While determining the business plan for Redeem Physical Therapy, I had to decide whether or not to contract with the medical insurance companies or operate as a self-pay, cash based entity. There are pros and cons to each model, but I eventually concluded that cash pay is ultimately in the best interest of people. Let me explain…
In my opinion, the two worst parts of our healthcare system are corporate, for-profit companies offering the medical services and insurance companies as the payers for the service. And the two entities play off each other in order to drive up the cost of treatment. Have you ever looked at one of those explanation of benefits (EOB) from your insurance company? It typically has columns for each service: charge from the company, insurance adjustment, amount covered by insurance, and then amount you owe. Have you ever wondered why the charged amount is so high?
The reason is twofold: the company wants to charge as much as possible in order to make a profit and the insurance company is going to only offer to pay for a percentage of the charged amount. For instance, if a company needs to make $70 to break even on a service they are providing they would like to charge closer to $100. This gives them a profit and allows them to set aside money for any potential slow period of business in the future. The insurance company tells the company they will only pay 40% of the charged amount. Well, $40 is not enough to even cover the companies costs so they raise the rate that they charge. Now they charge $300 dollars for the service and accept the 60% cut from the insurance company and pocket $120. Sounds like a racquet because it is.
What does the company need to make so much in profits? Because the larger the company, the more layers of management in the company. Most of these layers of management get high salaries for their labors, but they do not actually do the thing that brings in revenue for the business – seeing patients! The bigger the company the higher the margin needs to be to pay everyone. In fact, I know of a company that required over 20 people to authorize the purchase of a new piece of equipment needed because the clinic had grown and added new clinicians. 20! None of which brought in revenue but earned a paycheck to repeat work that had already been completed!
So, that means the insurance company is the good guy, right? Sticking up for the common man against the greed of the corporate health system? Wrong, unfortunately. The insurance companies are trying to make money too. Many of them are actually hiring third- party companies to be gatekeepers on physical therapy benefits. For example, you may have a plan with your insurance company that covers 30 physical therapy benefits for the year but this third-party company gets to tell your provider that only 6 visits will be covered for your back injury. And after you use the six visits, they will place several hoops in front of your provider making it unappealing to fight for more visits. This deterrent decreases the amount of money paid out for physical therapy by artificially restricting your access to care that you are paying for through your continually rising premiums. In other words, the insurance company pays someone else in order to keep from paying for a service for which you have paid them to cover! So, not they are not the good guys either.
The solution is simple, however. Find a provider that works for you, because you are paying them, instead of a provider working for the insurance company because the insurance company is paying the bill. This is the reason we have not contracted with any insurance company. We have chosen to work for you and contract with you directly! And, as a result, we get to work directly with you in a one-on-one environment. We get to give you undivided attention. You will not be scheduled with multiple people like you do with the corporate outpatient companies.
Being a small company and refraining from contracting with insurance leaves us unencumbered by bloated overhead and insurance restrictions. We get to fulfill our mission of providing excellent care and helping clients reach their goals, not the goals of the insurance company. If this sounds like the environment you have been looking for, please give us a call!