What to Look Out for with Payer Contracts, Part 1 of 4: Evaluating an Opportunity

There are many important factors to take into consideration before you sign or renew a contract with a payer. How will this payer help you grow your business? How will it treat your patients? How will it affect the quality of care you provide? How will it impact everyone on your staff? And could it place an unnecessary financial burden on your practice?

How Will It Affect Your Bottom Line?

In this series, we’ll help you weigh all the pros and cons. We’ll ask a lot of questions, but promise this extra legwork will pay big dividends down the road. First and foremost, can you make money on this contract? What is the projected payment per visit? What is the estimated cost per visit?

Is this a contract you already have or a new one you received through a network? Ask your fellow practice owners if they received the same solicitation. If not, find out why. Did your network reject this contract? If so, what was their rationale?

Next, you’ll want to look at how many patients this payer will really bring through the door. What percentage of your practice’s business will be derived from this payer? Are you willing to give up some of your profit per visit to have access to this pool of patients? Or will it lower the payment for a patient population you already have through another, better paying contract?

Does this contract give you access to patients you wouldn’t have otherwise? Does this payer actively direct new patients to you? Are there out-of-network benefits? How many other PT and OT clinics are included in this provider’s panel? Are there too few to properly service this area or are there too many to compete with in a limited geographically area.

How Will It Affect Your Patients?

Is the goal of the contract to assure higher quality of care? Does it “raise the bar” over that required by law? If so, how? Does it require Medicare certification? Does it require the use of outcomes tools and measures? Does it require specific clinical services or special clinical certifications? Does it require treatment by a particular level of staff? Are the co-pays high? (e.g. >25-30%) Many patients will be reluctant about complying with a treatment plan if it requires their own out-of-pocket costs. Are the payment levels below Medicare? This might discourage them to schedule follow-up visits as well.

How Will You Be Compensated?

What are the driving motivators of this contract? Are the primary goals to decrease the cost to the payer, ration care, or both? It’s essential to know which form of risk sharing will be involved. Though it is rarely used today, capitation has proven to be ineffective at controlling costs for payer entities.
You may be offered episodic (or case rate) payment for an episode of care. Or you may have to decide if you’ll be content with a per diem cap or a fee schedule that is capped per day.

Above all else, resist signing a contract out of fear. This is precisely why payments to therapists keep dropping. When you carefully consider all of your options, you will earn more for your services. In the remainder of this “What to Lout Out for with Payer Contracts” 4-part series, we’ll show you how to how to prepare for a negotiation, evaluate existing contracts, and renegotiate an existing contract.

Don’t fall for any high-pressure sales tactics to commit to a payer. Instead take a step back and do your research. Read the fine print of the contract. Ask your fellow practice owners what they’ve experienced with this payer. Peruse the online forums to see what others have experienced. Or you can run that contract by your attorney, billing manager or a billing service. As a BMS Practice Solutions client, we can help you through this process. For the past 25 years, we’ve worked with 3,000 payers across the country, so we can help you make an informed choice that’s right for you.