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Why are your Managed Care Negotiations Similar to a Game of 3 Card Monte

A note from our President, Sam Donio

May 2021

Everyone knows Three Card Monte, where you have to pick one card (usually an ace) out of three that allows you to win. Although the game seems straight forward, the dealers win far often than not because of their slight-of-hand and distracting techniques. They are so adept at moving cards on the table that you lose track of what you need to be focusing on. And there’s a reason why they continue to offer three card monte…because they win!

3 card monte.jpg

Managed care organization have you losing track of where the key card is by distracting you with new rates. And new rates are so shiny, but so often they are just another sleight-of-hand trick.

What do we mean by that? Well, managed care organizations will give you new rates and tell you it’s an increase of x% on your current rates, but is that really true? NO ITS NOT! Why…because they will not actually be paying to 100% of those rates; they more often will pay you something less than those rates, often far less.

The key is to know how much less, so you can evaluate what you will actually earn – not what the announced rates are, but what your actual revenue will be. Look at your current rates. If they are shorting you on your rates now (and they probably are), they will most likely short you at least as much on the new rates. It’s how they make money!

Unfortunately, most of the time our clients model the new rates compared to the old rates. But they often do not take into account what they are actually being paid, which is always less. Thus, a crucial aspect of their modeling relies on faulty assumptions.

To make matters worse, not only are most hospitals shorted on their rates but they make spending decisions based on this faulty analysis.

This phenomenon of higher rates = less revenue is prominent in the managed care contracting world. However, there are ways to increase your chances against the dealer. If we change how we model the new rates and use current revenue realization rates, then we are in a much stronger position – because now we will know where the ace will be, as opposed to where we thought it was.

Although this analogy may seem flip, I can assure you that we work with clients every day who are amazed at their shortfall of expected vs. realized revenue when it comes to their managed care rates. Many don’t realize that they have the power to change the dynamic. The Three Card Monte dealers expect to win, but there is no rule that says they have to. 

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