and in many states, they are not even required to provide notification of such changes. If possible, avoid participating in a contract with a unilateral amendment option; if the unilateral amendment is not negotiable for some reason, minimally ask for the payer to provide advance notice of any changes

#3. Identify your goals prior to entering negotiations.

Before entering contract negotiations, clarify your goals for the negotiation, whether that’s increasing the practice’s net revenue, improving reimbursement accuracy, or putting stricter terms in place for overdue payments. Once you’ve identified and prioritized your goals, be prepared to present your requirements clearly and concisely. You need to be ready to demonstrate that any demands are reasonable—be prepared to respond to potential arguments with data and evidence to support your requirements.

Additional Resources

The American Medical Association recently released a comprehensive toolkit to assist private practices with payer negotiations, including a free 2-hour webinar series plus the following publications:

How do value-based care models affect payer-provider relationships?

The success of value-based care models is highly dependent on establishing effective and collaborative payer-provider partnerships. However, the increasing use of value-based care models and risk-sharing setups frequently result in increasingly complex payer contracts. According to a recent report, this increasing complexity is decreasing current payer-provider alignment, rather than improving it.

This report found that only 11% of private payers had a lot of trust in their associated physician groups, while only 6% of providers had a lot of trust in public payers. The lack of confidence seemed tied to communication issues, as most payers and providers reported feelings of disconnect.

Lack of trust combined with limited communications is resulting in misalignment in payers’ and providers’ overall goals for value-based care, which then limits the success of their value-based care initiatives.

What technologies are used to enhance communication between payers and providers?

Strengthening the payer-provider connection is an essential step if value-based care is to succeed. Fortunately, the right technology, implemented correctly, can be a tremendous help in fostering positive payer-provider relationships.

Importance of interoperable data exchange

One key requirement for effective payer-provider collaboration is interoperable data sharing. Sharing data, especially clinical data, is perhaps one of the most critical forms of communication in healthcare. Providers use clinical data for nearly every aspect of provider operations, from making treatment decisions, to tracking and improving patient outcomes, and submitting claims and requests for Prior Authorization. Payers use clinical data as well, for tasks such as determining medical necessity and making prior authorization decisions.

Clinical data exchange is also essential for value-based care, for improving quality scores, and for simplifying risk management. Enabling payer-provider data exchange at the point of care opens the opportunity to proactively identify and communicate information such as gap closure opportunities; it also enables providers to access information to help manage patient care quality.

Traditionally, payer-provider clinical data exchange involved the time-consuming and labor-intensive process of manually tracking down and delivering clinical data, imaging, and other required patient information. Streamlining this process can benefit payers, providers, and patients. The American Journal of Managed Care reports that sharing clinical data can help:

  • Improve coordination of patient care and population health management
  • Improve patient experience
  • Address health equity challenges

Effective clinical data exchange can deliver actionable information to providers, helping them to make more informed healthcare decisions for patients. CMS states that improved data-sharing can help drive better patient care by better informing decision-making for both patients and providers. More effective clinical data exchange also makes it easier for providers to review patient data in a timely manner, facilitating care management decisions and accelerating payers’ ability to make medical necessity and prior authorization decisions. It also helps to close care gaps because patients can be treated more quickly, driving improved patient outcomes.

Healthcare data exchange is critical for controlling healthcare costs. It does so, in part, by decreasing the administrative burden on both healthcare providers and payers. However, sharing healthcare data also means payers and providers can work together, providing proactive healthcare to patients and increasing care coordination—both of which can help to decrease healthcare costs.

Finally, effective data change contributes to lowered costs by making the process more efficient.

Leveraging technology to enhance payer-provider communication

By leveraging technology solutions, payers and providers can improve clinical data exchange, facilitate the prior authorization process, identify and exchange information regarding gaps in care, and more. However, for a data exchange solution to be useful, it needs to be simple and convenient. It also needs to occur without disrupting the provider’s workflow. To maximize provider utilization, the solution should ideally fit into the normal process of documenting patient visits.

Improving payer-provider communications is a focus area for Veradigm, which is why we offer a number of solutions that can help streamline payer-provider interactions.

Veradigm Payer Insights

Veradigm Payer Insights is a dynamic solution that allows payers to deliver care gap alerts to their providers, within specific patients’ EHR records, as part of the provider’s existing clinical workflow.

Previously, identifying potential patient gaps in care required providers to proactively log into payer portals or other outside sites. However, if documentation of gaps in care is not accessible at the point of care, during the provider’s normal patient visit workflow, the potential for that information to positively impact patient care is greatly reduced. Veradigm Payer Insights reduces provider abrasion by delivering a free and easy-to-use solution to this challenge.

Leveraging the Veradigm Network, Veradigm Payer Insights enables large-scale, bi-directional interoperability between payers and providers. Payers can identify and access additional gaps in care using their providers’ EHR data, based on their specific criteria. They can then generate seamless gap in care alerts within the EHR workflow. Alerts contain relevant, patient-specific information for the provider to evaluate and address with the patient.

With Veradigm Payer Insights, payers and providers can collaborate to help minimize risk and improve patient outcomes.

Veradigm eChart Courier

eChart Courier facilitates payer-provider collaboration by streamlining the medical chart retrieval process. This solution saves time, cost, and resources by enabling the electronic retrieval of patient charts.

Manual chart retrieval is a time-consuming process that diverts resources that could be better used to support patients.

eChart Courier automates medical chart retrieval, enabling healthcare providers to share patients’ medical records with payers seamlessly and securely. eChart Courier operates through the practice’s EHR system, increasing efficiency and allowing chart access without changing the provider workflow. Information is then delivered in a secure, HIPAA-compliant fashion.

Veradigm Collaborate

Veradigm Collaborate is part of a suite of solutions designed to optimize payer-provider interactions and make gap closure efforts as efficient and effective as possible. Veradigm Collaborate enables more efficient payer-provider communication, minimizing provider abrasion and alert fatigue. It allows consolidation of provider alerts for risk adjustment, quality, and pharmacy opportunities. Customizable prioritization algorithms enable delivery of only the highest confidence level alerts. Payers can also configure multiple types of content for provider notifications for maximum flexibility.

Veradigm Collaborate helps payers identify the best opportunities for provider engagement. Flexible dashboards help users identify groups, providers, and members with the greatest overall impact, to help prioritize focus areas. Data from multiple risk adjustment and quality sources are consolidated and aggregated into single-member alerts and limited to one alert per member to minimize provider burden.

Veradigm Collaborate also encourages provider collaboration and engagement by delivering value at multiple levels:

  • Helping to improve patient quality of care and helping providers close gaps by sending consolidated alerts regarding potential quality gaps
  • Facilitating communications to help assess, address, and close open gaps
  • Secure, easy-to-use, self-service web portal where providers can securely upload supporting documentation
  • Easily accessible, on-demand educational materials that reinforce providers’ critical role in Quality and Risk Adjustment programs
  • Easy access to American Academy of Professional Coders (AAPC) CEU-approved webinars for practice coding staff

What are the key trends in payer-provider relationships in the healthcare industry?

The payer-provider relationship went through significant changes in 2023, and this trend is expected to continue in 2024 as the shift to value-based care grows. Some of these anticipated trends include:

  • A greater emphasis on personalized healthcare: Artificial Intelligence (AI) is being used to help personalize patient care, making it possible to create personalized treatment plans based on the individual patient’s unique health data
  • A greater use of AI technologies such as Machine Learning (ML) and Natural Language Processing (NLP) to help predict patient outcomes, enhance diagnostic outcomes, and personalize patient care
  • Greater emphasis on payer-provider collaboration to successfully manage the health of defined populations, including interventions that target Social Determinants of Health (SDOH)
  • An increasing prevalence of value-based partnerships between payers and providers, as payers adopt value-based care models that require greater collaboration with providers. This shift will incentivize better patient outcomes and cost-effective, quality healthcare. Wellness and prevention will move to the forefront as payers offer increasing levels of support to providers via analytics that identify gaps in care to help work toward improvements in population health
  • Increased adoption of technologies permitting the interoperable exchange of clinical data and data for claims processing, which will increase efficiency in payer-provider communications and decrease rates of claims disputes

How do changes in healthcare policy impact payer-provider dynamics?

Payer-provider relationships have long been extremely complex: The provider may be dealing with Medicare, Medicare Advantage, Medicaid, self-pay, direct-to-employer, and multiple commercial insurers—each with their own requirements for data collection and quality measurement. With providers contracting with multiple public, private, and self-funded payers, data collection requirements alone can become overwhelming. The costs and administrative burden have been well documented, with studies showing a potential savings of as much as $350 billion by implementing a simplified financial system.

Rapidly evolving healthcare policies can make these relationships even more demanding, as both payer and provider organizations face new territories stemming from changes in healthcare policy requirements related to health equity drivers, social risk, value-based care imperatives, and more.

Let’s look at some of the more notable healthcare policy changes and how they affect payer-provider dynamics.

Value-based care

The shift to value-based healthcare has made payer-provider collaboration essential—and value-based healthcare is at the root of many of the current changes in healthcare policy.

  • Value-based reimbursement asks providers to deliver care differently, which makes it vitally important to change the overall approach to patient care
  • Value-based care requires an increase in preventive care, demanding greater payer-provider collaboration to establish proactive patient care plans
  • Value-based healthcare also requires payers to become better partners in patient care, requiring payers and providers to identify common quality outcome goals


Value-based care, with its requirement for greater payer-provider partnership, also requires improved payer-provider communication of clinical and patient-related data. Increased interoperability would address this need, enabling increased data exchange and increasing opportunities for payers to support and collaborate with their providers.

CMS’s Advancing Interoperability and Improving Prior Authorization Processes Proposed Rule (CMS-057-P), currently under evaluation for inclusion in a final rule, addresses this need for increased interoperability to facilitate payer-provider data exchange—and it is also extremely likely to increase the need for increased payer-provider collaboration. The proposed rule:

  • Emphasizes the need to improve the exchange of health information among patients, providers, and payers, both to facilitate effective healthcare and to improve current processes for prior authorization
  • Focuses on establishing standards for data exchange and improving access to health data to improve patient care

Increased collaboration concerning patient care

Value-based care also makes it critical for patient data to reach providers in a timely manner, encouraging ever-closer payer-provider collaboration. Only with a close payer-provider relationship can a true partnership be formed, and only with a true partnership can stakeholders implement a proactive approach to patient care.

Not only is it critical to be able to deliver key patient data to providers at the point of care, but that data needs to be in a useful form. It also needs to reach providers while they are actually seeing their patients, when they are most likely to be able to use it to meaningly affect the patient’s care.

Payer-Provider Relationships and Veradigm

Veradigm is dedicated to simplifying and streamlining payer-provider relationships. Our unique portfolio of collaborative solutions facilitates data exchange, enhances vital payer-provider communications, and more. Veradigm’s tools can support your value-based care initiatives in an ever-evolving healthcare environment.

With innovative, insightful solutions, Veradigm is poised to help health plans, healthcare providers, and the patients they serve to improve patient outcomes, minimize patient risk, and streamline payer-provider collaboration.

For more information on payer-provider relationship topics, check out these additional resources:

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