Out-of-network reimbursement used to be a profitable strategy for surgery centers, but times have changed. Pressure from payors, high-deductible insurance plans and the elimination of out-of-network benefits has made it increasingly difficult to survive on out-of-network. Eric Woollen, vice president of managed care for Practice Partners in Healthcare, discusses six situations where the strategy still works.
1. Signing a contract with an insurer would make cases unprofitable. Because of the risk of out-of-network reimbursement these days, many surgery centers dependent on out-of-network choose not to contract with payors because the contracts offer prohibitively low reimbursement on cases. "Payors, networks and commercial insurance companies can often dictate the market and produce contract rates that are fiscally unreasonable," Mr. Woollen says. He says a single unprofitable case should not be cause to move out-of-network, but aggregate unprofitability can be.
He recommends surgery centers look at their case volume as a whole to determine whether the offered contracts would damage profitability. For example, the surgery center might lose money on Case A but make significant profit on Cases B, C and D, meaning the surgery center can stay in-network as long as volume for profitable cases doesn't decrease. "As long as you're going to generate positive revenues overall, you might want to go ahead and move forward with the agreement," Mr. Woollen says. If, on the other hand, your aggregate reimbursement is too low to keep your center profitable, you might want to consider out-of-network.
2. Local health plans offer strong out-of-network benefits. The profitability of out-of-network reimbursement is often dictated by the health plans sold to employers in your market, Mr. Woollen says. He says essentially, a health plan will shop a range of plans to an employer group and will offer preferable premiumpricing if the employer chooses to minimize, reduce or even eliminate out-of-network benefits.
"The employer might say, 'Well, your network is very inclusive of the majority of providers we see in our area, so let's go ahead and save the money on premiums and potentially pass those savings on to our employees,'" Mr. Woollen says. While the decision to exclude out-of-network benefits limits employee choice, some employers prioritize cost savings over the ability to seek care from any provider in an area. Mr. Woollen says before a surgery center goes out-of-network, the leaders should understand the percentage breakdown of a payor's membership with out-of-network benefits. He also says some insurers will provide data on the split between self-insured and fully-insured members by county.
3. Payors have created a "closed network" in your market. Mr. Woollen says there are markets where payors have essentially created "closed networks" that don't allow additional contracting. "We've seen areas where payors say they won't add a single-specialty surgery center like a pain management center," he says. "You don't even have an opportunity to accept their rates and become a participating provider."
He says the payors may feel they already have a complete network without your facility and do not require any more saturation in the market. In this case, you have no choice but to go out-of-network because the payor won't allow you to contract with them.
4. Your volume will not suffer significantly if you go out-of-network. When surgery centers sign contracts with insurance companies, they essentially accept lower reimbursement rates in exchange for increased volume and steerage, Mr. Woollen says. The hope is that the payor network will drive patients to your facility, making up in volume what you may lack in individual case profitability.
If you're considering going out-of-network, you should have an idea of how the decision will affect your volume, Mr. Woollen says. The incremental volume gained via an agreement should at a minimum offset the discount given versus the current per case out-of network reimbursements. Additionally, some patients cannot visit out-of-network facilities at all based on their health plans, and payors have been known to threaten physicians' professional contracts if they refer patients to out-of-network facilities.
5. Your patients' deductibles are not aggressively high. Mr. Woollen says aggressive benefit design is one way payors prevent providers from going out-of-network. If a payor has a significant number of plans with out-of-network benefits, they may increase the financial responsibility to the patient to incentivize staying in-network.
"I've seen plans with out of network deductibles of $10,000, so basically they're showing the patients there's a significant cost savings in going to an in-network provider," Mr. Woollen says. If your patients have very high deductibles, they may be less likely to come to the surgery center in the first place, and if they do, you may struggle to collect full payment after the procedure. Communication is critical for the process of out-of-network to function properly.
6. Payors in your area have not capped out-of-network payments. Mr. Woollen says certain payors are capping out-of-network payments by creating "maximum allowables," or the maximum amount of money the insurance company will pay for an out-of-network case. This strategy makes out-of-network infeasible by essentially creating a one-sided contract that your surgery center has not agreed to. No matter what you bill for an out-of-network case, you will only receive a certain amount from the payor.
Learn more about Practice Partners in Healthcare.
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1. Signing a contract with an insurer would make cases unprofitable. Because of the risk of out-of-network reimbursement these days, many surgery centers dependent on out-of-network choose not to contract with payors because the contracts offer prohibitively low reimbursement on cases. "Payors, networks and commercial insurance companies can often dictate the market and produce contract rates that are fiscally unreasonable," Mr. Woollen says. He says a single unprofitable case should not be cause to move out-of-network, but aggregate unprofitability can be.
He recommends surgery centers look at their case volume as a whole to determine whether the offered contracts would damage profitability. For example, the surgery center might lose money on Case A but make significant profit on Cases B, C and D, meaning the surgery center can stay in-network as long as volume for profitable cases doesn't decrease. "As long as you're going to generate positive revenues overall, you might want to go ahead and move forward with the agreement," Mr. Woollen says. If, on the other hand, your aggregate reimbursement is too low to keep your center profitable, you might want to consider out-of-network.
2. Local health plans offer strong out-of-network benefits. The profitability of out-of-network reimbursement is often dictated by the health plans sold to employers in your market, Mr. Woollen says. He says essentially, a health plan will shop a range of plans to an employer group and will offer preferable premiumpricing if the employer chooses to minimize, reduce or even eliminate out-of-network benefits.
"The employer might say, 'Well, your network is very inclusive of the majority of providers we see in our area, so let's go ahead and save the money on premiums and potentially pass those savings on to our employees,'" Mr. Woollen says. While the decision to exclude out-of-network benefits limits employee choice, some employers prioritize cost savings over the ability to seek care from any provider in an area. Mr. Woollen says before a surgery center goes out-of-network, the leaders should understand the percentage breakdown of a payor's membership with out-of-network benefits. He also says some insurers will provide data on the split between self-insured and fully-insured members by county.
3. Payors have created a "closed network" in your market. Mr. Woollen says there are markets where payors have essentially created "closed networks" that don't allow additional contracting. "We've seen areas where payors say they won't add a single-specialty surgery center like a pain management center," he says. "You don't even have an opportunity to accept their rates and become a participating provider."
He says the payors may feel they already have a complete network without your facility and do not require any more saturation in the market. In this case, you have no choice but to go out-of-network because the payor won't allow you to contract with them.
4. Your volume will not suffer significantly if you go out-of-network. When surgery centers sign contracts with insurance companies, they essentially accept lower reimbursement rates in exchange for increased volume and steerage, Mr. Woollen says. The hope is that the payor network will drive patients to your facility, making up in volume what you may lack in individual case profitability.
If you're considering going out-of-network, you should have an idea of how the decision will affect your volume, Mr. Woollen says. The incremental volume gained via an agreement should at a minimum offset the discount given versus the current per case out-of network reimbursements. Additionally, some patients cannot visit out-of-network facilities at all based on their health plans, and payors have been known to threaten physicians' professional contracts if they refer patients to out-of-network facilities.
5. Your patients' deductibles are not aggressively high. Mr. Woollen says aggressive benefit design is one way payors prevent providers from going out-of-network. If a payor has a significant number of plans with out-of-network benefits, they may increase the financial responsibility to the patient to incentivize staying in-network.
"I've seen plans with out of network deductibles of $10,000, so basically they're showing the patients there's a significant cost savings in going to an in-network provider," Mr. Woollen says. If your patients have very high deductibles, they may be less likely to come to the surgery center in the first place, and if they do, you may struggle to collect full payment after the procedure. Communication is critical for the process of out-of-network to function properly.
6. Payors in your area have not capped out-of-network payments. Mr. Woollen says certain payors are capping out-of-network payments by creating "maximum allowables," or the maximum amount of money the insurance company will pay for an out-of-network case. This strategy makes out-of-network infeasible by essentially creating a one-sided contract that your surgery center has not agreed to. No matter what you bill for an out-of-network case, you will only receive a certain amount from the payor.
Learn more about Practice Partners in Healthcare.
Related Articles on Coding, Billing & Collections:
HHS: Return Overpayments Within 60 Days
Survey: Delay of ICd-10 Will Be Costly, "Potentially Catastrophic"
Study: Payment Varies Widely for Common Surgical Procedures