Revenue and cash flow considerations of accepting in-network vs. out of network patients
Do you know how McDonald’s considered all-day breakfast? When McDonald’s was considering a multitude of consumer requests for all day breakfast, a study was done to see about how the company could accomplish such a feat from an operational standpoint and the impact on overall revenue for millions of stores worldwide. It was found that because the stores were already covering overhead for lunch and dinner even if they charge less for breakfast items all day, the increase in revenue would be substantial. There were many operational considerations, but ultimately, they found ways to overcome those challenges and the stores realized substantial revenue gains.
Does your facility stand to gain increased revenue or improved cash flow from accepting in-network vs. out of network patients? Many assume the answer to be a resounding yes because in-network also offers referrals from the insurance providers. Isn’t filling all your patient beds just like McDonald’s offering all day breakfast?
The real answer is maybe but it’s a more complicated question to answer without considering things like:
- Operational capacity planning
- What the in-network or out of network payments are per patient
- What is stated in your in-network agreement
You could fill all your patient beds with in-network patients only to find unfortunate surprises that negatively impact your overall revenue or cash flow such as:
- Outrageously low per patient in-network payments
- A stipulation in your in-network contract that you must not use a third party billing company
- Would you have been able to fill beds with out of network patients at a higher rate?
Increasing cash flow
It is important to note that 82% of small businesses fail due to cash flow problems. The health of your business is dependent on making sure that you continue to examine ways to improve cash flow and increase revenue.
There is marginal profit for facilities to go in-network. The profit margin assumes certain availability and unused capacity.
Did you know that residential treatment centers typically get about $1200- $1300 per day for in-network vs. $2,000 per day for out of network? In some cases, the in-network providers only give you $300 to $400 per patient. At that point, if you are a behavioral health facility manager, you need to consider that if you get too many patients at the lower end of the scale, you may fall into the red. When the census is up, but you aren’t making money then that is cause for alarm. If you are a facility manager, look at managing intake so that you don’t take too many low-paying patients.
Knowing the Gotchas is the Answer
Learn more about how to avoid the Gotchas of Accepting In and Out of Network Patients. Please complete the form below to receive a free copy of our "In and Out of Network Top 7 Gotchas and How to Avoid Them"