To Contract, Or Not to Contract

Posted by Heather on 7 July 2011

The decision to contract with commercial insurance companies or remain strictly fee-for-service with your patients is one that will have an enormous impact on your administrative flow and needs within your practice. There are pros and cons to contracting, and we’ll take a look at both sides in this discussion.

The first thing to consider is your present situation. Are you finishing up your residency? If you are just starting out, contracting with insurance carriers is one of the most direct means of gaining exposure and acquiring new patients, as your name will be published in the carriers’ provider directories. Are you moving from a group practice or hospital based practice to your own solo practice? If yes, will any of your current patients be coming with you? Did you have insurance contracts with their plans previously? To remain a preferred doctor in their network, you will need to go through the contracting process again as a solo provider. Are you working in an area where your potential patient base may be unlikely to afford your services without some coverage through their insurance carrier? If so, this will definitely inform your decision. Do you have a focus in psychiatry or skill set that is uncommon? Your services are more valuable due to their rarity in these situations and provide an opportunity where you can succeed at remaining a cash-only or fee-for-service practice. Are you in a dense urban environment? Large populations are more likely to be able to support cash-only providers as well. All of these questions reflect current geographic and financial realities that will be part of your decision making process.

An obvious con to joining an insurance network is that you will (most likely) have to accept rates of payment that are below the fees you’ve established for your services. You will want to ask for a provider fee schedule with your potential insurance contract candidates at the start of your process to make sure their allowed amounts on your most frequently billed services are reasonable for your situation.

The additional administrative burden (opportunity cost) of handling insurance claims for your patients is the other big consideration. You will need to utilize a billing service or make sure you have the time (or someone to help you in the office) to submit insurance claims and post their corresponding payments when you receive the checks. Some insurance carriers have prior authorization requirements, or may ask you to submit treatment plans in order for your patients to receive their insurance benefits.

The biggest pro to contracting with insurance is the increased exposure you receive to potential patients as your name is listed in online and paper directories. Referring physicians of other specialties have an obligation to refer to other doctors within an insurance network, and this will give you more exposure as well. If there is a lack of psychiatric practitioners on a certain insurance panel in your region, this can mean that you might build your patient base very quickly.

These are some things to consider when deciding whether or not to go through the contracting process with an insurance company. Entitlement programs like Medicare and Medicaid have their own points to consider, and I’ll talk about those in an upcoming post. I’ll also give you more details about the credentialing process and what to expect if you do decide to pursue a contract with an insurance carrier.