Is the higher reimbursement rate actually better?

A commercial rate may be higher than Medicaid.  That does not automatically make it a better contract.

When evaluating a commercial insurance opportunity, reimbursement is often one of the first things organizations look at.

That makes sense.

But the fee schedule only tells you what the payer is willing to pay.

It doesn’t tell you what it will cost your organization to participate with that payer and actually collect the money.

Consider:

• Credentialing and enrollment
• Authorization and utilization management
• Eligibility and benefit verification
• Claims submission and follow-up
• Denials and appeals
• Administrative staffing
• Patient responsibility and collections
• Payment delays and rework

A payer can reimburse $150 for a service while creating significantly more administrative work than a payer reimbursing $110.

So which contract is better?

It depends.

Leadership should evaluate the total cost of participation—not simply the reimbursement rate.

The better question isn’t:

“What does the payer pay?”

It’s:

“What does it cost us to successfully participate with this payer, and what margin remains after we do?”

Higher reimbursement does not always mean better economics.

That’s why payer contracting should be viewed as a financial and operational decision—not simply a rate negotiation.

More to come in this series.