Should I Stay or Should I Go?

Man choosing between two doors

How to read and assess payer contracts.

By Robbie Leonard, PT, DPT*

“Should I Stay or Should I Go?” Some of you might be old enough to recognize that 1980s song from The Clash.

It’s what popped into my head as I was contemplating the important points of this article. One of the most common questions that I hear from private practice owners is “Should I take this contract?” Or, just as common, “Should I get out of network with this payer?” These are tough questions that most times don’t have easy answers. In this article we will discuss the key points to consider if you are asking yourself either of these two questions.

1. Ask the number of people covered in a 10-mile radius of your location.

If they can’t or won’t answer that question, you may not want to go any further in pursuing that contract. Some of these payers are trying to build a big enough network to be viable in a market. Some are even attempting to establish provider networks that simply give you access to existing patients at a lower rate! If they have a good number of covered lives in your market or are contracted with a major employer in your market, then proceed with reviewing the contract.

2. Review the terms of the contract in detail.

If you happen to have a health care attorney or a revenue cycle consultant that you use for services, it is a great practice to have them review any contract before signing it. In addition, the Private Practice Section (PPS) has an exceptional tool that can be used to determine if the terms of the contract are in your favor. Under the Payment Resources tab on the PPS website, there is a tool titled “Checklist of Key Issues for Managed Care Provider Agreements.” This tool walks you through all the common provisions of a managed care provider agreement and provides language that is favorable to the provider.

3. Assess the payment section and rate.

Before you sign any contract, it is important to understand your key statistics. Knowing your total and variable costs per visit, units per visit, average payment per visit, as well as staff and clinic capacity numbers will help you determine if the contract is worthwhile. If the contract is lower than ideal, review the points in #8 before dismissing it altogether.

4. Dive into the payment details.

When you look at the payment portion of the contract, it is important to dive into the details. Consider the following questions:

  • Is the contract offering a fee schedule? If so, does it cover the codes that you typically bill? What would the reimbursement per visit be if your therapists charge your average units per visit?
  • Is there a visit rate cap or case cap?
  • Does it include “lesser of” language?
  • Does the contract reference the Medicare fee schedule? If so, does it reference a particular year, or will it change with future Medicare changes?
  • Does the contract reference multiple procedure payment reduction (MPPR)? If yes, does it use the Medicare methodology?
  • Finally, does the contract reference Medicare payment rules?

5. Read the fine print.

Details are often difficult to find. When you review the contract, you will commonly find a clause that references the “Online Provider Manual.” It is best practice to review these manuals prior to signing a contract, looking at any medical policies or clinic policies that reference physical therapy. Often, this is where you will find out if the payer limits the number of units billed or limits the number of visits. This may also be the location where they deal with MPPR and the details regarding the use of non-licensed personnel (i.e., techs/aides) for patient care. Be careful what you agree to when signing an agreement that references any and all provider manuals and policies on a payer’s website. It is better to have them list specifically the manual(s) that you are agreeing to with a written notification requirement for any changes that the payer makes in those manuals.

6. Assess the administrative burden.

The administrative burden is also an important consideration. The decision must be made whether those burdens are worth the extra administrative cost for the potential business. You might also negotiate some of these terms and ask for them to be eliminated. Don’t be hesitant to ask for what you want as a provider. If the payer says no to your requests, then you determine if you want to move forward. Consider the following questions:

  • What are the credentialing requirements?
  • What are the authorization or pre-certification requirements?
  • Does the contract require you to notify patients in writing prior to providing non-covered services to a covered member?
  • Does the contract require you to do any specific type of paperwork?

7. Understand the contracting entity.

Assess whether you are contracting directly with the payer or with a separate entity. For example, you may have an Optum contract for payment for all United Healthcare patients. If that is the case, there is added complexity to the agreement since you will be required to follow Optum rules as well as the payer limitations. For example, Optum might authorize 12 visits for a case, but the United plan has a 20-visit limit on PT for the year. The patient has already used 15 visits for the year when they start with your practice. In this case, the patient only has 5 visits left for PT for the year, even though 12 visits were authorized by Optum. Administratively, this requires your staff to check with both the parent company for any visit limits and the contracting entity for authorization.

8. Make a strategic decision on the contract.

Sometimes you will need to decide on whether to accept or keep a low-paying contract or go out of network with a payer that you currently have a contract with. If a contract is paying you below your cost per visit, it might seem like the right choice to jump out of network; however, this is also not a simple decision. You need to have a solid understanding of your clinic’s payer mix and also the market payer mix. For example, if 50 percent of your patients have Blue Cross insurance and Blue Cross is 75 percent of the commercial market in your region, it may not be reasonable for you to be out of network with Blue Cross and remain in business. If you face this scenario, look for ways to reduce costs or improve collections via improved collecting of over-the-counter payments.

The decision to take a contract that is at or below your cost per visit is not easy. Here are a few valuable questions to ask yourself when facing this situation.

  • Is the contract below variable cost per visit?
  • Do you have a significant number of empty spots in your schedule that would go unfilled without this contract?
  • Do the bulk of your referral sources take that payer as in-network?
  • Does the volume of patients offset the reimbursement rate?
  • Would the lower-paying contracts take away slots from your higher-reimbursing cases?

Contracting is a complex activity. Make sure that you utilize the tools that are available through PPS and reach out for help when appropriate. “Should I Stay or Should I Go?” Maybe!

Robbie Leonard

Robbie Leonard, PT, DPT, is a PPS member and consultant at 8150 advisors in Greenville, South Carolina. She can be reached at

*This author has a professional affiliation with this subject.

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