Providers and Payors: Friends or Foes?
by Dr. Adel Olleik and Ali Oleik
April 14, 2025 | Article
The relationship between healthcare providers and payors is often viewed as a delicate balance between collaboration and conflict, with both sides striving to improve patient outcomes while managing costs. As healthcare models evolve, this dynamic is increasingly under scrutiny: are providers and payors partners in delivering value, or are they adversaries with conflicting goals?
The Provider-Payor Dynamic: Why It Matters
The relationship between providers and payors has a direct impact on the quality, accessibility, and affordability of healthcare services. Providers aim to deliver quality care while maintaining financial stability, whereas payors focus on controlling costs and ensuring efficient resource allocation. According to a 2023 report from McKinsey, the global healthcare expenditure is expected to reach $10 trillion by 2026, largely driven by increasing demand and rising costs. This financial pressure amplifies the need for providers and payors to work together efficiently, but balancing cost controls with quality care remains challenging.
Points of Tension
While both providers and payors strive for the best outcomes, they often have conflicting interests that create tension. Some of the primary issues include:
Reimbursement Disputes: Providers frequently struggle with delays and denials of claims from payors. A 2022 study by the American Hospital Association found that over 40% of claim denials are preventable and addressing them could save the healthcare sector billions. For providers, denied claims mean lost revenue and financial strain.
Value-Based vs. Fee-for-Service Models: In recent years, payors have pushed for value-based care, which reimburses providers based on patient outcomes rather than the volume of services. While value-based care can reduce costs and improve quality, it shifts financial risks to providers, who are now accountable for both the quality and efficiency of care.
Administrative Burden: The documentation and reporting requirements imposed by payors add a significant administrative burden on providers. According to a 2023 survey by the Medical Group Management Association, physicians spend nearly 15 hours per week on paperwork related to payor requirements, detracting from patient care.
Shifts Toward Collaboration
Despite these challenges, many providers and payors are recognizing the benefits of collaboration to address shared goals, such as improved patient outcomes and cost control. A 2023 Deloitte survey reported that 67% of healthcare organizations are actively seeking collaborative partnerships with payors to create more effective care pathways and streamline processes.
Shared Data and Analytics: By sharing data, providers and payors can gain insights into population health trends, identify gaps in care, and implement preventive measures. For instance, some healthcare systems and insurers have used predictive analytics to reduce hospital readmissions, a costly issue for both parties.
Joint Care Management Programs: Collaborative care management programs have proven effective in reducing costs and improving patient outcomes. For example, Humana’s Bold Goal initiative has seen success in managing chronic diseases by working closely with healthcare providers, leading to a 7% decrease in hospital admissions among participating patients.
The Role of Technology in Bridging the Gap
Technology plays a significant role in enhancing provider-payor relationships by enabling transparency, reducing administrative burdens, and improving patient care.
Telemedicine and Remote Monitoring: Digital health solutions, such as telemedicine and remote patient monitoring, have allowed payors and providers to offer more accessible and efficient care. According to a 2024 PwC report, telehealth usage is expected to grow by 18% annually, driven by both provider and payor investment in virtual care infrastructure.
Automated Claims Processing: Automation can streamline claims processing and reduce disputes. AI-powered claims review systems can identify discrepancies before submission, allowing providers to address issues in real time. This not only speeds up reimbursement but also reduces administrative costs for both parties.
Towards a Symbiotic Relationship?
Looking forward, the relationship between providers and payors must evolve to meet the needs of a changing healthcare landscape. This involves building trust, establishing shared goals, and leveraging technology and data. As healthcare systems move toward more integrated care models, collaboration between providers and payors will be vital in achieving a sustainable balance of quality care and cost containment.
Risk-Sharing Agreements: Increasingly, providers and payors are exploring risk-sharing models, where both sides share financial risks and rewards based on patient outcomes. These agreements can align incentives and create a more cooperative environment.
Patient-Centered Approaches: Ultimately, placing patients at the center of the provider-payor relationship can drive mutual success. By focusing on improving patient satisfaction and health outcomes, both parties can achieve long-term goals and sustainability.
Amid growing pressures, finding common ground has become a necessity, not an option.
The three most common trade-offs in payor-provider relationships over the last two decades.
Source: Gates Group Strategic Advisory Team
From Competition to Cooperation
While historically fraught with challenges, the relationship between providers and payors is shifting towards one of greater collaboration. By addressing mutual goals, reducing administrative burdens, and harnessing technology, these two groups can become partners rather than adversaries in the quest to deliver quality, affordable healthcare. The success of this relationship will shape the future of the healthcare industry and determine how effectively it can meet the needs of patients worldwide.
About the Author(s):
Dr. Adel Oleik is the Managing Partner of GATES Group across its regional offices.
Ali Oleik is GATES’ Strategic Partnerships Director in the Riyadh office.
The authors wish to thank Salam Shokor for his contribution to this article.