The Pros and Cons of In-Network Payer Relationships

It’s hard to identify when you’re trapped in an unhealthy relationship—even if that relationship is just a professional business arrangement. Yes, it’s possible that your in-network payer relationships are verging on unhealthy, especially if payers constantly grind your gears, and you’re hesitant to renew your contracts with them. The good news is that you have no obligation to remain in-network with every payer—and, in some cases, it may be better to ditch the in-network relationships altogether. That said, there’s a reason (well, several reasons) why so many clinics choose to go in-network, and it’s in your best interest to weigh the pros and cons of in- and out-of-network payer relationships before you make any hard and fast decisions.

Pros

In-network providers are generally more appealing to patients.

Many, many patients have health plans with mind-bogglingly high deductibles and pricey copays—even if they stay in-network. When patients step out of network, their steep healthcare costs only climb higher, and they’re often stuck with a big bill they may struggle to pay. As a result, many patients make a serious effort to stay in-network so their medical costs don’t get out of hand. So, if you’re in-network with some of the bigger payers in your region (e.g., UnitedHealthcare or Cigna), you’ll likely appeal to a big portion of the patient population. Plus, you can play up your in-network availability in your marketing materials.

In-network relationships are referral-friendly.

When you’re in-network, you increase the chances that you’ll get referrals from other members of the network. The payer itself, first and foremost, will put your provider information into its provider directory. According to a survey conducted by CredSimple, 31% of patients use their payer’s online provider directory to find a provider. Having your information on that list might be enough to redirect a handful of patients to your clinic and earn you some “payer referrals.” And that’s just the payer’s online directory; patients can also request network information over the phone, which presents another opportunity for the payer to refer patients your way.

Additionally, a survey from Healthcare Dive found that while physicians don’t always refer in-network, they know how important that can be for some patients. If you communicate with your referring physicians and keep them updated about your payer status, they may refer more in-network patients your way—and the improved communication could fortify your referral relationships, to boot.

In-network relationships don’t have payment surprises.

When you establish a relationship with a payer, the first thing you do is hammer out a contract that specifies how much reimbursement you’ll receive for each service. When you go out of network, there’s no such agreement; your payer reimbursement rates depend on your patients’ out-of-network benefits. At that point, it’s up to you to collect the rest of the amount due from patients, which can be a struggle in itself. That’s one thing to be said about payers: they’ll consistently reimburse you as long as you follow their rules and jump through their hoops.

In-network relationships typically result in more profitable practices.

The data that we collected in our 2019 industry report revealed a strong positive correlation between in-network relationships and overall gross revenue. Essentially, we found that “organizations that accept reimbursement from commercial payers show higher annual revenue levels.” A large majority of the organizations that relied on cash payment or reimbursement from the government took in significantly less revenue each year. Want to see if your reimbursement levels are on track with the industry standard? Be sure to download your free copy of the report. It contains detailed statistics about average reimbursement rates.

Cons

In-network relationships come with a laundry list of payer rules.

As many of you know, contracting with payers isn’t all sunshine and rainbows. All payers have a list of billing rules and/or treatment restrictions that can limit a provider’s autonomy. It doesn’t help that these rules are in a never-ending state of flux. Payers often adopt the rules and regulations that Medicare implements—and that’s on top of their own rule changes. Keeping up with every rule can be challenging, and it’s frustrating to suddenly get denials for billing practices you’ve followed for months—or even years.

In-network relationships might not be financially solvent.

Some in-network relationships have an unhealthy power dichotomy—and that rings especially true for smaller practices. It can be really tough for small practices to negotiate contracts with payers, and sometimes those smaller players are forced to take what they can get. Often, that means they must accept rates that barely allow them to break even. So, while in-network relationships can come with a lot of benefits—and may generally be the better option—if a payer’s rates are causing your practice to lose money, then it might be time to reevaluate your contract.

Only you can decide what payer mix is right for your practice—whether you choose to remain in-network with all your commercial payers, step out of the network, or fully transition to cash-pay. And if you make that decision strategically, it could seriously boost your cash flow—and thus, your profitability.