One of the difficult decisions facing hospitals is whether to be “in-network” or “out-of-network.” In-network hospitals have contracts with commercial insurers to accept discounted rates. In-network hospitals tend to have fewer denied claims and more timely payments from insurers. However, many hospitals find these advantages are outweighed by one huge disadvantage extremely low in-network reimbursement rates. Low insurance reimbursement rates have been blamed for a wave of hospital closures and bankruptcy filings in New Jersey. This problem has driven a number of New Jersey hospitals to explore leaving insurance networks altogether and becoming out-of-network with respect to some or all of the state’s large commercial insurers.
Out-of-network status provides hospitals with the ability to charge for their services and products as they see fit, free from contractual restraints with insurers. On a per-claim basis, reimbursement rates tend to be higher than in-network reimbursement rates. And, once a hospital has left an insurance network, it may be able to use its out-of-network status as a basis to negotiate higher in-network rates with insurers. With out-of-network status, however, comes the risk of substantially reduced volume as the result of the loss of referrals from insurers, more scrutiny from insurance carriers and more denied claims. How to respond to these risks and maximize the advantages of being an out-of-network provider requires careful preparation and an understanding of the legal issues involved.
