Five myths about contracting with commercial healthcare payers

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Ethical ABA companies should build the necessary resources and structure into their financial and business models to ensure their employees and clients have the right support structure and conditions to be successful. It’s important to make sure income covers these costs in a way that is sustainable over time. Having adequate reimbursement rates are central to a company’s success. Longer term implications may be less apparent to first time owners/operators.

Approaching contract negotiations in an informed manner is integral in this process. It should be tackled at the outset and not retrospectively or as an afterthought. When contracts are signed with commercial payers it can be very difficult to renegotiate better rates. If you are not intimately familiar with this process, this may be one of the worst places to forgo professional expertise. Just do the math. Changing your blended rates by even a few dollars can have a meaningful impact on your financial position and therefore your ability to reinvest in quality and compliance. This impact magnifies as you scale.

Here are 5 misconceptions that some ABA providers have about the process.

MYTH #1: COMMERCIAL HEALTHCARE FUNDERS CAN’T OR WON’T NEGOTIATE. 

False.

Commercial healthcare funders can negotiate. Any internal policies discouraging this activity can be modified or waived at the funder’s discretion. It’s generally a matter of bargaining power more so than anything else, so network adequacy is an important factor.

MYTH #2: CONTRACTING WITH ALL FUNDERS IN A GIVEN REGION IS A SIGN OF SUCCESS OR BETTER BUSINESS ACUMEN. 

False.

The reimbursement schedule commercial funders offer as their initial rates are largely market dependent. Knowing and negotiating to your budget is key.

MYTH #3: ACCEPTING RATES BELOW MEDICAID IS A REASONABLE OR STANDARD PRACTICE IN HEALTHCARE.

False.

In healthcare in general commercial reimbursement is often well in excess of public funders – Medicaid or Medicare. These public funders have processes for determining their rates and although this is not the only factor by any means, this is a relevant indicator and relevant to provider budgets and projections. 

MYTH 4: A FUNDER PROMISED ME THEY WOULD RE-EVALUATE MY RATES AFTER A YEAR IN NETWORK; THAT SEEMS LEGIT.

Unless you have that in writing, I would definitely say false.

If they’re serious about that they’d be willing to put it in writing, whatever the specifics of the arrangement may be. 

MYTH 5: FUNDERS WILL PROACTIVELY INCREASE REIMBURSEMENT RATES PROPORTIONAL TO INCREASES IN PROVIDER OPERATING COSTS

False.

SOME FINAL THOUGHTS: 

If any of your payer rates on their own can sink you, you might want to give that thought, since it’s possible your “better” payer lowers their rate. It’s not a regular thing, but it has happened multiple times across several markets. 

The “I’ll figure it out later approach” is not only unlikely to pan out, but it’s entirely irresponsible. You have people whose jobs depend on you, and clients who probably don’t want to get back on a waitlist at another provider.

ABA is an emerging market and whether it’s lack of knowledge on the part of providers, or market share, the reality is funders won’t make it a practice to pay more than they need. If providers keep taking the rates they’re offering, then why would it make sense to pay more, right? Providers operate independently and as part of a competitive market, and it’s up to the provider to determine whether the rates allow for sustainable operations that meet pertinent standards.

Brandon Herscovitch, Ph.D., LABA, BCBA-D

Partners Behavioral Health can help with your clinical and business standards, compliance, and outcomes. We can help you scale an ethical ABA practice you’re proud about.

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