Contracting with health systems is a different game.

When a network build requires a major health system contract, the approach that works for independent physician practice contracting will not get you there. Health systems have legal departments, finance departments, contract analysts, and managed care executives — all of whom have a role in any new plan contract, and none of whom move on the timeline that a network build usually wants.

Understanding how health systems make contracting decisions, what their internal process looks like, and what they are evaluating in a new plan relationship is essential preparation before you pick up the phone.

Who actually makes the decision

At most large health systems, the managed care contracting decision involves at minimum: a managed care director or VP who owns the relationship, a finance team that models the contract economics, and a legal team that reviews the contract language. At systems with multiple hospitals and a large employed physician group, there may be separate contracts for the hospital facilities, the employed physicians, and any affiliated independent practices — each of which may go through a slightly different internal approval process.

The person who takes your initial call is usually not the person who approves the contract. That is fine — they are the right person to build the relationship with and to understand what the system's priorities are. But don't confuse a positive initial conversation with decision-making authority. Ask, early in the process: who else needs to be involved for this contract to be approved? Understanding the approval chain before you invest time in negotiation prevents surprises late in the process.

The timeline reality

Health system contracting timelines are measured in months, not weeks. A new plan relationship with a major health system that has never contracted with you before will typically require:

• Initial outreach and relationship building: 2 to 4 weeks
• Formal proposal submission and finance review: 4 to 6 weeks
• Contract negotiation (term sheet, facility fee structure, carve-outs, payment terms): 4 to 8 weeks
• Legal review: 3 to 6 weeks
• Board or executive approval, if required: add 2 to 4 weeks for the next meeting cycle

This means a health system contract that you start negotiating in month three of a build may not be fully executed until month eight — which may be your go-live month. The credentialing of system-employed physicians can proceed in parallel with contracting, but many credentialing processes require an executed contract before they will complete. Build for this.

The facility fee question

Hospital-based outpatient services — imaging, lab, physical therapy, and specialist visits in hospital-owned outpatient facilities — typically carry facility fees in addition to the professional fee. This is a meaningful cost difference from the same service provided in a freestanding or independent setting. How you structure the facility fee negotiation affects both your unit cost and the member experience (because members face higher cost-sharing at hospital outpatient settings under most benefit designs).

Make sure you understand, before you enter financial negotiations, which services the system is billing as hospital-based and which facility fee schedule you are negotiating against. Some systems have multiple facility fee structures — different rates for different hospital campuses or outpatient facility types. Getting clarity on this upfront prevents a late-stage discovery that the contract economics you modeled were based on professional fees only and the actual cost is substantially higher.

All-or-nothing provisions

Large health systems often push for provisions that require you to include all facilities and employed physicians in the network, or none of them. This is a negotiating position, not a regulatory requirement, and there are legitimate business reasons to push back on it.

If a system has a hospital in a county where you don't need it for adequacy, or has specialists in service lines that are outside your benefit design, paying for a system-wide contract to get the providers you actually need may not be the right financial structure. Negotiate scope clearly — what facilities, what service lines, which employed physician groups are included — and don't agree to all-or-nothing language without understanding exactly what “all” means in terms of your cost exposure.

The leverage in a health system negotiation is your members — and your members are only valuable leverage if the system actually wants them. Know that before you sit down.

When to bring in executive relationships

Health system contracting sometimes stalls at the working level for reasons that have nothing to do with the financial terms — it can be an internal prioritization issue, a change in the system's contracting strategy, or a relationship problem between the plan and the system that predates the current engagement. When a negotiation has been stalling for more than six to eight weeks without clear progress, it is often worth an executive-to-executive conversation to understand whether the relationship has a path forward. A health plan CEO or CMO call to a health system CEO can reset a stuck negotiation faster than any amount of working-level follow-up.