Only Take Contracts That Pay Enough

February 8, 2012

You really don't have to accept every manager care contract that comes your way, even if it means losing patients. Know your costs to choose right.

Know what it costs you to do business and, if possible, refuse managed-care contracts that pay below your standards. You may be tempted to accept any contract that comes your way, but providers are increasingly in a position to turn down contracts that don’t bring in enough to cover expenses.

Your analysis of costs can be complex or simple. Some practices look at what it costs them, in fixed and variable costs, for patients covered by different payer groups (Medicaid, Medicare, commerical) or just in terms of total patients seen a month. Include all your overhead and compare each contract to the next. It helps to have sense of payment benchmarks. Keep in mind not only the amount you get paid under the contract but the chances of this particular payer reimbursing with any accuracy and speed. If they deny every claim, it doesn't matter what they pay.

While turning down a contract may feel risky, the fact of the matter is that it doesn't help you to have more patients if you lose money each time you see one. Of course, if you have a nice cushion from some patients, you can use that to continue to see long-time patients you care about or to cover your losses if you still take Medicaid, for example. The point, though, is not to go out of business and be unable to help any patients at all.