If you are a physician, therapist or any other helping professional whose business model relies on third party manged care reimbursement you are engaged in the World’s WORST business model (and that’s not hyperbole…keep reading to see what I mean.)
Let me start with a story to set the stage:
Imagine you are a bright, idealistic college student. You’re good at academics, want to make a difference in the world and have hundreds of career options in front of you.
After lots of thought and planning you invest $100,000 in a graduate education. After all is said and done, you are in school anywhere between 2-12 years past your college graduation. You train to change people’s lives, heal what pains them. You make a difference and you sacrifice your life goals to prioritize your career. You may delay getting married, having children, taking vacations.
You do good work, finish school and training proving yourself and set out to make a living practicing in your area of expertise.
The first order of business is to figure out how you will get paid for all of your good work. The standard business model is accepting payment from a third party and this is where the business model gets funky, so pay close attention…..
This third party decides how much your work is worth.
The third party sets limits on how much work you can do with each customer.
The third party can reject your invoices at any time for any reason.
The third party prohibits you from discussing your fees with other providers of the same service.
There are many of these third party payers and they all pay different, seemingly arbitrary rates.
The third party can change what they pay you at any time.
If you don’t follow all of the rules of the third party they don’t have to pay you at all.
The business model requires you to rely on an outside source to determine what you work is worth, set your rates and reimburse you on their terms. They can change the rules at any time. Outside forces constantly and consistently determine your bottom line. You have no choice, no chance to test price points. If you want to add a new service that isn’t recognized by the third party, they don’t pay you. The third party tells your customers that YOU are responsible for accessing their funding on their behalf, so no one knows what they really pay you or what your services are worth.
If you have any entrepreneurial spirit at all, please re-read the above paragraphs and tell me if you would sign up for this business model. Honestly, it’s ridiculous, don’t you think? Who in their right mind would invest $100,000 and years of their life in education, training and business and then turn over all hope of a profit to an outside entity?
Why don’t health care providers do anything about the model?
Doctors, therapists and other health care providers are not business people. We are not trained to pay any attention to how we get paid or who pays us. Many of us work in organizations that take care of all the adminstrative silliness so are have no idea how broken the system is. We are trained to do work that “insurance will pay for,” or to “find something that the insurance will reimburse.” Nice, huh? Your doctors are trying to find things wrong with you so they can get paid. It’s not their fault..it’s the business model and no one questions it.
Those who understand that business model, CEOs of insurance companies think it is a GREAT business model. They call the shots, they are in charge, they have the power and they make lots of money managing your business and our health care. Those in power never want to give it up. Just read Shakespeare if you don’t believe me.
As providers we are also brainwashed that if we don’t accept this crazy business model our patients will be harmed. “How will they afford care? Who will take care of them?” But, in the USA, we don’t want to provide a public health plan to help out those who are less able to afford care, so providers are put in a bind: take the lousy capitalist model that puts you in a subservient position to third party payers, or be a guilt ridden, selfish person for not buying into the model and getting the respect and pay you deserve.
What can we do about it?
Create different business models. Take ownership of our careers. Declare, “We’re not going to take it anymore!”
Imagine what would happen if doctors, therapists, dentists, and all other helping professionals declared this at once? What if we only worked with third party payers who treated us with respect? What if we only accepted insurance that had a real person answer our calls and handle our questions? What if we dropped insurers who pay us insulting rates and make us fill out 5 pages of busy work to access that cash?
And what if we informed patients that it is their insurance company that restricts their care, pays low rates, makes us wait on hold for hours? Or how about we put the onus on the patient to submit all insurance claims, understand how complex and time consuming it all is? It’s their care after all. [And don't tell me the public 'can't figure it out.' They figure out auto insurance, life insurance, home insurance. They can figure it out. Now we just enable ignorance].
Do you think the public would speak up? Complain to their insurance company, employers, government officials, congresspeople and senators? Well, yeah, they would. Would health care policy need to change if the providers of care stood up and demanded respect, a fair system and lower overhead costs?
Let’s not agree to business models imposed upon us. Let’s educate ourselves about business and empower both the medical profession and consumers to be proactive in how health care is accessed and paid for. If we are told that health care is a business, and entrepreneurs run the system, let’s even the playing field so that the competition is fair. We have a choice.
If you found this post helpful, you may enjoyu my free audio, The Way of the BizSavvy Therapist. Or if reading is more your thing, sign up for this blogs RSS feed (you can get the posts sent directly to your email).
Susan is a licensed psychologist, business consultant and marketer for health care professionals who want to diversify their income streams and utilize online tools to provide services and market their practices. She teaches providers how to leverage social media to educate about health care while growing profitable practices.
I wholeheartedly agree. I found your site today, as I am getting ready to move from teaching to practicing psychology. I am a master’s level practitioner, and am trying to get on insurance provider networks as “Plan B” in case I cannot find a job. It is so discouraging. I have 15 years experience assessing children for learning disabilities, and the one insurance company in my state that will reimburse master’s level psychologists will NOT reimburse me for psychological testing. It is the one area in which I have the most expertise and the area in which I feel the most competent. And now, I find out that the general public will not be able to access my services unless they want to pay out of pocket. Grr….
I hear you, Rachel. I encourage you to read the archives on the blog because the only solution is to develop a new business model. Third party payment is a tough way to make a living. In my practice I accept one insurance and that’s it. Everyone else pays out of pocket and submits their claims. It works because my business plan sets the stage for this approach to work. Anyone can do this, I’m certainly no business guru! I write this blog to help people accelerate the steps I had to go through to figure it all out. Let me know if you have any questions. Thanks for stopping by!
Hi Susan – I agree, it is the world’s worst business model. I do not know what to do about it…I started my private practice last year. The ppl willing to pay out of network have lousy coverage and the ppl with good coverage only want to go in network….ppl do not have extra money to spend in this recession, that is my perception ..and I am not a half-empty-glass type of person, but it is very discouraging being in business like this…I do not like it, while I love what I do and I love my clients…I do not like being beholden to insurance companies BTW, the govt is trying to LOWER Medicare reimbursements by 21% this year..the docs are fghting it I hear, but they always lose…and this is in an economy where oil prices are way high above the crude oil barrel price…so what can be done in this corrupt society?? Here in NJ, the chiropractors sued BC/BS and won. it took five years. and BC/BS was ordered to pay back money to the chiros, but are refusing, so now the attorney general has ordered BC/BS to pay but the chiros now have to sue again over lack of payment…the insurance compnaoies ahve so much power b/c of lobbying and b/c the politicians like the support they get from the big biz of insurance…so I would like a way out but dont know how???
well see you, Kathy
Hi Kathy,
What all helping professionals need to do is develop different business models. I use a hybrid of accepting limited manged care, offering lower cost options (such as 30 min appts, phone coaching, email coaching, workshops, tele-classes -you get the idea). ANY business that relies exclusively on a third party to pay them is in deep trouble. We can’t look to the government, our associations, or someone else to do this work for us. If we want to make a good living doing what we love, we need to get creative, think outside the box, try new things, support new approaches and paradigms. This is how managed care figured out how to make the biggest buck and we need to to do the same. Waiting around for another person or entity to figure this out for us is a waste of time. Why spend time and money going to court, suing for money, when we can use the same time and resources to create new income stream? Then we KEEP the money and don’t have to worry about someone else determining our success.
I appreciate this post. Ever since I went in to practice in September, all of my colleagues have been PUSHING me to hurry up and get my LCPC so I can accept insurance. A lot of clients have been lost because they call and find out I am not on any panels yet. I am scheduled to take my LCPC in a few weeks, but am not all that anxious about getting on panels for the same reason that you mention in your post.
How do I explain to my clients (and potentials) why getting on these panels is not always the best thing?
Hi Susan,
I love your point, and I love the thought provoking questions you used to get us thinking. Personally, I started my practice in Oct and since I am an associate level MFT I do not have the option for becoming in-network with any insurance companies. At first I was really worried about this, but now just a few months in to developing a practice I have to say this has turned out to be the biggest blessing because I am operating a private practice with out the third party being involved so I am learning out of the gates how to NOT depend on insurance companies. What an amazing gift!
I have found that your ideas of offering different types of services to be very helpful in this process. For example, one things I’ve “made my own” is offering 75 minute sessions for the same fee as a 50 minute sessions. My clients love the extra time, and feel supported in a different way from clinicians who take insurance.
It’s obvious how insurance companies influence us as clinicians, but it is also interesting how using insurance influences our clients and their journey with us. Money is a therapeutic issue, and addressed correctly can be a valuable part of joining with our clients. In our society, there are so few places that money discussion is acceptable; I am finding that just breaking this pattern with my clients brings healing.
I am very open about money and payment, and talk about it often with my clients so it is an easily assessable topic for us, and let me tell you, they respond! For example, when asking them if/when they’d like to reschedule I openly say “I understand if you’d like to take a week off to support your budget a bit, I am totally good with that, you need to do what is right for you and your family.” It’s a simple statement, but it brings about huge results. It allows them to tell me what is really going on (I usually get a lot more information after this discussion); and to not schedule just to make me happy knowing they might have to cancel later; it helps them feel like real people and not a pay check; it reinforces our treatment focus- them; it keeps them in the loop and part of the process and aware of what I make financially which makes me a more real person to them; it helps to give them control over their own life vs. doing what the insurance company or Dr. says….. I could go on and on about this, I think the rewards of out of pocket payment far out weigh the cost of therapy.
So back to your point Susan, this is a bad business model for us AND for our clients. It causes separation and power differentials between client and provider. Maybe we struggle to stand up for ourselves, but as helping professionals maybe we’d be more likely to stand up for our clients????
(BTW- Happy Birthday Susan!)
@Carla Read Caley’s response here. She says it better than I can…..
@ Caley Thanks for the great summary of how we can turn this disempowering business model on its head. Great work discussing the finances up front. Very biz savvy
!
I agree. This business model is so very frustrating. It seems that We declare our lives to the betterment of others through our gifts and talents, only to be smacked in the face with red tape and regulations which degrade the talent we have.
But, I also have seen that those who can not afford the cash based therapy grow tremendously. I think there are benefits. At this point I am in practice with two primary care physicians and two physician assistants so we often discuss the ramifications of this business model. Often we feel our hands are tied. The economy is in a place where our services are not as valued as others.
It is up to us, to begin to teach the value of what we do to the decision makers…
-Kristie
I am starting a new practice as a clinical social worker in gerontology who wants to work with clients 50 years and older- boomers and elders who are experiencing anxiety or depression due to major life transitions and losses. The elders often are not computer savey, so they are harder to reach this way. The boomers are more likely to be the clients who would find me online. I have been getting fairly consistent enoouragement not to apply to join insurance pannels, even if they were open to taking on new practitioners- and they are not! So my current marketing plan is to offer a free initial consultation and to offer a cash discount. I like Caley’s idea to offer a 75 mins. session for the price of a 50 min. session. I have been attending network events with others in the aging services, but my referral results so far have been terrible. I am planning to offer free public speaking events as my next step to become known. I am also considering developing a second stream of income by becoming certified to do guardianship evaluations for the courts. What is so discouraging to me is that the start up to my practice requires new skills that are not in my area of expertise and are not in my “comfort zone” as a therapist. I come from a long background of serving clients in community mental health centers, where there was always a steady supply of clients and my challenge was time management and goal setting to fit my limited work schedule. I would love suggestions for building a referral network. Thanks, Sally
see correction for website
What a wonderful article and I am in total agreement. I would say more, but I am contracted with all those companies, with exception of the one that threw me off their panel when I told them I was irritated that I had to wait 40 minutes for an emergency referral that had called me about, and I am fearful of all of them. Afterall, most of the big boys have been in court multiple times for things like price fixing, racketeering and death from maltreatment…. I just don’t think I would look good in concrete shoes. Enough said, as I am desperate enough to take on even a low fee referrals (which become lower calling when I have to put in time to call India to collect for the work I had done) to support myself and make my house payment. BTW, biz is severely down with the recession/depression and when I was able to make over $100,000, I had to see 60 managed care patients a week. The money was nice, but I am not sure I was as helpful as I could have been to either myself or the patients. I do want to get off panels and have a cash practice… after 25 years in the field, and look forward to hearing how I might do that. I look forward to your 30 minute consult.
Steven C. Kassel, MFT, BCIA-c, BCIA-EEG, AAPM
West Los Angeles and Santa Clarita
http://www.kassel.us
s@kassel.us
I am finding it very difficult to start a practice. I look forward to your 30 minute consult.
I have recently been involved in an online discussion about offering different rates based on things such as:
- the client’s ability to pay (typical sliding scale)
- time of day
- frequency of sessions
I was surprised that a number of participants in the discussion strongly advocated against having any sort of different fees, even if the provider is out-of-network.
One argument given is that it confuses what the “usual and customary rate” is in the marketplace. To me, insisting on one rate seems completely backwards, and a lose-lose for practitioners and clients.
Hi Susan,
Thank you for your article. In Australia, we have similar problems. Clients want to claim services back from their private health funds. Of course the insurers have changing rules of who is allowed to be registered as a ‘qualified’ therapist. How can we change our and their mindset? I look forward to your coaching call.
Kind regards, Eva
I am inspired by your framework for reimbursement of services. I am at a point where I thought having a practise would cost as much as all the time, energy and education costs…I am transplanted from California, finally am close to a regular or associate license but can’t get how to get connected or start a practise…they didn’t teach that at Cal State…in fact, I just recall that they said 1. a client needs to pay to have a therapeutic experience and 2. keep the fee consistent with no sliding fee…Wow…that was a lot of help…not…
HI Susan,
I have been in “part time” practice for a couple of years now while at the same time keeping my 40 hour job going. Exhausted but not giving up. I agree with your comments about insurance companies. I am part of one panel and after this one year experience does not want anymore. However, that also puts me in a bind. How do I build my practice so I can quit my job and be my own boss while also surviving financially? Looking forward to a coaching call to figure this out
Well said. You have summarized my thinking and frustrations into one nice post. With some patients I used to spend one hour providing therapy and one hour on the phone with the insurance company. Not a great way to make a profit or manage time.
I am in private practice and only accept one insurance carrier at this point. Otherwise people pay out of pocket. This cuts my reliance on third party payors significantly.
Hey Susan -
Sure I’d love to be in the running for a free consultation! I’ve already commented on this blog post, but I will comment again.
This on year with an insurance panel has made me also wary of being beholden to their rates and their methods of watching over our shoulders about our clients. I also LOVE technology and believe that SKYPE and tele-work is going to be big in our biz in 2010 and huge in 2011. So, I am positioning myself for this. Also, teaching online is ideal. Please put me in the hat for some coaching!
Love Kathy
I have made some of the same assertions on various association discussion boards and newspaper comments blogs.
My wife used to said that teaching was one of the few professions where practitioners are EXPECTED to martyr themselves. I guess we can — with no sense of hyperbole — add psychologists to the mix as well.
The one “work-around” which troubles me though is that we should carve out a “niche.” Yes, by all means we should endeavor to expand outside of the “box” to maximize our professional potential. That said, many of us — as illustrated in the post — got into this biz BECAUSE we wanted to help people with mental illness. Life coaching, motivational speaking, business consulting may indeed be related ventures and some of us may feel the a natural progression into them. However, some of us “just” want to be psychologists.
I would hope that this wake up call might spur the health care “purists” amongst us to stand up and be counted as the highly trained, imminently valuable practitioners they are!
Steve, I hear you on the “add-ons” of coaching, speaking, etc. as being uninteresting to many. And one does not need to go outside of traditional services to make a good living. However, I do believe in today’s culture we need to niche or specialize. There is no way around the reality that people want to work with a specialist and simply putting out the message that “I do psychotherapy” will leave us underemployed. No one will ever see the value of a generalist, no matter how well trained. This is the plight of the primary care physician and the local general store. Generalists are in demand in clinics, large medical centers and hospitals–but they are poorly paid, in general.
I have been in practice since September working with a group, on medical staff at a hospital as a consultant, and teaching a few classes. I feel that I have put effort into marketing and have not seen the results I was hoping to receive (ie website, business cards, introducing myself to staff at hospital and offices located near mine, sending postcards to all medical staff providers at hospital, giving talks to groups, ect). I know growing a business takes time, but I feel that I should have been up and running by now. I also do not know much of anything about types of panels to get on and how to go about getting on them. I am a medicare provider but that is it. It seems that other panels want you to have been in business for awhile. I would love some coaching to help direct me. Please help!!
I agree with what’s been said, but I’m also at a loss as to how to make my practice be anything but insurance driven. I have a really difficult time talking about money with clients who have insurance that I don’t take, and who would be potential self-pay clients. Instead they have always wanted to find a provider who does take their insurance, so I lose them. How to talk about the potential benefits of working in a self-pay model without getting stuck in the allure of $20 copays?
@Rose, I checked out your website, which is very nice, but it looks like you are offering a generalist practice, yes?. Take some time to earch the archives on this site under “Specialty.” I did a series explaining why specialty practices thrive and general ones don’t. Finally, See my comments to Sandy below.
@Sandy, you need a specialty so people say, ” I only want to work with you because you can help me with X and the other therapist who takes my insurance isn’t so good at X. I’ll figure out how to pay you, argue with my insurance, change insurance or change jobs to work with you!” (I have had clients do all of those things to afford my very specialized services. Most understand why I don’t accept their insurance and are happy to do the legwork to pursue therapy with me.
Thanks for this offer Susan. I have been in private practice for close to thirty years and when I look back I know that I have fallen into the trap of always working harder and not smarter. Like others I have felt frustrated with the double binds created by being so tied to the insurance networks. One particularly tough issue is working with the insurers who demand that we have to accept both their private customers and their Title 19 customers if they have that contract. We find the extra challenges of this group (cannot charge for no shows for example) very difficult.
Also, we live in a community that may not utilize our services if we didn’t accept insurance. We have been successful by being a big clinic. However, being an owner seeing thirty clients a week and trying to run a business is not the best way to enjoy success.
Thanks for your site. I really enjoy it and often share your articles with my partners.
Wendy
I feel so much more empowered when I see clients outside of the insurance system. Less time with paperwork and more time thinking and praying about how to help the client. Also, I find the clients much more motivated when they are paying out of pocket for the whole session.
I have been asked to join a group of sole practioners. It was advertised to me the administrator will take 25%. I orginally thought this was a good idea, however it has been three months without any referrals and there is a strong emphasis on getting on insurance panels. I believe the administrator will also take 25% for the business that will pay out of pocket. The numbers don’t add up to me, so I’m going to find another office. Sound good? Then what has gotten me so stalled right now, I have been wondering.
Susan . . . you are smart. I’m listening!!! (Reading!!!)
@ Ann 25% isn’t a bad deal, but if you’re not getting referrals what’s the point (get that administrator reading this blog-stat!) YOu need to be somewhere you are getting clients, so, yes, move on. Why are you stuck? I dunno…what are you afraid of?
Susan, I’ve really enjoyed reading the your blog archives; they’ve been interesting and insightful. I’m glad to be here. Re: accepting insurance, I am starting to think about private practice and I don’t really want to work with the insurance companies at all. I’m not interested in diagnosing problems, and being on insurance panels forces you to do that. I would rather be helping people work at their own pace, and imo, working with from strengths perspective does not gel with slapping a label on a client.
I’ve been thinking: after someone completes law school and passes the bar, they start practicing law. If you receive your CPA license, you can start working as an accountant. Why is it, do you think, that a mental health professional with a master’s degree, a credential, and several years of post-grad experience is told to build up more experience, maybe get another credential or two, etc, before even thinking about a private practice? Experience is good, I get it, but when is enough enough? (theoretical question, but I would appreciate your thoughts) Thanks!
C.J.
C.J., Good question and I know that at least the APA is looking at the training models for psychologists. I don’t really know why it takes so long. You can typically open a practice once you are licensed, but you can’t be on ins panels until you have worked for 3 years post-license. I think it is because of liability. If you won’t be accepting insurance, it should not be a problem. Sorry I can’t be more helpful…..
I have just opened a LPC private practice with other social workders. Everyone is paneled on at least two panels. One is extremely hard to get because of all the paperwork ie college transcripts. I have a BA,MAT, MA and LPC. Enough already! How do I get out of doing 3rd party insurance? Two EAPs and a Hospital says they can’t refer to me because their patients can only manage a copay. So now what??
I am new to your website and am intrigued by some of the out-of-the-box thinking I’ve read about. As you engage in phone coaching, email coaching, workshops, tele-classes, etc., do you run into any liability issues with your malpractice insurers and/or ethical issues?