5 Out-of-Network Myths Debunked
Have you heard any of these? Read on!
Here at Collect Rx we are continually amazed at how often people either have it half right or not right at all when it comes to the out-of-network (OON) industry realities. What surprises us even more is that providers don’t take advantage of the opportunities with OON reimbursements to increase revenue.
Let’s Face it…
As providers survey the landscape today, candidly there aren’t many opportunities to improve reimbursement rates. In-network contracts are what they are and there is limited, if any, opportunity to increase those rates. Similarly, Medicare and Medicaid reimbursement rates are what they are. But out-of-network represents a great opportunity for many providers to bring more dollars in the door to improve the bottom-line.
Now, on to the myths…
We’re sure you’ve heard of, or maybe have even said some of these. The 5 myths are as follows:
- “The days of out-of-network are over.”
- “Being 100% in-network maximizes reimbursements.”
- “I have a third party rental agreement that covers it.”
- “We’re doing fine.”
- “Outsourcing doesn’t make sense.”
1. “The Out-of-Network Days Are Over”
Candidly, the rumored “death” of out-of-network has been predicted for the past 20 years, yet it’s still very much alive today and will continue to be. Despite the dire predictions and the efforts payers have made as just described to reduce OON reimbursements, in 2021 there were more than $250 billion dollars of OON claims and growing. A lot of dollars for a segment that is going away!
A second reason that OON will continue to be an important piece of the market is the sustained growth in PPO enrollment. Most out-of-network bills come from PPO members, and PPO enrollment has more than doubled as HMOs have declined. Statistics show that 10-20% of PPO members will have an out-of- network experience each year.
Thirdly, “Narrow Networks”, or an insurance plan limiting the number of participating providers in exchange for a reduced premium, will lead to the growth of OON patients. Andrew Lovewell, administrator of the Surgical Center at Columbia mentions, “As healthcare costs continue to rise, and the opportunity for narrow network or high value networks with steerage develop, I think that private equity will continue to take a larger stance in the healthcare markets across the country.”
Payors are increasingly offering narrow network policies. The reason? Narrowing the network allows the payer to offer lower premiums as only less expensive providers are allowed into the network. In other words, there are fewer providers in narrow networks.
And we’re not just seeing smaller providers excluded from narrow networks; rather we are seeing major providers in major markets being kept out of these networks.
The one big downside stemming from narrow networks for patients is choice, or lack thereof.
Narrow networks, by definition, result in there being fewer in-network providers. As such, narrow networks lead to more OON providers. It’s therefore becoming increasingly important for these providers to understand how to handle OON billing.
But the ultimate most important reason OON is not going away is that people WANT to have OON benefits, and people are willing to PAY for OON benefits.
At the end of the day, payers have NO CHOICE but to sell policies with OON benefits. Opportunities to improve OON reimbursements may vary by geography and individual factors. But it’s clear that it’s not going anywhere and is here to stay.
Here at Collect Rx it is surprising how often people either have it half right or not right at all when it comes to the out-of-network (OON) industry realities. What surprises us even more is that providers don’t do more to take advantage of the opportunities with OON reimbursements to bring more dollars in the door.
- White Paper: Technology & Automation
- Common Coding and Billing Mistakes
- Technology & Your Revenue Cycle
2. “Being 100% In-Network Maximizes Reimbursements”
Out-of-Network reimbursements are almost double in-network reimbursements.
Despite the efforts by the payers, reimbursements for out-of-network bills today are higher — and frequently much higher — than a provider’s reimbursements on their in-network business. And with the proper expertise, strategy and execution plan, there’s an opportunity for providers to increase those reimbursements on these bills even higher.
Our view, and the view of most of the hundreds of ambulatory surgery centers we service, is that a hybrid out-of-network / in-network strategy puts surgery centers in the best position to maximize revenue. In other words, we recommend a strategy whereby an ASC goes in-network with some payers and stays out-of-network with others by following the process.
When putting together your OON strategy and determining which payers you should be OON with, the factors to consider include –
(1) the local payor and employer mix
(2) the comparable reimbursement levels for their most common procedures
(3) the relative market share of the ambulatory surgery center as compared to other providers.
If providers are prudent in picking and choosing the payers with which they are out-of-network, and are prepared to seriously engage payers on the unique parameters related to out-of-network reimbursements, they will maximize total revenue and profits.
PROVIDERS WITH NO CHOICE:
Now for some providers, of course, there is no choice but to be out-of-network. Because of their lack of leverage in the marketplace, some providers don’t have the ability to enter into managed care contracts even if they want to do so. But assuming the provider does have the ability to enter into contracts, how does it decide the payers with which they should sign a contract, and those with which they should stay OON?
So let’s review how you decide whether to go out-of-network with a given payer. The key is to compare the reimbursement levels currently experienced for their most common procedures under the in-network contract with the projected reimbursement levels if the ASC goes out-of-network with that payer. To make the comparison, the provider needs to compare the in-network reimbursement levels with the OON reimbursement levels on these most common procedures.
TOE IN THE WATER:
For providers that have traditionally been in-network, our recommendation is a “dip your toe in the water” approach. In other words, don’t go and cancel all of your contracts at once. Rather, pick a payer with which your volume is low and start there. See how you do financially over the subsequent 4 to 6 months before deciding where to go next.
One quick note about patient steerage and volume. Sometimes we hear providers express concern about losing patients if they go OON. While this is true for some types of providers, remember that, ASCs get their patients from physician referrals. As such, ASCs tend not to be dependent on payers for patient volume. As a result, unlike with other providers, going OON often does not significantly impact patient volume. If you execute it properly, OON should remain an integral part of most facilities’ reimbursement strategy.
3. “My Third Party Rental Agreement Covers It”
This one is a doozy. Buckle up.
One of the methods used by the insurance companies to lower out-of-network reimbursements is to enter into third party network rental agreements or continuous discount agreements. The irony is that many providers see these agreements as beneficial to them. In essence, the contracted rate is really just a cap on their OON reimbursements. If the payer will do better by using the contract, they’ll use the contract. If the payer will do better by not using the contract, they won’t use it. All of this benefits the payer, not you.
Unfortunately, most providers don’t understand how detrimental they can be.
First, it’s important to understand who is the customer with these agreements. To be clear, it is NOT the patient. It is NOT the provider. It IS the insurance company. Go check out their websites – you’ll see it right there. The reason this is important is that they are not there to serve you but to serve the insurance companies. And they do so as a cost containment initiative for the payers. Think about it – if they’re helping insurance companies SAVE money, who is LOSING that money?
While these agreements may sound attractive because they are easy to implement, these relationships oftentimes have unintended consequences and should be closely scrutinized. Let’s review some of the specific issues that often arise in these agreements.
How do they treat patient steerage?
Be clear that there is typically NO patient steerage from rental agreements. In the traditional managed care contract situation, you are essentially agreeing to a volume discount in exchange for the insurance company steering patients to you. In contrast, with rental network agreements, you’re accepting a discount, but typically are not seeing any additional patients.
Do providers know they’ve entered such agreements?
Not only do providers have no idea of the breadth of these agreements, many providers don’t even know they’ve entered into them. They were signed years ago by staff no longer at the facility, and the provider doesn’t even know it. We are constantly finding during our negotiations that contracts are being referenced, but our center’s biller has no idea about it when we inquire. Unfortunately. when we produce the contract for our provider, it still takes months to cancel.
Are the payers required to use a contract?.
No. To begin with, payers have multiple agreements and will choose the one with the best rate.
Also, there may be types of claims, such as those with limited benefit policies, that they don’t use the agreement to price. In other words, if the reimbursement level would be lower than the contract rate, they won’t take the contract. If the reimbursement level would be higher than the contract rate, they will use the contract.
Sometimes, providers don’t realize that the reimbursement levels are based on a % of the allowed charges, not billed charges. This means that payers take a cut to arrive at the allowed amount, THEN they apply the discount to that lowered amount.
So let’s say you have a case with $10,000 in billed charges, and the agreement says they’re reimbursing at 70% of allowed charges. The payer then determines the allowed charges.
In this example, assume the allowed charges are 60% of billed charges, or $6,000. THEN the payer applies the discounted rate from the contract, 70%. Of course, 70% of $6,000 is $4,200.
Many providers would think they’re getting 70% of $10,000, or $7,000, when actually they’re getting 70% of $6,000, or $4,200.
Collect Rx can provide a complimentary analysis of any 3rd party contracts so you understand what it is saying and how it is being applied.
We did this for one of our providers who told us their contract was for 90% of billed charges. We told them it didn’t make sense because it’s difficult to get a contract directly with a payer for 90% of billed charges, how can you now have a contract for ANY payer at 90% of charges. When he sent us the contract, it read 90% of allowed charges, not billed charges. Meaning the payer can decide on what charges are allowed, then take 90% of that number. After our analysis, the provider was only averaging an allowable of 34% of billed charges with that contract, and not the 90% they were expecting.
Are you allowed to terminate at will?
Typically these contracts are for one year terms and are subject to an “evergreen” clause, meaning they automatically renew on a yearly basis unless terminated by either party. The “catch” here, is the notice period to terminate. Sometimes the notice period is 180 days, meaning that you have to give 6 months notice just to terminate, and that notice must be at least 180 days prior to the anniversary date of the contractual period.
So let’s suppose you entered an agreement on July 1, 2017 and you decide in April 2018 that you want to cancel it. Since you’re less than 180 days from the anniversary date of July 1, 2018 you couldn’t cancel it until July 1, 2019 – in other words, on the following anniversary date.
This is an extremely onerous termination process.
Most providers just assume that in-network benefit levels are being applied since they accepted the discount. But really, the payer gets the best of both worlds – a discount on the rate and the higher out-of-network benefits.
Is there a reference to an administrative handbook? Oftentimes, these agreements explicitly incorporate the terms of the handbook into the contract. So things like multiple procedure reductions might not be addressed in the main contract, but is addressed in the handbook and you don’t even know it. I’ve even heard of reimbursement rates being changed using the handbook. How many of you review it when changes are made?
Bottom-line: If you’re in one of these agreements, you should seriously consider whether to cancel the agreement. Similarly, if you’re considering entering into one of these agreements, think hard before doing so. As you can see, in a lot of instances, these agreements hurt, not help, your reimbursements.
4. “We’re Doing Fine”
A fourth myth, and one we probably see most often for providers, is providers telling us “We’re doing fine.” In other words, these providers don’t need to think about what’s happening with their OON business because they’ve got it under control through one or more of the various tactics. What we see all too often is that many times these providers don’t, in fact, have it covered.
A lot of providers look at their OON reimbursements and say “we’re doing fine.” The reason they are lulled into believing they’re doing fine is that they compare their OON reimbursements to their in-network or Medicare or Medicaid reimbursements and find that OON is much higher. This is not, of course, the right comparison to make.
YOU COULD BE DOING BETTER!
What most providers fail to realize is that they could be doing better, sometimes much better, than they’re doing today. As we will say to providers, “you have an OON problem, you just don’t know it.” Put it this way, payers wouldn’t be taking the actions I described earlier to reduce OON reimbursements if it wasn’t in their financial interest to do so. But because they are doing better on their OON reimbursements – after all, 50% is far greater than in-network or Medicare reimbursements – they become complacent even though, in reality, they can be at 80% and above.
You Need To Ask Yourself:
· Resources. Do you have resources dedicated to appealing out-of-network under-payments and denials?
· Data. Do you have the data necessary to be successful?
· Appeals. Do you have the process and resources in place to effectively appeal claims?
· Audit. Do you have the process and resources in place to audit your activity?
If the answer was “no”, or even if you’re slightly unsure we urge you to contact us for a free consultation.
5. “Outsourcing Doesn’t Make Sense”
The final myth to address is the provider who declines to think about outsourcing this function.
Remember that the nation’s largest payers, with their considerable resources, expertise, and data, still outsource this function to companies that specialize in reducing out-of-network reimbursements. Yet we talk to providers all the time who insist on handling it themselves or retaining billing cos that lack the ability to do so.
Without the resources from the above points in #4 (expertise, data or bandwidth to name a few), which most providers fall under, you will not be successful with OON bills.