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Avea Solutions Blog

3 Ways to Avoid Falling Victim to Usual & Customary Rate Reductions

Apr 7, 2017 11:36:32 AM / by Stanley Rokaw

Stanley Rokaw

 3 Ways to Avoid Falling Victim to Usual & Customary Rate Reductions


If you own or operate an out-of-network behavioral health facility, much of your revenue stream hinges upon the predetermined maximum allowable rates of individual payers. These rates go by many different names  (e.g. usual and customary, reasonable and customary, and maximum reimbursable), and are usually aggregated from financial data gleaned from similar providers within a common geographic region, are specific to payer, and are subject to change, often without warning.

If your practice has been rocked by a recent dramatic dip in allowable rate reduction from a major payer, here are three tips to help soften the cash flow blow this may have caused, and to avoid falling victim to these shifts in the future.


1. Consider Going In-Network

Negotiating in-network contracts with the payers that top your list can be a good way to both secure a fiscally reasonable rate to support your facility’s growth and to easily forecast expected cash flow. The negotiation process may be lengthy, but those who are successful can secure a reasonable and predictable revenue stream. While the agreed-upon rate may be less than what you currently receive, it’s also more dependable; and as an added bonus, your practice has more protection from sudden dips in maximum allowable rates.

2. Vary Your Payer Mix

Here's a scenario: you discover your local Blue Cross Blue Shield is allowing 90% of your billed charges, a substantially higher rate than the other payers you’re accepting. Seeing an opportunity, you begin focusing marketing and admissions efforts on attracting more and more Blue Cross Blue Shield patients. But then, the unforeseeable happens: Blue Cross Blue Shield drops its allowed rates from 90% to 20%. Those formerly great profit margins have disappeared, and you’re left scrambling to enact critical operational decisions. Admitting patients with a variety of different insurance policies helps insulate your business from any dramatic cuts in allowable rates as laid out above.

3. Use an Analytics Tool to Stay Current with Trends

The best way to make decisions is by first understanding there’s a decision to be made. Arming your practice with the data necessary to quickly identify downward trends in payer allowable amounts lets you stay ahead of the curve and adjust marketing or admissions efforts as needed. Make sure your transaction recording processes are quick, and that your revenue management platform provides easy access to information that will help identify early warning signs of drops in allowed amounts.

Our experience running billing companies and working with facilities informs our mission to develop software specifically built for behavioral health. If you'd like more insight into the revolutionary financial reporting AveaOffice makes possible, schedule a product tour below. We can't wait to talk with you!


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Topics: Insurance, Industry Shifts, Claims Management

Stanley Rokaw

Written by Stanley Rokaw