Making the right decisions for your rehab therapy private practice can be challenging. Nagging questions may even keep you up all night—questions such as, “Am I paying my employees enough? Or, “Should I send unpaid balances to a collections agency?” Or, with regard to in-network vs. out-of-network vs. cash-based, “Which payment model is right for my practice?” While we wish we could give you all the right answers—so you can get some rest—we can’t. After all, each practice is unique, and thus, the answers to these—and any other—questions you may have will be unique, too. What we can do, though, is provide you with as much information as possible to help make the decision process easier. With that in mind, here’s everything you need to know about in-network, out-of-network, and cash-based payment models (as well as some questions and answers to help guide your decision-making):
The Payment Models
According to NerdWallet.com, “In-network health care providers have contracted with [an] insurance company to accept certain negotiated (i.e., discounted) rates.” In return for accepting discounted rates, in-network providers usually receive built-in advertising, because the insurance company will promote those providers’ services to their beneficiaries. As WebPT’s Courtney Lefferts wrote here, “if you negotiate your payer contracts appropriately, you have a built-in referral source along with fair payment.” In this post, WebPT Billing Success Manager LaShawn Sherman—who used to work for a large payer in California—said, “The in-network benefits are obvious: patients can choose your clinic or numerous other providers when seeking PT—and they will undoubtedly pay lower deductibles, copayments, and coinsurances with an in-network provider than they would with an out-of-network provider.” Furthermore, “as an in-network provider, you’ll more than likely receive new patient referrals through your insurance carrier,” she said. And, “you’ll continue to get reimbursed at the same negotiated rate for any treatment or services you provide, as outlined in your payer contracts.”
If being in-network sounds like your cup of tea, you should know that you’ll have to jump through a few hoops to get there. According to Lefferts, “when a therapist wants to become an in-network provider, he or she must go through both the credentialing and contracting processes”—both of which can be time-consuming and energy-depleting. And your credentials aren’t permanent. In fact, you’ll need to recomplete the credentialing process as frequently as your state laws and contract terms dictate. Speaking of contract terms, be sure you’re well prepared to negotiate agreements that actually meet your needs—and that you know what red flags to watch out for in your payer contracts.
Out-of-network providers are not contracted with insurance companies. In other words, the insurance company recognizes the provider as being a legitimate medical professional—it knows things like the provider’s name, national provider identification (NPI) number, professional license number, and tax ID—but the provider has no contractual agreement to charge a specific rate. As WebPT President Heidi Jannenga explained in a recent webinar, out-of-network providers have significantly more flexibility when it comes to determining the price of their services—although they do still need to adhere to the rules set by the insurance company, which may require them to submit requests for prior authorization or precertification. Being out-of-network also affords providers the ability to choose their payment method. They can:
- Collect part of the payment from the patient and then submit a claim to the insurance company to be reimbursed for the remainder;
- Collect the entire payment from the patient and then submit a claim to the insurance company requesting reimbursement on behalf of the patient; or
- Collect the entire payment from the patient and provide the patient with a superbill that he or she can submit to the insurance company to request reimbursement.
Many cash-based providers use payment method number three above: they collect the entire payment from the patient and provide a superbill for the patient to submit in order to receive reimbursement. In fact, the terms “cash-based provider” and “out-of-network provider” are often used interchangeably. However, that doesn't necessarily mean patients will receive reimbursement—especially in full.
This is one of the reasons why it’s so important to set clear expectations with patients prior to their first visit. As I wrote here, “it’s imperative you ensure that all prospective patients understand exactly what it means to see a cash-based provider. That includes telling them what, when, and how they’ll be charged for your services—as well as what steps they’ll need to take in order to request reimbursement from their insurance companies.”
Before making any decisions, you'll need to consider a variety of factors—including your risk tolerance, geographic area, referral sources, and overhead. Patient demographics are important as well, because some patients may not be comfortable paying for your services out of pocket—whether or not they later receive reimbursement from their insurance company. Also, keep in mind that you don’t necessarily have choose one model over the other; you can, in fact, adopt a hybrid model, which involves picking and choosing the insurance companies you wish to contract with—and dropping the ones you don’t. Keep reading to learn how—and when—to make that call (adapted from this webinar and this FAQ doc):
When should I drop a payer?
The decision to drop a payer can be a challenging one to make—and it’s not something you should do without a plan, because it could cause your revenue to decrease (at least in the short term). However, accepting patients from a payer that isn’t paying you enough to cover the clinical costs associated with seeing those patients is a losing battle—one that could end up hurting your practice in the long run. According to Jannenga, “some providers try to make up the cost difference by either increasing the volume of patients they see or reducing total patient treatment time or care episodes, but none of those decisions are based on what’s best for patients; instead those providers are making concessions to their treatment plans that essentially reduce the quality of the care they’re providing for all of their patients.” If you’re making that sacrifice, then something has to give, and it’s probably best if that something is the payer.
When should I not drop a payer?
As WebPT CEO Nancy Ham explained in the above-cited webinar, “you might feel obligated to accept a way-less-than-ideal contract because rejecting it could:
- prevent some of your current patients from receiving the care they need,
- reduce the number of new patients you see, and
- cause problems with your top referrers.”
That’s why Ham recommends considering the whole picture before you “draw a line in the sand” with a particular payer.
When is becoming an out-of-network—or cash-based—provider a good idea?
Becoming an out-of-network provider can be a smart solution in situations where you’re not getting enough money from your payers to cover the cost of a patient visit. That’s because going out-of-network will enable you to negotiate with the patient directly—something you can’t do when you’re under contract with a payer—to reach a fee that works for both of you. To learn how to convince your patients that your services are worth paying out of pocket, watch the recorded version of the webinar here and check out the Going Out-of-Network and Demonstrating Value sections of this FAQ doc.
As insurance reimbursements continue to decline, switching to a model where you receive payment directly from the patient may become increasingly enticing (in fact, cash-based and out-of-network practices are actually on the rise). Plus, some practitioners have found that switching to this type of payment model enables them to provide more focused, individualized care for their patients, thereby improving patient outcomes and satisfaction levels—two very important metrics for a successful practice. What model does your practice currently use—in-network, out-of-network, cash-based, or hybrid? Use the comment section below to tell us what makes the model you’ve chosen right for your practice.