If you have completely out-of-network practice, you can set your self-pay rates at whatever the free market will support. But what if you are in network with some 3rd Party Payors? What if you are trying to grow your private pay patient population, while remaining in contract with some insurances … are you still free to set your cash-pay pricing at whatever level you see fit? The answer to this question may surprise you.
There is a quickly growing number of insurance-based practice owners with a strong desire to convert to a cash-based practice or at least try to increase their percentage of self-pay patients. When these entrepreneurs reach out to me, many do not initially understand the legalities of this process and the issues they can run into; especially when it comes to setting their cash-pay rates. There are certain things that must be kept in mind to ensure you are not violating your contracts with insurers, and possibly breaking state laws.
Insurance Contracts and Cash-Pay Limitations
First and foremost, carefully check the contracts you have with 3rd party payors. They unfortunately may not allow you to “just take cash” from a patient with that insurance, even if the patient wants to be self-pay. There is often a clause that mandates you directly bill the insurance company for any covered services provided to their insureds.
Most Favored Nation Clause and Self-Pay Pricing
Check for other contractual billing restrictions as well. A common one is called a “Most Favored Nation” (MFN) clause, which generally means that you agree to charge the insurer no more than you charge others. If the contract has this clause, you need to determine if it is specific to what you charge other insurance companies or if it includes patients themselves. Let’s look at why this is an important distinction…
Suppose the contract does Not have a clause that mandates direct billing for any of their insureds, and you could see those patients on a private-pay basis; but the contract does have an MFN clause, it could have an effect on what you can charge that self-pay patient with that specific insurance. For example, it may be required that your cash pay rates for the patient be no less than what you would bill the insurance company for the same services.
Now, if you are in-network with an insurance company, it may not be that common that one of their insureds will want to see you on a self-pay basis; but if you’re offering longer one-on-one treatment times for those willing to go private-pay, you may run into this scenario. There may also be patients who don’t want their insurance billed for a few PT sessions because they figure it will result in higher premiums over time and cost them more money in the long run. Many deductibles are so high now, it would take a ton of sessions to reach it and they would rather go cash-pay and keep it between them and you. The point is this: If you are actively trying to build your private-pay patient population, this scenario will likely become more and more common for your practice, and you need to know how to deal with it.
Same-Day-Payment Discount … a Viable Loophole?
Some practitioners see this situation as easily fixed by offering a “same-day-payment discount.” The rationale is that they offer the same discount to patients and any 3rd Party Payors who are willing to pay for the services on the same day they were given. In theory, this sounds good (and I quite like the idea), but that doesn’t mean it’s absolutely legal for everyone reading this! This is an area where caution is needed, and even more so, confirmation from an attorney. State Laws and individual contracts vary widely, so what works for some practices out there may not be a legal option for your practice.
There are a number of take home points here but the primary one is that if you are planning to provide both cash-pay services and remain in network with any insurance companies, you need to review your contracts with an attorney, and also have the attorney find out if there are any laws in your state that would further dictate your pricing to self-pay patients vs. the 3rd Party Payors with whom you have a relationship.
What strategies have you used to deal with this situation in your practice? This is a complex topic, so please share your advice and/or questions in the comments below.