Skip to content Skip to navigation

The pros and cons of in-network contracts

February 9, 2016
by Joanne Sammer
| Reprints

The decision whether to become an in-network provider for local payers is a critical one for behavioral healthcare organizations. And like anything, organizations must consider the pros and cons of obtaining and maintaining in-network provider status. Here are some of the key issues behavioral healthcare organizations should carefully weigh before making this decision.

Pro: The right payer network could generate referrals and increase intakes.

As an in-network provider, a treatment center would be listed in the payer’s online provider directory, which can bring in a flow of new patients who are members of the plan. As out-of-pocket costs increase, savvy consumers will increasingly look to in-network providers to keep their costs as low as possible. In addition, the payer itself would steer patients to in-network providers through its call center.

When consumers and other in-network providers know about a behavioral healthcare organization’s services, “it kind of builds on itself and generates a fair amount of referrals,” says David Chernof, vice president of quality assurance and standards for Bridgeway Behavioral Health in St. Louis, and a Behavioral Healthcare editorial advisor.

In addition, many patients and family members will quickly eliminate any provider that does not accept their insurance plan. Experts recommend providers add the list of which insurance plans they accept on their websites because patients often use insurance coverage as the first criteria for identifying potential providers.

Kevin Ryan, member in the healthcare and life sciences practice of law firm Epstein Becker & Green in Chicago, says those lower out-of-pocket costs could lead to a much longer relationship because the patient will see the in-network provider’s service as less of a financial drain overall.

Con: Increased patient flow is not guaranteed.

Referrals to in-network providers is not automatic and may depend on the market conditions. Being an in-network provider for a smaller payer does not always increase patient volume enough to balance the trade offs involved.

“Behavioral health organizations should consider the demographics of the payer,” says Ryan. “The amount of additional business is certainly dependent on the payer, the provider, the specific service area and other competitors.”

Consider the payer’s presence in the service area, its reputation among patients and what other behavioral healthcare organizations say about reimbursement lag time and pay rates. Providers might be able to find the answers to these questions by conducting their own due diligence and by talking to other providers that are in-network. A search on the respective state healthcare exchange marketplace can also yield information related to the payer’s foothold in the market.


 

Con: Joining a payer network does not always make sense financially.

The financials of the payer relationship will likely be the ultimate sticking point. For example, a behavioral healthcare organization might calculate its per-day cost of treating patients and compare it to the per-day reimbursement level from a specific payer to its in-network providers, according to Anelia Shaheed, an associate with law firm Julie W. Allison, P.A. in Miami.

Although this seems all too obvious, “a lot of providers don’t do this,” says Shaheed. “If you are operating, like most providers, with a certain profit margin, going in-network could basically eliminate that.”

But in return, the provider expects to increase patient volume, which in theory should boost revenue overall. The calculus of volume and per-patient margin can impact everything from expansion plans to the provider’s solvency. To enter into an in-network relationship, providers must do at least a basic analysis that identifies the minimum the provider can accept as an in-network provider to maintain financial stability.

“You need to really understand what your service cost is,” says Chernof. “Any negotiation with an insurance company to become an in-network provider will focus on rates and, if the insurance company does not offer a rate that makes the margins you are looking for based on your own cost, I would say don’t do it.”

There are providers accepting cut-rate payment, often because they don’t calculate their costs accurately enough before signing the agreement.

Pro: You can negotiate.

A focus on financials must continue throughout the relationship.

“Insurance contracts are not set in stone,” says Shaheed. “You can negotiate.”

For example, if a payer offers a certain reimbursement amount for a particular service, the provider can counter with financial proof that it requires a higher rate. Other elements of the contract could also be negotiable. For example, some contracts might limit providers’ ability to appeal decisions made by the payer.

By continually tracking program costs against in-network reimbursement, treatment centers will know when they need to ask for rate increases or even decide whether the in-network relationship itself is still viable. In some markets, the insurer is so large, individual provider negotiations are exceedingly difficult.

Chernof encourages executives to bring plenty of data to the table. This data should include the number of insured patients treated, any outcomes data, the number of vulnerable patients engaged in a lower level of care to prevent relapse, and overall financial data on the cost of service delivery. Experts also recommend pitching a routine cost-of-living increase.

“Remember to ask for a rate increase every year if not more often,” says Chernof.


 

Con: In-network providers are subject to payer audits.

Pages

Topics