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  • Writer's pictureMuhammad Sair Khan

How to Identify a Correct Cost of Service for Your Behavioral Health Center

Within the last year, many addiction treatment centers have gone out of business due to decreasing reimbursement and financial hardship. To help protect your center’s bottom line, it’s vital that you understand what is a fair cost for your services—and when you need to fight for better reimbursement.

How Insurance Companies Determine Rates

The landscape of revenue for addiction treatment has changed. Instead of being paid for out-of-pocket, 60 percent of treatment is now paid for by insurance companies.

Insurance companies uses “usual, customary and reasonable” (UCR) rates for your area to determine what to reimburse you for certain services. They determine UCR rates by looking at what all the providers in your area are charging for similar services.

The UCR rate in your area may be lower than what you need to charge to turn a profit. Instead of paying attention the UCR and your competitors, you need to look at your own finances to determine the correct cost for your services.

How to Determine the Correct Charge for Your Services

To determine what to charge for your services, you need to have a thorough understanding of your own costs and finances for all services. For instance, you need to know what it costs you in terms of supplies, staff (including administrate and billing staff), overhead, and other factors to provide different levels inpatient and outpatient services.

You also need to understand how these costs change depending on how many patients you are caring for. For instance, if you are at 100 percent capacity, your costs may be lower per patient than at 50 percent capacity.

You need to understand what it costs to care for each patient so you can charge enough to cover those costs and turn a reasonable profit (typically 20 to 60 percent). Without knowing this information, you are flying blind in negotiations with insurance companies who will try to provide the lowest reimbursement rates possible. You also need to know how these costs increase over time so you can renegotiate for higher rates as necessary (an option included in most payor contracts).

When negotiating a contract with a payor, have these hard numbers and data ready to make your case. You should also have data on patient outcomes ready to prove that your services are effective.

When to Appeal a Low-Paying Claim

To determine if you should appeal a claim, look at the UCR rates in your area. If the claim is more than 20 percent below UCR, it’s definitely an opportunity to appeal. However, be sure to use the UCR rate for the type of coverage your patient has. For instance, if they have an ACA plan, the UCR may be lower than for employer group policies.

Navigating UCRs and your costs takes time and expertise. At Datapro, our experienced team can help you negotiate in-network contracts and work toward better reimbursement. Contact us today to gain a better understanding of your costs—and the correct charges for your services.

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