What is this rate built on?
Last time I asked who owns the number after the outside team leaves.
This time I want to go earlier. Before the work starts. Before anyone signs.
The belief I'm working from this month: a result keeps working only if a missed number leads to a real change.
Here's where that belief gets tested first. In the contract.
1. A rate is not a rate
A rate set on a forecast mix, with no reconciliation if the mix moves, is not a rate. It is a risk transfer.
The forecast is an assumption. The rate puts a price on it. If the mix moves and nothing in the agreement reconciles, the difference still lands somewhere. The contract just never said where.
So the question before you sign is not what is the rate.
It is what assumption is this rate built on, what happens if that assumption moves, and who bears it?
2. Assumptions move quietly
This year I sat with a health system finance team during a denial management pilot. The model flagged a payer segment where write-offs were running 34% higher than the plan average.
The segment had been that way for six quarters. The data had always been there. Nobody had asked the question.
That wasn't a rate negotiation. But it has the same shape. A plan built on an average. A reality that drifted away from it. And nothing that forced anyone to look.
Assumptions don't announce when they stop being true. They just stop. If nobody wrote down what happens next, the answer is nothing. For six quarters.
3. Who bears it
The second half of the question is the one people skip.
I've written about behavioral health payment pilots. The fastest way to kill one is to put downside risk on providers in year one. Most of them do not have the data infrastructure primary care spent a decade building. And a provider that cannot see its own numbers cannot manage to them.
That's the trap in a risk transfer nobody named. The risk can land on the party least able to see it coming.
I asked a version of this earlier in the year, about health system CFOs taking on venture investing. Who actually owns the diligence? And who wears it if it does not work?
Same question. Ask it before the signature, not after the variance.
4. Write the move before you sign
In the last issue, the third question in the warehouse test was "Move it." What happens the day a measure moves the wrong way? If the answer is "we'd discuss it," there's no move.
A reconciliation clause is a move written in advance. It turns a missed assumption into a named change instead of a meeting.
I've seen what that looks like inside an organization. Two health systems, similar size, similar markets. In the one that moved, the VP of Strategy could kill an initiative that missed two consecutive quarterly targets. The consequence was agreed before the miss. That system cut its budget cycle from five months to six weeks and reallocated $12M toward its top three priorities in the first year.
A contract can work the same way. Before you sign, answer three things in writing:
- The assumption. What forecast is this rate built on? State it so nobody can argue about what it means.
- The move. What happens if that assumption moves? Name the threshold and the reconciliation.
- The bearer. Who carries the difference until it's reconciled? A name, not a table.
I wrote this about capital plans, and it holds here too: any question you can't answer in a sentence is the work to do before the vote, not after.
That's what owning the assumption looks like. You don't wait for the number to miss to find out whose problem it is.
Think about the last rate you agreed to. What assumption was it built on, and who carries it if that assumption is wrong?
If this was useful, forward it to someone who signs contracts, or subscribe so the next issue comes straight to you.
James