Contracted Rate vs Standard Rate

Understanding and projecting revenue as a therapist in private practice can be complex. There are a lot of factors that can influence rates, and there are a lot of terms floating around such as a contracted rate, standard rate, cash rate, retail rate, or private pay rate. What do they all mean? And how can you use them to better understand the financial health of your practice? Practice Solutions is here to help!

Standard Rates

Standard rate, cash rate, retail rate, and private pay rate… they are all different names for the same thing: the rate that you charge for your services for patients who are not using insurance to pay for their session. We will be using the phrase “standard rate,” but if you are more familiar with any of the aforementioned terms, just know that they are all representative of the same concept.

Standard rates are the dollar amount that you decide your services are worth, and what you charge to a cash pay client. In spite of the name, there are not really standards to abide by for standard rates, but there are some best practices that you can employ to help you in establishing your standard rate. You can use different factors such as geographic location and the cost of living in that area, the rates of other therapists in the surrounding area, your education level and specialties, and your personal financial goals to set your rates per session.

Ultimately, your standard rate is up to you. You can even change your standard rates if you feel that they are too low or too high, but you need to give your clients ample notice of any rate changes and include an effective date that the new rates will begin.

Contracted Rates

While you have ultimate control over your standard rates, contracted rates are established by the insurance company and are the rates that the insurance company has agreed to pay you for your services. Contracted rates are often communicated via a Fee Schedule, and the rates are listed by each CPT code that the insurance company will cover. These contracted rates are either paid to you by the insurance company, by the patient, or split between insurance and the patient depending on whether or not the patient has met their deductible. For a comprehensive graphic that explains this, check out our blog Helping Your Clients Understand How Insurance Works.

Contracted rates for providers are proprietary information to the insurance company. Often, they will only share their contracted rates with you if you complete the credentialing process. You are not allowed to share your contracted rates with other providers.

The insurance company establishes a contracted rate, but in some cases you are able to submit a case for an increase in that rate from an insurance company. Your case could be built around a variety of factors, such as completion of further education, changing demographics in your area, or a change in the cost of running a practice. Aside from the insurance company making adjustments to their fee schedules, this is one of the only ways that your contracted rates will change.

How do these rates affect my billing?

When a patient is not using insurance to pay for their session, you send them a bill for your standard cash rate. This process is very straightforward and appealing to many providers because of the simplicity. There are ways that you can successfully run a cash based practice, but we are seeing an increase in need for providers who accept insurance. Many patients are unable to afford standard rates, and rely on their insurance plans to receive the care that they need. See our article Why We Need More Therapists to Take Insurance to find out more.

When a patient is using their insurance to pay for their session, you will need to know your contracted rate for the service that you are providing. The session can be billed to the insurance company at your standard rate, but you will only be paid the contracted rate amount. When billing insurance, knowing your contracted rate amounts and performing eligibility and benefit checks can help you communicate clearly with your patients about what they are expected to pay for a session. You should also know your contracted rate so that you can calculate what a patient owes if they have a co-insurance payment.

The No Surprises Act has made it even more important for you to know your fee schedule of contracted rates, as the fee schedule will help you in providing the Good Faith Estimates required by the new legislation.

Using Rates to Understand Financial Health of Your Practice

If you operate a cash pay practice, it is fairly straightforward for you to project revenue using your cash rates, and the number of sessions that you have scheduled in a week. When accepting insurance, revenue projections can be trickier. Having an understanding of your fee schedule can help you in estimating revenue by looking at the different types of sessions that you do in a week, and using your fee schedule rates to determine what you can expect to be paid for each of those sessions. You may have financial goals for your practice, and you can use the session rates to help establish a schedule that best helps you in meeting those goals.

If you would like to have someone who can help you interpret your fee schedules, perform eligibility checks for you, as well as complete claim submission and follow up, we suggest that you fill out our contact form! Practice Solutions billers do all of these things with a relationship based approach. Bringing a Practice Solutions biller on your team can save you time and stress, so contact us today to learn more!