The Contracted Rate Is Not the Paid Rate
Nobody has ever audited whether health plans' claimed contract savings are real. Not GAO, not a journal, not once. The closest study found why: administrators treat provider contracts as proprietary and obstruct the audits that would check — while sometimes charging "shared savings" fees larger than the provider's reimbursement. Six things from building a contracting instrument around that absence.
1. The signature and the check are different documents. Between them sit lesser-of clauses, stop-loss corridors that flip a claim to percent-of-charges, outlier provisions, and the edit stack. There is no published prevalence data for any of these — the mechanics every negotiation turns on exist only in trade literature. The only way to know a book is to model that book.
2. Name the denominator. RAND's latest round: employers paid 254% of Medicare in 2022, with states running from under 200% (Arkansas, Iowa, Massachusetts, Michigan, Mississippi) to over 300% (California, Florida, Georgia, New York, South Carolina, West Virginia, Wisconsin). "We're at 175% of Medicare" is excellent in one state and unremarkable in another — and meaningless without a stated source.
3. A discount from a number they write is not a price. Peer-reviewed: discounted-charge contracts — still a fifth of hospital admissions — are the most inflationary contract form, because the discount anchors to a chargemaster the provider controls. Forty percent off a doubled charge is a raise.
4. The escalator negotiates itself. A 5% annual escalator against 2.5% Medicare trend moves a 220% contract to 248% over five years — twenty-eight points nobody bargained for in year one. Compounding is the quietest clause in the contract. The year-five price was decided at signing; almost no one priced it then.
5. The fallback price moved. The No Surprises arbitration record: roughly 4.8 million disputes against a projection of twenty thousand a year. Providers win 85%+ of determinations. Median awards run around triple the qualifying payment amount. A network strategy that prices out-of-network exposure at the QPA is pricing at a ceiling the arbitration record has repealed — leverage math from 2020 is now wrong in both directions.
6. The value-based label outruns the risk. Even by the industry's own self-reported survey, commercial payment is still 50% pure fee-for-service, and only 19% carries any downside risk. Most of what is sold as value-based care is FFS with a bonus stapled on. Ask what percentage of dollars can actually be lost.
We built these into an instrument: the escalator compounding table, the structure-mix check against the published shares, the IDR record beside any out-of-network assumption, and the audit-rights flag on every savings claim — because a savings number without audit rights is a number nobody, including the client, can ever confirm.
Negotiate the audit right before you negotiate the rate.
For your ten biggest contracts: what share of paid dollars actually flowed at the headline rate last year — and who in your building can answer that?