Physician advisors and hospitalists bring indispensable value to contract negotiations between hospital systems and payers. Traditionally, contracting has been managed primarily by finance and administrative teams. However, as contracts increasingly dictate clinical practices, the absence of direct hospitalist input poses risks to clinical integrity, financial stability, and patient care outcomes.
Hospitalists possess a unique understanding of patient care realities, evidence-based medical practices, and regulatory standards. This expertise positions physician advisors to effectively negotiate terms that are not only financially appealing but also clinically appropriate and achievable. For instance, when contract language about clinical denials or observation status definitions is ambiguous, hospitalist input ensures clarity aligned with the Centers for Medicare and Medicaid Services (CMS) regulations and real-world care scenarios.
Consider the issue of observation care: without hospitalist involvement, contracts often contain vague definitions allowing payers to deny inpatient status unfairly. A physician advisor or hospitalist would advocate for clear contractual language aligning with the CMS two-midnight rule, ensuring inpatient approval if the payer cannot demonstrate patient care delays or justify observation beyond two midnights.
Hospitalists can also advocate for clear policies around post-acute authorizations, insisting on explicit timelines and consequences if payers fail to authorize necessary care within 24 hours. Such clarity reduces administrative inefficiencies and ensures timely patient care.
Physician advisors significantly enhance the peer-to-peer (P2P) process by advocating for clearly defined expectations, streamlined scheduling, and efficient, meaningful conversations between clinical peers. Hospitalists’ involvement in this process reduces administrative burdens, improves communication efficiency, and decreases the frequency of inappropriate claim denials.
Furthermore, hospitalists understand clinical validation denials and medical necessity criteria better than non-clinical staff alone. When physician advisors participate, contracts can explicitly reference widely recognized medical necessity guidelines—such as Milliman Care Guidelines (MCG) criteria used at M Health Fairview, a large healthcare organization in Minnesota—to ensure consistency, fairness, and transparency, thereby minimizing arbitrary denials.
Clinician involvement also safeguards fair treatment in readmission denials. Hospitalists can ensure contracts clearly define readmission policies aligned with CMS and local health department standards, distinguishing truly preventable readmissions from unavoidable rehospitalizations. This protects hospitals from unjust penalties and revenue losses.
Audit frequency is another contentious area where hospitalists and physician advisors add significant value. They can advocate for contractual limits on audit frequency, clearly defined review timeframes, and caps on the percentage of cases subject to audits. This ensures fair practices and reduces the hospital’s administrative burdens and resource drain.
Hospitalists can help ensure contracts explicitly define qualifications for medical directors responsible for reviewing and denying claims. In alignment with Minnesota statute and Medicare guidelines, insurers should disclose their reviewing medical directors’ names, specialties, and state licensure. Reviews must be performed by a physician of the same specialty, maintaining quality, accountability, and integrity in the denial process.
Additionally, physician advisors are well-positioned to negotiate clear and effective appeal processes within contracts, establishing firm timelines and explicit consequences for non-compliance by payers. This accountability is vital for hospital financial planning and resource allocation.
Joint Operating Committee meetings are another essential aspect that hospitalists can champion. Regular meetings between hospital clinical leaders and empowered insurance decision-makers can quickly address disputes, foster collaboration, and enhance transparency.
Integrating physician advisors and hospitalists into contracting leads to smarter, more equitable agreements. Their involvement ensures clinical practicality, regulatory compliance, and patient-focused perspectives in negotiations, resulting in contracts that improve hospital operational efficiency, enhance care quality, and secure appropriate reimbursement.
As financial margins tighten and the complexity of healthcare increases, hospitalists and physician advisors are essential for ensuring hospitals remain clinically effective and financially viable. It’s time to consistently include hospitalists in the contracting room—not just to support contracts, but to shape them.
Dr. Poonacha
Dr. Poonacha is a staff hospitalist, clinical associate professor of medicine, and medical director of utilization management at the University of Minnesota Medical Center in Minneapolis.
Dr. Chamoun
Dr. Chamoun is the vice president medical practice—UR and CDI at M Health Fairview in Minneapolis.