Payer Contracting: Part One

Richard: Welcome back to Agile&Me, a Physical Therapy leadership podcast series. I'm Richard Lever, your host. And today I'm excited to welcome Mark Setlock. Mark is our Director of Payor Relations for Alliance Physical Therapy Partners. So welcome, Mark.

Mark: Well, thank you very much, Richard. It's nice to be here. Thank you.

Richard: So this is going to be a series of podcasts because everyone is very excited about payor relations, obviously. So I thought that there's enough information for a number of podcasts. So if you're listening, then excited to welcome you to not only listen to the first one but later episodes as well. But before we do that, Mark, I'd love for you to perhaps introduce yourself to the listening audience as it goes to your background and experience as it pertains to payor relations.

Mark: Sure. So I started in payor relations back at the hospital level at an academic medical center. And that got me to see both sides of the physicians and the hospital contracting. And directly from there, I jumped into PT and spent the last 15 or so years working at various P.T. companies, pediatric and outpatient physical therapy. And even spend a little bit of time on the payor side just to see how it was over there.

Richard: So you were on the dark side then?

Mark: I was for a very short time, yes.

Richard: We'll forgive you. So 15 years, that's a lot of experience within the PT space. So excited to chat with you given your experience within this sector. So I think in this episode, what I'd really like to do is just explore the real basics because, from my perspective, I'm sure many of our emerging and existing leaders within the PT space, payor relations is somewhat of a dark art and you know, there's a lot to know about it to understand it one and two to be actually, I think, impact our relationships with payors. So if we can start really at the beginning and when we talk about payor relations. We're really talking about payor contracts. So why do we even have contracts with payors?

Mark: Well, I believe we have a pair of contracts because it allows the payors to have some sort of direct involvement in the healthcare space. So, the payor contracts are really just legal documents that the health insurance companies sign with providers and the payors are collecting the premiums from the members, under the promise that they're going to pay for their health care. And so I think it was an opportunity for payors to inject their spin on health care and to kind of help dictate the direction of patient care.

Richard: So essentially, very basic level, it's a contract between the provider and the insured, essentially. They are the third party, really, the entity that bonds that relationship. And the contract essentially stipulates, and we'll go into this in more detail, I'm sure, later with regards to how it's provided, the terms of the provision. I assume it includes a lot more things as well. So contracting has been around for a long period of time. So did this start for a specific reason or, you know, do you have any historical context to, perhaps contracting? Because, you know, I only came to the States about two decades ago. I'm sure that there is, there is more to this with regards to contracting.

Mark: Yeah, I think the ultimate goal of the contracts is to lower cost to the members. And so I think that this really picked up steam kind of in the 80s and 90s with employer groups giving that as a benefit to their employees. And so this kind of grew out of that, I believe. And so the payor is promising to lower the cost. The ever ballooning cost of health care for the members. And the members are getting that benefit from their employer and the employer early on was paying the bulk of the premiums on their behalf and then over time and in recent years, it's the costs have shifted to more to the patient and the patient has more out of pocket, more deductibles, more coinsurance needed than it used to. But I think that that kind of started in the 80s, 90s, I believe.

Richard: That's really interesting, the concept that the payor, the insurance company was supposedly there to reduce cost. And I would imagine pretty much ever since the cost of health insurance has gone up in excess of inflation. But we'll unravel that I'm sure at a later date.

Mark: That's a very astute observation.

Richard: As providers, as a clinician, when a patient comes in, it's this concept of patients they will say, well, are you in or out of network with my insurance? What does that mean? Well, essentially, what does it mean if one is in-network or out of network? And what are the consequences perhaps associated with a little bit?

Mark: Certainly. So when a provider is considered in-network that means that they've signed a contract, a legal document to be able to provide care. At a set rate for the payors members. If the provider is considered out of network, that means that they have no contract with the members payor. And so, therefore, there are no additional rules. There are no rate restrictions outside of the government restrictions that may be there. But it means that the provider is free to treat the patient and expect up to their full bill charges for reimbursement.

Richard: So essentially what one is agreeing to as a provider is a set amount of reimbursement. So let's say, the insurance company will give 100 for the visit. So it doesn't really matter what the provider's bill is. It will actually be set at 100. So there is, I suppose there is the benefit. There are benefits with being in-network and we'll talk about those, but essentially it theoretically guarantees a set amount for a set service. And then I assume from the patient's perspective, it really gives them confidence, all being well, that they will know exactly what the price of their care is based on a negotiated contract between the payor and the provider.

Mark: Yes, that is correct. So the out-of-pocket coming from the patient would be, or could be very substantially less in an in-network relationship versus an out-of-network relationship.

Richard: And I think in other areas of healthcare, this is often cited as an issue because patients don't necessarily know when they go to other types of healthcare, if the provider is in-network or out-of-network, and there isn't necessarily that level of transparency. And in hospitals, I know that you can actually have people who are providers that are out of network within a facility that is in-network and it can get very confusing for patients. Yes, it can. But for the therapy, I have a feeling and I believe that the majority of therapy providers verify benefits for patients and provide that information to patients if they are in or out of network. Is that accurate to say?

Mark: Generally, there's patient counseling that happens at the clinic level or perhaps at the billing level, the therapy teammates are explaining to the patient they're verifying their benefits online and explaining to the patient that this should be covered under in-network rates and certainly it's always up to the patient to know, what they're in-network rates are but as a service, a lot of providers will call or check online and give the patient the parameters of their coverage. And in some cases would be able to explain what kind of a cost estimate the patient should expect to pay per visit.

Richard: I’ve always found it interesting. The fact that outpatient therapy providers on the whole within the US essentially verify whether somebody is in and out of network and even possibly give some more additional information. I've always wondered why we do that because, as other healthcare providers, it's really up to the patient to understand their coverage insurance plan and go and look for themselves whether they're in or out network or actively find, seek that out rather than being given the information. Is that accurate? And if it is, why do you think this is a tough question? Why do you think that therapy feels obligated to do the work of what really the patient should be doing?

Mark: Well, I think it's a way for the therapy industry to provide a service to the patient because I think that the industry as a whole feels kind of attacked on having to justify rates, having to justify the reimbursement or the patient out of pocket or justifying to the patient why they need to come 12 visits to get fully healed as opposed to the eight that the payor has provided. So I think when we're discussing hospital systems and outpatient therapy, I think the big difference is that the hospital industry gets higher rates on average because they provide a lot more different disciplines and a lot more. They control a lot more of the market so they have a lot more leverage than the PT industry has, so I think this is a way that the PT providers can show an added value to their services and comfort the patient and alleviate any stress that the patient may have about coming to physical therapy after having their surgery provider working on them.

Richard: Now, many providers, outpatient therapy providers are in network again in a later episode we can talk about what's happening perhaps at that larger level, more recently as it pertains to deciding to be in or out of network, but over the years I think there has been a gradual transition of providers from being out of network to in-network. If I talk at a kind of a very high level, whether that will continue is yet to be discussed, but there's got to be advantages. I assume what are the advantages of being in-network for the patient and for the provider? And we touched on the patient already, but what are the advantages?

Mark: So for the patient specifically they would know who in their neighborhood could be able to treat them under their in-network rates. So that means that they could expect to have a lot less of an out of pocket payment. Their deductibles would be much less than the co-insurance could be much less than, and we're talking to the tune of several thousand dollars for an episode of care. So, that's the advantage for the patient, less money out of pocket for them. The advantage for the provider is that you, well, your referrals, can send patients to you without having to know, are they in-network or out of network?

So the main advantage for a provider to be in-network is to continue to see a stream of patients. That they don't have to worry about getting additional authorizations, or they don't need to perhaps justify each and every visit that they're doing or service that they're providing, and it's a smoother transition. They may not have to wait as long for payment from the payors. It'll be a lesser payment, but more than likely, they're not going to have to fight over each and every nickel from that in network payor they can expect to get paid relatively quickly in a timely manner.

Richard: Again, in my simplistic mind, when I boil it down, the primary benefit I see is a balance between volume and price. Ultimately for the provider, you're in a network, you possibly have access to a larger patient population, a pool of patients that are willing and prepared to come to see you, but you have to sacrifice for the rate. You probably aren't going to get reimbursed as much ultimately. And again, correct me if I'm wrong, but you're likely to get reimbursed a little less, if not significantly less. Then if you had seen that patient out of network, if the patient had been prepared to be seen out of network.

Mark: Yeah, so you're exactly right. So out of network billing, you could get 100% of billed charges under an in network contract, you're limiting your ability to get that 100% and it might be knocked down to either a flat rate for that visit, or it could be a percentage of Medicare or percentage of a fee schedule. So it's very important to figure out what kind of reimbursement you're giving up for the benefit of seeing that patient. And just to add to that one of the benefits is that you don't need to talk an out of network patient into coming to you for money. So you have to justify to the patient that you need to do that. The reason that they should be coming to you is because of the great outcome that they can expect. But it's going to cost them money. So I think that's a key point here is that being out of network makes your job harder to ensure that that patient feels comfortable based on the amount of money that's going to come out of pocket for them to come and have you treat them.

Richard: There's nothing stopping a provider from seeing people who are out of network. It's just so if a patient particularly wants to see a therapist, because they've heard great things about them, even if the therapist is out of network, the therapist can still see them. It's just the fact that the patient is likely to be responsible for a higher financial burden, essentially.

Mark: Yes that's correct. Because it's always up to the patient where they get their care from. But it's up to the payor to decide how much of that care is going to be covered by the payor or covered by the insurance.

Richard: So we've talked a little bit about the advantages, but as we know, there's always a different side to the coin, isn't there? Particularly when it comes to payors. So what are the key disadvantages of being in-network for the provider and for the patient.

Mark: So the biggest disadvantage of becoming in-network is that whenever you sign a contract, and this is true for any contract that you're signing, you're limiting your options. Based on whatever is written in that contract. So the big thing that you're going to be giving up is the freedom to really direct the care and come up with what you feel is the best care that's going to get covered. By signing a contract that the payor is always going to be involved in having you need to justify whatever treatment you've given whatever codes you've been able to bill. Whatever modifiers that they require on the claim form the, the contract will also limit the reimbursement. You wouldn't be able to, or generally not going to be able to get your 100% of your billed charges. It'll be a reduced rate, and so those are the big things. And then anytime, like I said, whenever you're signing a contract, you're limiting yourself. So if you can treat outside of a contract, you can dictate the care much better than being in network with something.

Richard: So bottom line is there's not only you are accepting a limited or a reduced reimbursement rate for the potential of having a larger pool of patients seeking services from your location and facility, but you're really giving up a lot of control and you're really allowing the payor to, I don't know if this is the right word, police you and dictate under contract law the terms and conditions in which you provide that care.

Mark: Yes, that's exactly right. And throughout the contract, some of these contracts are very, very wordy and a lot of pages and each of those clauses restrict what you can do freely just based on the practice act in your state for the license and the care and the services you're able to provide. Contracts really limit that rather than you know, enhance any of that. So when you're signing a contract, you have to make sure that you're really looking into that contract and making sure that's the right thing to sign for your practice.

Richard: So ultimately apart from perhaps guaranteeing or, well, not even guaranteeing, apart from the idea that a certain amount of volume or referrals

will be sent to you as a provider, I can't really see any advantage. Of being in- network for the provider right?

Mark: Yes. And you're exactly right for that. And so the benefit for the provider to be in-network is really enjoyed by the member themselves, in a lower cost structure. I guess you could say that it makes referring to an outpatient therapy provider easier for the primary care. Because they don't need to keep a list to know who they can send and can't send to particular providers. So therefore it streamlines that process, but you are giving up a lot when you're signing up a contract.

Richard: And the other thing which we've kind of touched on with regards to how a contract, what a contract contains, it's not only, the reimbursement side, it's also more and more the administrative component to the patient as well, management to the patient. So being in-network ties you to certain requirements, be that authorization, be that proving medical necessity, be that providing certain information, clinical information on a certain frequency. Be that undertaking credentialing requirements both for the clinician, for the clinic, for the business. It's stacked on, isn't it? Within the contract? And it's not just you know, we often think, well, it's just okay, we've gotta accept a lower reimbursement rate, but it's a lower reimbursement rate with administrative burden that is in excess of what one would normally do for an outer network patient.

Mark: That is correct. And even some stuff that can go back, up to a year or two in the past when you're signing certain contracts and depending on the clauses within those contracts it allows for payors in cases to audit. Past treatment, past visits, and then say, you know what, you owe me money back and go back, you know, 16 months to collect money from you. So that's one of the things you need to really be sure that you're reading through the contracts and making sure that there isn't anything that can hurt you in the end, because if you're out of network, then usually once it's paid based on the voluntary payment doctrine that states that if, you haven't signed a contract, that if you're out of network what has been paid on behalf of the patient and has that's been accepted by you is what is truly what was paid and they can't go back and take any of that money back from you.

Richard: Yeah, going kind of to the plumber analogy, which I often use because I think it's quite interesting to do it. So it's this concept that a plumber comes in, changes your heating system, the service fixes it. The patient is happy with the care they have, but potentially due to some administrative rule, be that length of time to submit the claim or be that the fact that there's a chart audit

and it's deemed by a non clinician that it wasn't medically necessary based off the actual documentation rather than actually what the patient received in care, they can say, oh, actually, we're just going to take all that money back now even though the patient's probably happy and they had a successful course of care that payor's themselves can just, you know, take it back and you've got basically no recourse associated with it.

Mark: Yes, that's exactly right. So in your analogy, that means that the plumber has already paid for all those pipes that they put in all the tape that they use and they can't balance the bill with the patient. They can't get any of their money back. And so they've spent all this money and they can't see anything, any benefit from it.

Richard: And of course, with this analogy, if we take it one step further, then the payor actually gives that money back to the patient.

Mark: That is correct.

Richard: If there is a competitive market and if there is a limited supply of patients, I can see an incentive of being in-network to a certain extent. It's really how much are you prepared to sacrifice in order to attract the patient or be a provider of choice as it pertains to the payor. And I think in the past, I can see that and for certain geographies, I can see the appeal of that. Is that it? Are you sensing any changes as it pertains to providers moving in or out of network? I think there's some kind of push pull with this, isn't there? I don't think it's a simple answer. So tell me a little bit about what's been going on perhaps the last few years and then more recently.

Mark: Yeah, so I think that with the ever present threat of declining reimbursement I think the industry as a whole PT, outpatient PT providers as a whole are just getting fed up and they're starting to realize that I'm giving this care, my costs are escalating every month or every year. And I'm getting dinged on the back end where my reimbursement is dropping every year. Premium dollars for the payors are continuing to increase above the inflation rate. So we're getting. We're getting the wrong part of the ax here because we're paying more to provide the care to the members and give good care. But we're getting less money to do so. So I think providers in general outpatient providers in general are seeing that this is an unsustainable model for them and that they need to really call their their provider, their payor contracts and go with the ones that are being very good in reimbursement and allowing them to grow and then letting the ones that are not so good.

The ones that are very restrictive, the ones that are paying very low rates. And they go to the wayside. They'll terminate those and say, okay, I'll give up on those patients and I'll focus on the ones that aren't. That I can continue to keep my doors open and the lights on and my equipment fresh and all that stuff and and hire great therapists to help. And I think that I think we're seeing more and more of that as we go along. So hopefully this will continue and we'll start seeing an improvement to the rates.

Richard: I think it's an interesting study to look at for therapy in the last 10 years with regards to the number of providers that kind of enter or leave contracted contracts with payors. But up to COVID, I think there was a, I won't say a rush, but there was definitely a continued movement towards being in network. By outpatient therapy providers with the fear that if you weren't the referrals would be cut off and you would become an outcast, you would become, you wouldn't be able to participate with the majority of the patient population, you would become almost a niche clinic, an anomaly. That's a real fear, isn't it? Because if you look at certain markets, for instance, Pennsylvania, UPMC has had a stranglehold on referrals. If you try and operate as an independent provider and you aren't in the network, in the air geographical area of that entity, it's extremely difficult to operate based on limited patient patients available that are out of the net are outside of that payor. So I think there's a real fear, but as you say. It has passed the point now where that fear of not being able to access a certain patient population is lessened because the benefits of being in-network, which is essentially, getting a certain patient population and securing a certain rate of reimbursement, those benefits are diminishing, certainly since COVID. So I feel that, as you say, providers are beginning to say, you know what, enough's enough. I'm not going to accept these terms and conditions of being in-network. I would rather either go without that patient or I would rather treat them, you know, other patient populations or in some other manner.

Mark: Yes, I think that it finally gets to a point where it's unsustainable. And, and you want to treat every patient out there. But you also need to keep your doors open and you need the lights on and pay your bills just like everybody else. And so I think that's finally coming to a head and more and more providers are seeing the light in that regard.

Richard: This is really quite a sad place to be because, you know, as a clinician I want to treat everyone and ideally I'd like to treat everyone exactly the same way. But you know, the basic economics of healthcare in the US doesn't allow that. Let's be brutally honest, but I'd like at least to be able to give access, equal access.

But the situation now is that it is actually probably getting less and less this idea of equality.

Mark: Yes, I agree. Yeah.

Richard: Okay. So let's say a provider actually does want to get in-network which is really quite amusing. In fact, there are probably a lot of providers trying to get out of network at the moment. Let's say you want to get in-network. How do you contract with a payor? What's the process? What's the mechanics of it?

Mark: Well, the very first step is to contact the payor and tell them, Hey, I'd like to get a contract with you. And so that should start a dialogue with the, with the payor. And a lot of times you can go online and submit a form. And just say, you know, this is my NPI number, my tax ID number, my company name and submit that, hopefully you'll get a response and they'll send you a contract to review. And then once you review the contract and find out what's not going to work for you, you look for things that you can improve then you start the dialogue with the provider rep. And then hopefully come to a good resolution. That's going to be favorable to you. And I guess in the perfect world, favorable to them as well. But certainly you need to look out for yourself first.

Richard: And this process or the contract, the contracts are confidential, correct?

Mark: Correct. Yeah. You're not allowed to share them outside of the two parties that are discussing them.

Richard: Yes. So technically, Yeah. If there could be an entity down the road that has different terms and conditions for the same patient, correct?

Mark: That is correct. Yes. So it all depends on your ability to leverage, your services, your talents, your brand to get the higher rates or more favorable contract language. But that's exactly right. That a patient choosing 1 provider over the other may not have anything to do with the contract and what they're allowed to be seen or how much it will cost to see them.

Richard: Now, I would assume it depends on the payor, but as a provider and when you are seeking to get in-network with a certain pair and they send along the copy of the contract for you to review and sign if one so wishes. Is it basically a take it or leave it? Is it like a PDF? And here it is. If you like it, sign it. Or if you don't li

Mark: There's always wiggle room. But it certainly does depend on the size and scope of the payor about how much wiggle room you're going to have in that negotiation. So if they're trying to enter a market, then your leverage is going to be such that you could be able to negotiate rates, negotiate favorable terms on the contract. But if they're already an established player in that market and they. Don't really need to add another one, then it might be a take it or leave it and we really don't need you in here, but feel free to sign it if you want a type deal.

Richard: So there's definitely a supply and demand question. If the provider is one of many within the geographical area that's contracted with this payor, the likelihood of you getting a higher rate is probably less than if you were the only provider within 100 miles.

Mark: Yes, that's exactly right. It gives you more leverage if you're one of the only providers of a service in any given market.

Richard: Now one thing that I've been constantly told for the last 5-10 years is the idea, well, you know, the payor will give you a higher reimbursement rate, or more favorable contract terms, if you can demonstrate good clinical outcomes. Is that actually reality?

Mark: Well, I think that it certainly isn't reality. They want you to justify why they deserve an increase or why you deserve to be in-network. But the funny part is, they already have all that data. They have claims scrubbers and they can. They can look at those data analytics and see exactly how well the entire episode of care occurred and how fast their members have gotten back using you as a provider versus your neighbor as a provider. And quite frankly, most outpatient therapy providers don't have access to that kind of data to look at on their own. And if they did, they would only see their piece of that entire care that the patient went through from surgery to, you know, the functional outcome that you wanted. So. They often will tell you, yes, you need to justify to us why we should give you an increased rate, or why we should let you in this closed network. And it's just a very tough thing for an outpatient therapy provider to be able to provide

Richard: I've never really thought of it that way. The idea that the payor has more information about the care than the provider, or certainly when you look at it across multiple providers. It's really quite amusing in a sad way. The fact that they're asking for justification, but they have all the information and much more than one could ever get already at their fingertips. So it's just again, my

cynicism is getting in the back of me, but it's really just deployed to try and push back.

Mark: Well and what makes it even funnier is that there's a push for outcomes based, contracting and reimbursement structures. So they know the good providers out there. They also know the cheap providers out there. So if they send the care to a therapist that has agreed to lesser and they're like, okay, well, the patient's not going to complain. So we'll just allow them to go there. It costs us less to have them provide the care and no one's the wiser and we're happy about that.

Richard: I think for the basic idea of contracting, I think we've covered quite a lot. One last question, so we've discussed today, what are contracts, what are contracts, the difference of in and out of network and perhaps the advantages, disadvantages for the providers and for patients, the idea of, you know, very high level, how you would start or initiate a request to a payor for getting into network. Even if it's open, oftentimes you're told that it's closed anyway if they have a sufficient number of providers. Is there anything else that the audience needs to understand about contracts, payor contracts at a very basic level? What are we not, what haven't we talked about? I

Mark: I think we did cover a lot of the things. But I think the key is that the key to provider contracts is that rates are the biggest piece of that. But it does restrict you. And so it's important to look at all of the clauses that are in there and make sure that the contracts make sense for the provider.

Richard: Thank you very much Mark, I'm looking forward to the next episode where we'll perhaps dive a little bit more into payor contracts themselves. Appreciate your time and chat soon.

Mark: Thanks Richard.