### Why Providers Must Cease Subsidizing Payers’ Profit Margins: An Urgent Appeal for 2025

The healthcare sector is experiencing a financial crisis that has persisted without resolution for far too long. Providers—such as hospitals, health systems, and medical practices—are finding it increasingly difficult to maintain financial health, while payers, including major insurance firms like UnitedHealthcare, thrive with substantial profit margins. For example, UnitedHealthcare reports a 6% revenue margin, amounting to $22 billion each year. In comparison, hospitals see an average of a 3% margin, and many physician offices operate at a loss. This disparity is not only unsustainable but also inequitable, highlighting the immediate need for providers to secure reimbursement rates that guarantee their ongoing financial health.

### A Worsening Financial Dilemma

The financial pressures on health systems are especially intense. On average, health systems incur losses exceeding $200,000 yearly for each employed physician. Such losses threaten providers’ capabilities to offer competitive salaries, reinvest in cutting-edge technologies, sustain facilities, and ensure that patients have access to top-quality care. This systemic imbalance illustrates a concerning reality: providers are, in effect, subsidizing the profit margins of payers at the cost of their own margins and, in certain cases, their viability.

The narrow margins for health systems are further strained by inflation, workforce shortages, and the escalating costs associated with healthcare delivery. In contrast, certain payers continue to generate billions, reporting profits that significantly exceed those of providers. As we near 2025, it is vital for health systems and physician practices to take proactive steps to confront these inequities.

### A Tactical Plan for Negotiating Fair Rates

Fortunately, some provider groups have begun to reverse these trends by securing more favorable contracts with payers. A focused and strategic negotiation approach has led to rate increases of 20% to 25% for various organizations, proving that improvement is achievable. The following steps outline how providers can reclaim control over their financial futures:

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### **1. Perform a Comprehensive Market Analysis**
The first action in renegotiating reimbursement rates is to comprehend how current rates stack up against local and national benchmarks. By examining high-volume Evaluation and Management (E/M) and Current Procedural Terminology (CPT) codes, providers can pinpoint discrepancies between their rates and those of similar organizations.

For instance, if a provider’s current rates for frequently used services sit below the regional 70th or 75th percentiles, this data can serve as a strong foundation for pushing for an increase. Investing in powerful analytics tools and consulting support can enhance this process and yield actionable insights.

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### **2. Create a Board-Endorsed Policy on Minimum Acceptable Rates**
Establishing a formal policy that specifies the minimum acceptable rate for any payer contract is essential. This policy offers clear direction during negotiations and sets uniform standards throughout the organization.

Importantly, it also communicates to payers that the provider is prepared to take significant steps, including going out of network, if their rate requests are not fulfilled. While such measures carry risks, effective communication with employers, patients, and community stakeholders can alleviate potential backlash.

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### **3. Inform Payer Representatives**
Payer representatives often engage in contract renewal discussions without a comprehensive understanding of providers’ financial conditions. Providers should proactively engage with payer representatives to explain their rationale for rate increases. Key discussion points may include:
– Achieving financial sustainability by reaching the 75th percentile of regional rates.
– Aligning rate increases with payer trends (e.g., rising premiums and profitability).
– Offering competitive salaries to attract and retain skilled practitioners to guarantee quality care.

Demonstrating real-world examples of how inadequate rates hinder the provider’s capacity to deliver care can foster understanding, potentially facilitating a more cooperative negotiation process.

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### **4. Draft a Thorough Rate Increase Proposal**
Success in negotiations hinges on thorough preparation. Providers should assemble a comprehensive, data-driven proposal that specifies their rate increase requests for E/M and CPT codes over a 24 to 36-month timeframe. Furthermore, providers must quantify the financial impact of the proposed payer rates on their practice or health system.

For instance, illustrating how a 10% rate increase can lead to better financial performance may reinforce the provider’s argument. Utilizing historical data, benchmarks, and predictive modeling can enhance the proposal’s credibility.

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### **5. Be Ready to Issue a Notice of Termination**
If negotiations stagnate or fail, providers must be prepared to issue a notice of termination to the payer. Although this is a significant action, it demonstrates seriousness and can serve as leverage to advance negotiations. Providers should ensure transparency throughout this process, providing detailed explanations to employees and patients regarding the potential consequences of going out of network.

Out-of-network status has increasingly become the norm in high-stakes disputes. The recent UnitedHealthcare issue in New York City exemplifies payers’ readiness to negotiate when threatened with the loss of a major provider network.

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### **6. Oversee the Execution of New Contracts**
Once a new contract is finalized, it is crucial for providers to monitor the implementation.