What Contractors Need to Know about Payor Contracting for Healthcare Services

Healthcare services are expensive. As an organization’s need for healthcare services increases, so too does the cost of providing them. That’s why healthcare costs so much.

Contracting with a healthcare provider can save your organization money.

When a healthcare provider understands the specific needs of your organization and its employees, they can often be contracted to provide healthcare services at a much lower cost than if those services were to be provided directly by the provider.

This is due to the contracted healthcare service provider having to work in close conjunction with other organizations in order to provide healthcare services to your organization at the lowest cost possible.

The typical healthcare provider works in close collaboration with other organizations within their region in order to provide healthcare services to as many people as possible. The more organizations that are involved, the cheaper healthcare services will usually be.

A contracted healthcare provider is simply an organization that works in close collaboration with other organizations in order to provide healthcare services to your organization at a much lower cost than if those services were to be provided directly by the provider.

This guide will help contractors understand the different types of payor contracting for healthcare, describe the risks associated with each type, and provide contractors with advice on whether a contracting program is right for them.

What is payor contracting?

Payor contracting is a type of contract in which healthcare providers act as a contractor for your organization. They are paid a fee to provide healthcare services to your employees, and you are responsible for paying the employees’ healthcare bills.

It’s important to note that while payor contracting is most often used to provide healthcare services, it can also be used to provide other services, including benefits and group-term life insurance.

Types of Payor Contracting

There are three main types of payor contracting. Each type of payor contracting has its own set of pros and cons.

• In-Network: The health network of the contracted healthcare provider is used to deliver healthcare services.
• Out-of-Network: The health network of the contracted healthcare provider is not used to deliver healthcare services.
• Indeterminate: The contracted healthcare provider does not have an in- or out-of-network designation.

Pros of Payor Contracting

• Lower Prices: A contracted healthcare provider will generally provide healthcare services to your organization at a lower cost than if those services were to be provided directly by the provider.
• Greater Choice: Choosing a contracted healthcare provider is generally easier than choosing a provider that handles all aspects of your employees’ healthcare.
• Flexibility: Contracted healthcare providers generally have the ability to change their prices without notice.
• Reduced Risk: The contracted healthcare provider is not responsible for your employees’ healthcare.
• Greater Collaboration: A contracted healthcare provider will generally work with other organizations to provide healthcare services to your organization.
• Lower Liability: The contracted healthcare provider has very limited liability as compared to direct provider contracting.
• Reduced Compliance: Some contracted healthcare providers do not require your organization to comply with healthcare laws and regulations.
• Greater Control: Contracted healthcare providers generally have more control over the healthcare services provided to your organization than do direct providers.
• Greater Scalability: Contracted healthcare providers generally have the ability to increase capacity as your organization grows.
• Reduced Administrative Costs: A contracted healthcare provider generally has lower vendor expenses than a direct provider.

Cons of Payor Contracting

• Higher Costs: A contracted healthcare provider is generally paid a fee to provide healthcare services to your organization.
• Risk of Billing Error: You are responsible for paying the healthcare bill of your employees.
• Long Lead Times: Some contracted healthcare providers may take several days to respond to requests.
• Need to Track Employees: Many healthcare providers have a difficult time tracking your employees’ healthcare.
• Need to Fund Health Bill: You’ll need to fund healthcare for your employees before beginning work for the first time.
• Need to Develop Processes: Most healthcare providers have a difficult time keeping track of your employees.
• Need to Communicate with Employees: You’ll need to communicate with your employees about the types of healthcare services they are eligible for and how much you’ll be paying for them.
• Need for Documentation: You will likely need to keep records of your healthcare service arrangement with a contracted healthcare provider.
• Need for Deductible: Most contracted healthcare providers have a deductible of around $1,000.

Conclusion

Overall, payor contracting for healthcare is a great way to save money on healthcare costs. However, it’s important to understand the risks associated with each type of contracting and decide if the benefits outweigh the risks for your organization.