The pros and cons of in-network contracts

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.

“The payer can request to audit your records at any time,” says Shaheed.

Such audits could be routine utilization reviews or could be for a specific reason, such as suspected fraud, overpayments or coding errors. Payers have large swaths of their own data and might want to tap into provider clinical records for big data projects such as population health. Whatever the reason, under most contracts, the provider will receive notice of the audit and will be expected to cooperate with the auditors or face penalties such as suspended reimbursement.

Pro: Payment and administration could become easier.

If the financials of an in-network payer relationship make sense for the organization, another benefit of this relationship could be predictable reimbursement. Once a behavioral healthcare organization signs a contract, being in-network may simplify the complex claims process because billing would be governed by the terms of one mutually agreed-upon contract, says Ryan.

Some payers will also provide more support for in-network providers, especially when resolving administrative issues, according to Shaheed. It can be a frustrating process to get answers in a timely manner, but experts recommend persistence. Payers generally assign a representative to in-network providers to help address issues as they arise.

This can be an invaluable resource for treatment centers, particularly when they have a lean administrative staff.

“I don't have those relationships when we are not in a payer’s network, and that makes it significantly harder to resolve problems,” says Chernof.

However, even when a behavioral healthcare organization opts to become an in-network provider, it must still invest in resources to improve administration and communication with that payer. For example Chernof tracks and maintains comparative data on every insurance company his organization works with. With this information, he can identify patterns.

 “We use this data to improve the payment and authorization process,” says Chernof.

To that end, Bridgeway added a new staff position to conduct intense continued-stay and discharge reviews.

“Our counselors and staff were overwhelmed and often waiting for hours for a callback,” says Chernof. “This approach has improved our process and improved our ability to get additional days authorized. And managing and communicating discharges in it timely fashion has also improved payer relationships.”

Good for business and for patients?

While becoming an in-network provider is largely a business decision, for many, it has become a marketing issue as well. Some experts wonder whether increased insurance coverage for American consumers will force the hand of providers who have long relied on self-pay and out-of-network status.

“Payers and administrators want long-term relationships,” Ryan points out. “It is not in the payer’s interest to have constantly changing networks.”

Joanne Sammer is a freelance writer based in New Jersey.