How can a sole proprietor effectively anticipate which insurance providers to sign contracts with in order to attract a larger client base?
Hannah Odell Candidate Number: 0176
SL IB Business and Management
Word Count: 1722
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Introduction
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Payment
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Analysis - SWOT
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Internal
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Strengths
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Weaknesses
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External
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Opportunities
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Threats
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Conclusion
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References
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Supporting Documents
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Introduction In 2008, the mental health parity law and federal parity law were passed which requires that mental health services (counseling, rehabilitation for substance abuse, etc.) be covered by insurance in a comparable way to normal physical health insurance. This law allows a patient or client to visit their mental health professional as many times as needed in one year, something that used to be limited. Even if a patient included mental health coverage in their plan, their therapist might not accept that particular insurance.
Licensed counselors often have to deal with forming contracts with insurance companies. The process of creating a contract can take a long time if communication is not immediate. These contracts all include a fee schedule, and allow the mental health professional to see the policyholders of that particular carrier and under what financial terms work best for each client. By signing this contract, counselors are required to accept the feed and keep a record of all cases.
Robert Odell, MSW, LICSW, runs his own private practice as a licensed counselor and social worker with around 40 patients. He has to deal with insurance companies every week to insure that his clients get billed for their sessions and he earns his money. Odell offers multiple payment methods: pay in cash or pay a co-pay while insurance covers the rest. To have to pay the smallest amount, Odell must have signed a contract with a particular insurance company entailing what he would earn in a 50 minute appointment. A different contract must be formed with each insurance company that Odell chooses to work with. New insurance companies have been forming in the last couple years and Odell must anticipate if clients will use that insurance and if he should create a contract with them. Since Odell is a sole proprietor, he does not have anyone
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to help him create these lengthy contracts, leaving him alone to manage his time between providing help for his clients and trying to get new ones.
The problem this essay will address is how Odell can effectively communicate with new insurance companies he wishes to work with while at the same time maintain a steady practice. Using SWOT analysis, I intend to look at the effects of creating contracts with new insurance companies and how those will affect the practice as a whole.
Payment The simplest way Odell charges clients is straight from pocket on a credit or debit card. These rates are higher than if the client were to be covered by insurance. Washington State Law requires that everyone be charged the same amount even if it becomes discounted by an insurance provider. Odell charges 140 dollars for a 50 minute appointment and 180 dollars for an 80 minute appointment which are never discounted to a private individual.
Working with around a dozen insurance providers, Odell must create a contract with each one. The rate for one 50 minute session can range between 57 dollars and 112 dollars. Since insurance companies will not target him, he must approach them. Each contract entails how much Odell will get for each session with a client under that particular insurance company. He is able to view every policyholder and can easily view a financial term that is best for them. Each client using insurance must pay a deductible at the beginning of each year in order to receive coverage. Once the deductible has been met, the insurance provider will pay Odell the agreed price and the client will pay a small co-pay. If the deductible has not been met, the client will pay in full the agreed
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price between Odell and the carrier until all of the deductible has been payed. If a client comes to Odell who has a plan under a provider that Odell has not signed a contract with, he will still make a claim and insurance will cover a smaller amount, resulting in a larger co-pay than if Odell were to have a deal with that particular company.
Also, some providers are so large that effective communication cannot be utilized. Even though most of the communication is done electronically, these providers have countless emails and calls coming in every day so one-on-one communication is not always possible. From start to finish, initializing, writing, approving, and signing a contract can take up to six months. Even though Odell does not spend all of his time for six months doing this, it can slow the response to changes in the market as well as dramatically decrease speed of decision making. If any new law were to pass regarding health care and mental health services, the contract would have to be revised which could take up another lengthy time. In the last year, Odell has signed two contracts with new companies to insure he can provide counseling for a larger range of people.
Analysis - SWOT Signing contracts with various insurance carriers is very important, but at the same time, Odell must consider how much he gets paid. To look more on the effects of a contract with a new company, the SWOT analysis tool can be used.
Internal ←
Strengths
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Having more plans with a variety of carriers will allow for a bigger client base. People will be motivated to come to Odell’s practice because of the deal he’s made with their provider.
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Also, this makes billing easier for Odell. For companies that don’t have a deal with Odell, he must send a claim for 140 dollars and the return amount is unknown. The more carriers Odell has approved, the less mystery and guessing there will be when it comes to earning money. With contracts, the price that agencies will pay is stated and will remain the same for every client under that insurance.
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Weaknesses
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If Odell were to approach a new insurance company but he didn’t agree to what he would be paid, this can cause a setback in new client growth. If a client comes in with insurance that Odell doesn’t work with, that client will in turn pay a larger co-pay than if Odell were to work with that agency.
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Also, these contracts are time consuming. As stated before, it can take up to six months before everything is finalized and signed. In that time, clients with that pending provider could have not liked the fact that they had to pay a large co-pay and could have already left Odell for another therapist. Odell works a four day week and his schedule is usually fully booked weeks in advance. This does not leave much time to quickly reply to any phone call or email regarding the outstanding contract.
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External ←
Opportunities
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A new insurance provider could surface, opening up the opportunity to create another contract. It doesn’t cost Odell any money to create a contract, only time. If no clients are coming in with this new insurance, this will allow Odell more time to finalize the contract instead of hurrying to finish because a client doesn’t like paying a large co-pay.
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Also, accepting more insurance agencies will make Odell more desirable to possible clients. If a new client is on a budget, they may be unwilling to pay in cash or cannot afford it. By creating new contracts, Odell will be able to target a larger population. Other therapists in the area may not have as wide of a range of accepted insurance carriers as Odell, making his service superior.
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Threats
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Competitors can often cause a threat. Odell is not the only counselor who lets people pay with insurance, obviously, so that doesn’t limit other counselors in the area to which providers they can use. They can just as easily create contracts with new companies, making Odell look less distinct among other professionals.
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Also, even though counselors are not trying to heavily compete with other counselors, marketing can still be done. Odell has set up a website for his practice that includes content that he believes will be appealing to potential clients, making his website easier
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to find. Other Seattle counselors also have websites and potentially could be more popular because of factors like time and money. ←
Time is a factor that can affect popularity because even though Odell has been working in Seattle for 16 years, other counselors have been there longer. This allows for the competitors to set up their market and establish their client base. The Internet has really taken off in the last couple decades and has become immensely important in the business world. Odell has had his website for seven years, but only recently has it been optimized for the client. Other therapists could have had their websites developed for longer and that could be what attracts clients.
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Money is another factor that can affect the amount of new client growth. Odell hires someone to work on his website for him, and over time, the cost will build up. Competitors could be more successful because their website could be easier to use, more visually appealing, or has more features. All those come with more money spent. Odell needs to develop his website to be above standard, but can only do that if he generates more revenue.
← ← ← Conclusion Robert Odell has run his own private practice for over 16 years. He’s been working with insurance companies all that time to make sure his practice does not put clients in a bad financial positions and that involves creating contracts to sign. These contracts are often a lengthy process
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because effective and rapid communication is not always an option, resulting in a process that can take up to six months. Once these contracts have been made, they require no maintenance, only that Odell must keep a record of all clients under that insurance and all their appointments.
With this new a developing world, new insurance companies are becoming more prominent, and more clients are coming to see Odell with these carriers that he doesn’t offer. The question proposed was how Odell can anticipate which companies to sign contracts with to avoid wasting his time. This essay has proved that signing with new companies before he has clients under that insurance will allow him to spend more time working on the contract, as well as eventually leading to a larger client base if the carrier is not recognized by other counselors and therapists in the area.
References Odell, Robert. "Counseling & Therapy - Couples, Relationships & Individuals." Seattle Counseling. Published 2011. http://seattle-counseling.com "Does Your Insurance Cover Mental Health Services?" Accessed 20 Feb, 2015. http://www.apa.org/helpcenter/parity-guide.aspx. Odell, MSW, LICSW, Rober. "Interview with Robert Odell." E-mail interview. 19 Feb. 2015.
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