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How to Negotiate Higher Reimbursement Rates for Mental Health Treatments

2 Minute Read

In a recent New York Times opinion piece, the editorial board painted the picture of just how bleak reimbursement rates can be for community-based mental health clinics where patients primarily rely on Medicaid. In their words, “[R]eimbursement rates are so abysmal that clinics lose money on nearly every service their doctors provide.”

While this op-ed focuses on a specific type of clinic and insurance coverage, it speaks to a broader issue: the relatively low reimbursement rates for mental health treatments.

In recent months, we’ve seen the president’s administration lobby for insurers to provide the same degree of coverage for mental and physical healthcare. While these policy pushes show promise for the future, behavioral health providers still need to find ways to navigate their current normal. And that means finding ways to negotiate with insurers.

The Impact of Low Reimbursement Rates on Providers & Patients

For behavioral health providers, low reimbursement rates for mental health treatments are a double-edged sword. On one hand, limited payback for services rendered makes it harder for mental health clinics to stay profitable and keep serving their community. To put this in perspective, the president of one San Diego healthcare network said they lose 34 cents on every dollar spent on caring for behavioral health patients due to low reimbursement. This has made it difficult to justify further investments, and has even prompted other hospitals in the area to eliminate behavioral health services altogether.

Mental health providers that have a difficult time negotiating mental health reimbursement rates can lose money on every mental health treatment they provide and are less able to serve those in their communities affected by mental health conditions

At the same time, limited insurance coverage leaves patients in need of help less likely to seek out and use their services. In a study from the National Council of Well Being, 42% of the population cited cost and poor insurance coverage as the top barriers in mental healthcare access. What’s more, one in five Americans said they had to choose between mental health or physical health treatment based on their insurance coverage.

Strategies for Negotiating Higher Reimbursement Rates

There’s no question that negotiating higher reimbursement rates for mental health treatments can help contribute to the long-term financial stability and growth of clinics. The question is what steps can your clinics take to get these negotiations on the table.

Create a Value Proposition That Highlights the Strength of Your Facility

No two mental health clinics are built exactly the same. And in some cases, those differences can be a catalyst for negotiating higher reimbursement rates with insurers.

Maybe your clinic has providers with specialized certifications and accreditations. Insurers can associate these accolades with a higher quality of care that makes them want to partner with you — to the point they’re willing to increase reimbursement rates.

While Medicaid reimbursement rates and Medicare reimbursement rates may be standardized, mental health providers can use strong value propositions to negotiate higher reimbursement rates for behavioral healthcare with other insurance providers

Or perhaps, your clinic offers mental health services in an underserved area. With the goal to help improve mental equity, insurers are apt to offer higher reimbursement rates to make sure residents in that area have convenient access to mental health services.

Use Clinical Performance Data to Build an Even More Compelling Case

Data can speak volumes about the quality of care your mental health clinic provides. The key is to know which metrics to focus on in your efforts to negotiate better rates.

Time-to-appointment is one example. In a 2022 COVID-19 Practitioner Impact Survey, 40% of psychologists reported having a wait list that consisted of 10 or more patients. When a clinic can demonstrate shorter wait times and more immediate access to care, insurers will take notice.

When mental health professionals can offer short wait times to patients, especially amid behavioral health workforce shortages, private insurance companies can consider offering better reimbursement rates to providers as part of their evaluation and management services

Another valuable metric is patient retention rate. High patient retention rates can be a strong indicator that patients see the value in the mental health treatments they receive. Insurers will see the positive experience they want their policyholders to have reflected in your clinic’s operations, and thus are more inclined to want to partner with you.

Negotiating higher reimbursement rates for mental health treatments is just one way to grow your mental health practice. Find more strategies in this guide.