HLTH 3300 Private Practice (Managed Care Unit 2 Part 2)

What does "Private Practice" mean in healthcare?

Private Practice means being self-employed in healthcare — you don't have an employer. You handle all applications, contracts, and overhead costs yourself.

What must a physician do before starting private practice?

They must complete all required documentation such as proof of malpractice insurance, DEA license, and references, then submit everything to managed care companies for review.

What happens after a physician submits their application to a managed care company?

The managed care company's department reviews the application, which takes time. During this process, the provider cannot see patients and has no income until accepted.

What formal notification do physicians receive if accepted to a managed care panel?

They receive a formal letter on company letterhead stating that they have been accepted to the "Panel of Providers."

What happens if a provider is not accepted by a managed care company?

They receive a rejection letter with the reason stated (ex: issues with malpractice insurance, DEA license, disciplinary actions, or lawsuits). If they were hired by a group relying on that managed care company, the job offer is void.

What document does an accepted provider receive after approval?

They receive a Managed Care Provider Contract, which is typically 50-60 pages long, written in small print, and full of legal jargon.

Why does each paragraph in a managed care contract have its own signature line?

To legally confirm that the provider read, understood, and agreed to every section individually. It prevents providers from claiming ignorance later and limits company liability.

What does the managed care contract specify about what the company provides?

It clearly states what the managed care company does NOT provide. The provider must supply their own office, staff, furniture, equipment, and supplies. Managed care companies provide nothing.

What accessibility requirements must provider offices meet according to managed care contracts?

Offices must be ADA-accessible — if the office is on a higher floor, it must have an elevator, and parking must be adjacent to the entrance.

What must providers do regarding managed care policies and procedures?

By signing the contract, the provider agrees to follow all of the company's specific policies and procedures, no excuses.

How long is a managed care contract valid?

One year. It must be renewed annually, and the provider must sign and initial all sections again each year.

Why are managed care contracts renewed annually?

Because companies want to ensure providers maintain good standing. If there are disciplinary actions, lawsuits, or billing issues, the company can simply choose not to renew the contract.

What happens if a managed care company does not renew a provider's contract?

The physician can no longer see that company's members (patients), resulting in loss of income from that patient pool.

What does "Reimbursement" mean in healthcare?

Reimbursement in healthcare refers to how managed care companies pay providers for services. It is not like business reimbursements for expenses — it is payment for procedures and visits according to billing codes.

What are "Reimbursement Rates"?

These are fixed payment amounts managed care companies pay for specific procedures or billing codes. They are listed in the contract and vary by specialty.

How many billing codes exist in healthcare?

Over 100,000. Providers typically only use and memorize codes relevant to their own specialty.

Give an example of how billing codes work.

A contract might list: Code 701 = $15, Code 702 = $20, Code 703 = $25. If a provider performs procedure 701, Aetna pays $15.

Who determines reimbursement rates?

Managed care companies do. Providers have no control or negotiation power over reimbursement amounts.

Why can't healthcare providers set their own prices like other self-employed workers?

Because managed care companies dictate reimbursement rates. Providers cannot choose how much to charge patients.

How much does it typically cost to outfit one dental exam room?

Between $80,000 and $100,000 per room.

What happens if a provider is not accepted into any managed care panel?

They cannot earn income from insured patients, since they cannot bill managed care companies. They essentially have no patients or revenue source.

Can healthcare providers just charge patients cash instead of joining managed care panels?

Not realistically. Most patients rely on managed care coverage, so refusing to join panels would mean losing nearly all potential patients.

What does the contract's reimbursement section include?

A list of reimbursement rates for specific procedures that match the provider's license and specialty. For example, dermatologists will only have dermatology-related codes and rates.

What happens if a provider submits billing late?

Managed care policies usually require billing to be submitted within 5 days of the patient visit. Submitting late means the provider will not be reimbursed.

Why do most physicians limit how many managed care companies they work with?

Each company has its own policies and procedures. Managing too many contracts becomes overwhelming, especially with different reimbursement rules and deadlines.

What happens if a managed care company changes reimbursement rates?

By law, they must notify providers in writing at least 30 days before the contract renewal date.

Do reimbursement rates ever increase?

No. They almost always go down, never up.

What happens if a provider does not accept the new reimbursement rates?

The managed care company will not renew the contract, and the provider will lose access to that patient network.

What does it mean for a provider to be "in network"?

It means the provider has an active contract with the managed care company. Patients (members) can see them at standard covered rates.

What does it mean for a provider to be "out of network"?

They are not contracted with the patient's managed care company. The patient must pay significantly more out of pocket, and sometimes procedures (like surgeries) are not covered at all.

What do managed care companies also negotiate contracts with besides providers?

They negotiate with hospitals to determine if each hospital will be "in network." Every individual hospital has its own negotiated contract.

Why are not all hospitals in every network?

Because managed care companies negotiate individually with each hospital. If payment terms (like cents per pathology slide) are not agreed upon, that hospital is excluded from the network.

What is the typical profit margin like in healthcare?

Very thin. Providers and hospitals must cover salaries, supplies, and operating costs from limited reimbursement rates.

What are "Overhead Costs" in private practice?

All expenses the physician or group must pay monthly: rent, electricity, furniture, equipment, disposables, staff salaries, phones, computers, and paper. These must be paid before the physician earns anything.

Why is financial management difficult in private practice?

Because reimbursement takes 90-100 days to process while expenses like rent and staff pay are due monthly, creating a cash flow gap.

How is pay distributed in private practice?

Staff are paid first, then overhead costs. Whatever remains is divided among the physicians in the group. There is no fixed salary.

Why do many doctors avoid hiring nurses in private practice?

Nurses are expensive, and most practices cannot afford the additional payroll under thin reimbursement margins.

What is a common mistake private practices make with expenses?

Overspending on luxury items like extravagant waiting rooms or décor, which drains funds needed to sustain operations while waiting for reimbursements.

What is required for acceptance to a managed care panel?

Proof of malpractice insurance. Without malpractice coverage, you will not be accepted to any managed care network.

What happens if a managed care company buys your practice?

They give physicians a salary rather than commission-based reimbursement, removing private ownership but ensuring steady income.