Payor Contracting

How Changing Third-Party Payer Models Can Affect Your Practice

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The US has the most expensive healthcare system in the world, thanks partially in part to the role of third-party payers that have driven demand for healthcare services sky-high, leading to higher insurance premiums, higher treatment costs, and more extensive administrative burden on practices. However, other models of third-party payers may serve to bring the overall cost of treatments down, and provide better care for patients, albeit with a difficult start to the process.

The Current Third-Party Payer Model: Fee-For-Service

As you know, the healthcare industry is far from transparent to most patients, who don’t see the constant billing, claim filing and other administrative work that goes into securing reimbursement from insurers. This is necessary but expensive work because, in order to keep your practice above water, you need reimbursement for treatments from both the patient and their insurance company. Each service provided results in a coded claim rate that’s set by the insurer for that particular service. Once they’ve received your claim, they pay you for performing it for one of their insured patients.

The fee-for-service model incentivizes providers to perform a high number of procedures as opposed to other models, in which the quality of care and long-term wellbeing of patients is valued more highly. While this can have incredible benefits, it will affect your revenue stream if your payers decide to switch their model, which is becoming increasingly likely, as over a third of national reimbursement contracts are now value-based.

What is Value-Based Reimbursement?

Value-based reimbursement flips the reimbursement process on its head. Rather than paying for each service provided, under this model, insurers would instead pay for the quality of care given, based on data collected in the long term, such as side effects experienced, the extent of improvement, and many other factors. This means that if you thought it took a long time to get paid under fee-for-service, brace yourself. While in the long run practices can be fiscally solvent, there’s likely going to be a messy transition as the change is first adopted.

Transitioning Payer Models

People in charge of practices’ finances are looking at the prospect of years of instability as the nation’s insurance companies move to value-based payment. However, as the data collection processes and other technologies are being developed, there’s time to prepare. During the transition, you will likely experience a drop in revenue, depending on how your payers decide to roll out the new method. From there, your practice may be more incentivized to provide different health care than under the fee-for-service model, such as preventative care treatments, and making sure only to provide many services for a single person when absolutely necessary.

PayrHealth Can Help Manage Either Reimbursement Model

If you’re like a lot of practice managers and CFOs, the possibility of switching third-party payer models is nerve-wracking. That’s why we’re here to be your financial guide through a potentially tumultuous time. Call or contact our team online today to get in touch with our healthcare finance experts, and learn how we can help your practice adapt to a changing healthcare industry in this and many other ways.

Learn more about PayrHealth today

Our mission starts with an excellent experience and a target of lasting success for your health care organization. We see a future where providers and payors partner in making informed decisions for a strengthened healthcare system.

PayrHealth can take support your organization and its revenue goals. Connect with our team of experienced healthcare professionals to get the conversation started.

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