Deciding to Contract with a Payor: Joining "the Network"

Alex Yarijanian: 00:00:01

Picture this.

You're three months into building your telebehavioral health operation in a new state and you've got your clinicians credentialed, you got your tech stack running, your compliance program is buttoned up.

And then an email lands in your inbox from a regional Medicaid managed care plan, one of those big ones, and they want to talk about getting you contracted into their network. And your first instinct is, great, let's do it. More access, more members, more revenue.

But then someone on your team pulls up the contract and it's 40 pages and there's a prior authorization matrix in the appendix that covers 43 service codes. And there's a data sharing Provision on page 31. You're not sure how it interacts with your 42 CFR Part 2 obligations.

And the fee schedule is fine, not great fine. And now the question isn't can we do this? The question is, should we? And on what terms? That's what we're talking about today.

Welcome to the Value Based Care Advisory podcast, powered by Carenodes. I'm your host Alex Yarijanian.

This show is for healthcare operators, investors and practitioners who are building in the value based care space and want to understand the business policy and market dynamics that shape outcomes.

Today's episode the network decisions whether to contract with a payer, how to think about it strategically, how, on what most practices get wrong when they approach it. Let's get into it. I want to start by reframing what we're talking about when we're talking about payer contracting.

Most practice is treated as a rate negotiation. Get in, negotiate the rates, sign the contract, done.

That framing is incomplete and it's one of the reasons practices end up in contracts that look fine on paper and create real operational drag within 12 to 18 months.

The network decision is more accurately described as a market entry and operational alignment decision that happens to include a rate negotiation inside it. And once you've made it, you're largely locked in. Credentialing takes time. Patient panels expect continuity. Notice periods can run 90 days or more.

Getting out isn't clean. So the discipline I want to encourage is this.

Treat every payer contracting decision like a significant strategic commitment because it is one, and build your evaluation framework accordingly. Here's the core structure that I use. There are really six dimensions you need to evaluate before you sign anything.

I'm going to walk you through each one dimension 1. Market access and the concentration reality.

Start with the question how many members does this payer actually cover in my target market In a lot of markets, this isn't a subtle analysis. Health insurer concentration is high. There are regions where a single plan covers 60, 70% of the commercially insured and Medicaid managed members.

In those markets, staying at a network isn't a strategic position. It's a decision to lock yourself out of the majority of the addressable population.

For telebehavioral health operators specifically, you need to map out payer penetration against your service geography and particularly against HPSA Health Professional Shortage area designated counties.

If you're serving Medicaid populations, the density of payer membership in your geographic footprint is the starting point for any market access conversation. The reason this comes first is that it shapes your negotiating posture, right?

If you are operating in a market where one plan dominates and you need members to hit your volume targets, you're not negotiating from a position of ultimate or unlimited leverage. You need to understand that clearly before you walk into the room. Dimension two is to understand your value proposition.

Okay, so you need this payer, let's say. But what do they need from you? This is where most practices undersell themselves. Your value proposition isn't a negotiating asset.

And in behavioral health particularly there are real differentiators that payers genuinely care clinician availability and time to appointment licensure coverage, especially under PSYPACT or ASWB compact for these multi state telebehavioral health delivery models Measurement based infrastructure Outcome data HEDIS Quality performance capscores if you can demonstrate that your organization closes gaps in care that the payer is being measured on and you can show that data that changes the conversation from what rate will you accept to what does this partnership accomplish for the both of us? Know your value proposition before you negotiate.

Dimension 3 Operational alignment is chronically underweight and it is where margin disappears quietly over time. Contracting with a payer isn't just an agreement about reimbursement. It's an agreement to operate inside their administrative infrastructure.

That means their prior authorization processes. And you need to know the volume of services that will require prior auth, right?

And whether that process is electronic, manual or what the the parameters are. Because the staffing implications are very different.

It means their credentialing and re credentialing cycles are going to be needing to be paid attention to. It means specific requirements around clearinghouses, benefit managers and third party arrangements.

So it goes further and further in operational alignment. So before you sign, map the operational requirements against your existing workflows. What do you already have? What would you need to buy or build?

What cultural cost of Adapting to their process would be. And are there real costs that don't show up in the fee schedule? These are the questions I want you to think about.

Dimension 4 Payer's Past Performance Talk to your peers seriously. A contract is only as good as the payer's claims adjudication practices. And that information is not in the contract itself.

You want to understand how accurately do they pay on first submission? What are the dispute resolution timelines? How do they handle audits? What does the appeal process look like in practice? Not on paper.

A payer with favorable rate sheet who systematically underpays or delays is worse than a payer with a lower rate who processes cleanly and quickly. Actual collected revenue, not billed or contracted revenue, is what pays your overhead. So you want to be careful of that.

Dimension five is physician profiling and measurement programs. This is important. This one surprises people when they first encounter it.

A lot of payers operate cost and quality profiling programs that rank or tier the physicians based on their performance data. And those tiers aren't just internal. They often affect patient cost sharing.

A physician in a preferred tier might be subject to lower patient copays, which is a real steerage mechanism. It really does drive volume. Patients choose lower out of pocket costs.

So before you sign, understand what metrics does this payer use to profile physicians? How are they? How are these results reported? And does it have any dispute resolution mechanism? Is there a dispute process? Does it have any teeth?

And how might your historical data position you for a conversation like this? And a side shout out.

Especially important for behavioral health, where utilization patterns and measurement methodologies are still evolving, are not always well suited to the nature of the care that's being delivered.

So you as a provider have additional burden to make sure that you're aligning operationally and that you're identifying physician profiling and measurement programs at the get go. Dimension six is data sharing requirements. So read page 31 of the contract. Actually read it.

As value based arrangements have expanded, payer contracts increasingly include provisions requiring data access. So this is clinical data encounter data outcomes measures.

And there is the fhir, FHIR based interoperability push that added another layer of complexity. Of course.

And in behavioral health you have a specific overlay of what's called 42 CFR Code of Federal Regulation Part 2 that governs substance use disorder records and creates real constraints on what could be shared with whom and under what conditions. The intersection of payer data sharing requirements and HIPAA and 42 CFR Part 2 is not a hypothetical risk.

You guys this is real compliance exposure that behavioral health operators need to assess carefully before agreeing to data sharing terms and separately evaluate the privacy and security posture of any data sharing agreement. Where does the data go? Who has access? What are your obligations if there's a breach? Identify the answers to these questions.

Now let me spend a few minutes on the out of network alternative because I want to be honest with you. I want to be honest about what it does and what it doesn't offer.

Some practices stay out of network intentionally, particularly in certain specialty markets where the practice can command premium rates on a self pay or direct pay basis. This can be a viable model. I'm not dismissing it, but you need to. But you need an honest accounting of the trade offs.

How to network means payment at what's called ucr, usual and customary rates, not your bill charges and not in network contracted rates. It means limits on what your patients can actually recover from their own plans.

It means a collection burden that falls on your practice and the staff, time and friction that comes with that. And it also means operating in an increasingly complex regulatory environment. Right.

The no Surprises act materially changed out of network landscape, particularly for behavioral health providers in certain care settings. Understanding where your exposure sits under that framework before you assume out of network is a clean alternative. And that is essential. Okay.

For most behavioral health operators who are scaling. We're trying to serve large populations across multiple markets. Add a network with major pairs is not a growth strategy, it's a constraint.

The question isn't to whether to join payer networks, the question is how to do it. Well, let me bring this back to the practical takeaway.

The practices that negotiate the best payer contracts, and more importantly, the ones that are still satisfied with those contracts two years later, are the ones who came in with the clarity on all six of these dimensions before they sat down at the table. They knew their market access reality. They knew their value proposition and could articulate it with data.

They'd map out the operational requirements and cost at the alignment network, the alignment work they'd done, diligence on the payer's track record, they understood the profiling program and where they'd likely be landing within that schema. And they'd read the data sharing terms carefully.

The preparation changes, what you ask for, what you're willing to accept and when Walking away is the right call. One more thing.

If a contract involves significant value based payment terms, risk sharing arrangements or complex data provisions, get an experienced healthcare counsel involved in the review.

Not because the contract is inherently dangerous, but because the nuances in those provisions compound over time, and the cost of getting it right upfront is much lower than the cost of unwinding a bad arrangement later. Payer contracting is the beginning of an operational relationship, not the end of a negotiation. Treat it that way.

Well, that's a wrap on today's episode. If this was useful, share it with an operator or administrator who's navigating a contracting decision right now.

This is exactly the kind of thing that's hard to find, clearly laid out in one place.

You can find us at vdcapodcast.com and if you want to go deeper on any of the topics we cover Medicaid, managed care, value based payment models, tell a behavioral market strategy, subscribe to Substack and let me know on our website. Until next time.