Should I Take That Contract? Evaluating Insurance for Your Practice

I don't know about you, but every time an insurance contract lands in my inbox, I get this weird mix of excitement and dread.

Excitement because, hey, new revenue stream! More kids we can serve! Growth!

Dread because... well, is this actually going to be worth it? Or am I about to sign up for months of authorization headaches and terrible reimbursement rates that'll have me wondering why I'm even in business?

I talk to pediatric therapy practice owners every single week (it's literally my job), and this question comes up constantly: "Should I take this contract?"

And here's what I've learned: Most people are asking the wrong questions when they evaluate insurance contracts.

The Reimbursement Rate Trap

Let me guess what you do when a new contract shows up. You flip straight to the fee schedule, right? You scan for your most common CPT codes, 97110, 92507, maybe 97530, and you either feel relieved or your stomach drops.

I did the exact same thing when I first started working with therapy practices.

But here's the problem: The reimbursement rate is only one piece of the puzzle. (And honestly? Sometimes it's not even the most important piece.)

I've seen practices turn down contracts with decent rates because the administrative burden would've buried them. And I've seen practices accept lower rates because everything else about that payer made sense for their business model.

The rate matters. Of course it does. But it's not the whole story.

What You Should Actually Be Asking

When I recorded Episode 38 of the SPOT Growth Podcast, I wanted to walk through the real framework I use when advising practice owners about contracts. Because this decision? It's not just about this quarter. It's about the sustainability of your entire practice.

Here are the questions you should actually be asking:

1. What's the Administrative Burden Going to Be?

This is where I see practice owners get absolutely hammered. They sign a contract because the rate looks good on paper, and then six months later they're drowning in prior authorizations, re-authorizations every 10 visits, and claims getting denied for the most ridiculous reasons.

You need to grade potential payers like you're their teacher. A through F. Dead serious.

Ask yourself (or better yet, ask other practice owners in your network):

• How easy is it to get credentialed with this payer?

• Do they require prior authorizations? How often?

• What's their claims payment turnaround time?

• How often do claims get denied on the first submission?

• When you call them with questions, can you actually reach a human?

I know a practice owner in Tampa who tracks this stuff in a spreadsheet. She has columns for "time spent on auth calls," "denial rate," and "days to payment." When a new contract comes across her desk, she knows exactly how much that payer is going to cost her in staff time and stress.

That administrative burden? It costs you real money. If you're spending 3 hours per week just managing authorizations for one payer, that's time your staff can't spend on other revenue-generating activities. Or worse, it's time YOU can't spend growing your practice.

2. Does the Math Actually Work?

Okay, now we can talk about rates. But we need to talk about them in the context of your actual costs.

Here's what I tell practice owners: You need to know your break-even point.

What's the minimum reimbursement rate you can accept and still keep the lights on? This isn't your ideal rate or your preferred rate. This is the "if I go below this number, I'm literally losing money on every visit" rate.

To figure this out, you need to know:

• Your therapist's compensation (salary or percentage)

• Your overhead costs per visit (rent, utilities, admin staff, supplies, the whole deal)

• Your administrative costs specific to that payer

Let's say your break-even is $80 per evaluation and $65 per treatment session. If a payer is offering you $85 and $70? That's not a lot of margin, but it might work if they're low-hassle (see point #1).

If they're offering $75 and $60? You're in the red before you even start. And no amount of "but we'll make it up in volume" is going to change that math. (Trust me, that never works the way you think it will.)

I've had this conversation with practice owners who are terrified to look at these numbers. I get it. It's scary to realize you might be losing money on 30% of your caseload. But knowing is better than not knowing. Always.

3. What Percentage of Your Business Would This Be?

This is where strategic thinking comes in.

If this payer is going to represent 5% of your revenue? You have more flexibility. Maybe the rates are just okay, but you're trying to build a relationship with a major health system that refers through this plan. There might be strategic value there.

But if you're looking at a payer that could become 40% of your caseload? You better make sure everything about that contract works for you. Because if it doesn't, you're going to spend the next two years trying to dig yourself out of a hole.

I talked to a practice owner last year who had 60% of her patients on one insurance plan. Sixty percent. When that payer cut rates by 15%, she had to lay off staff. She didn't have enough payer diversity to absorb the hit.

Don't put yourself in that position.

4. What Are Your Expansion Plans?

Here's a question most people don't think about: Does this contract help or hurt your ability to grow?

If you're planning to hire another therapist in the next six months, will this payer give you enough volume to support that salary? Or will you be stuck with a bunch of low-margin patients that keep your new hire busy but don't actually contribute to your bottom line?

Some contracts are growth-friendly. They pay well, they're easy to work with, and they have enough volume to justify expansion.

Others are traps. They look good initially, but they cap your growth potential because the margins are too thin or the administrative burden scales badly.

It's Okay to Say No

Here's the thing I really wanted to emphasize in the podcast episode: You don't have to take every contract that comes your way.

I know it feels scary to turn down potential revenue. I know you're worried about saying no to families who need you. I know your heart is in the right place.

But taking a contract that doesn't work financially? That's not sustainable. And an unsustainable practice helps no one.

I'd rather see you serve fewer families well, with a healthy, profitable practice that'll be around for years, than burn yourself out trying to make bad contracts work.

When the math doesn't work, walk away.

When the administrative burden is going to drain your staff and kill morale, walk away.

When your gut is telling you this payer is going to be a nightmare to work with, walk away.

The Exception to Every Rule

Now, are there times when you might take a contract even if the numbers aren't perfect? Sure.

Maybe you're just starting out and you need the volume to get established. Maybe this payer dominates your area and you literally can't build a practice without them. Maybe you're trying to maintain a relationship with a referral source that's critical to your business.

Those are valid reasons. Just go in with your eyes open. Know what you're getting into. Have a plan for how long you'll stay with that payer and what your exit strategy looks like.

Don't just drift into a bad contract and wake up two years later wondering how you got here.

Your Action Plan

If you've got a contract sitting on your desk right now (or one coming soon), here's what I want you to do:

First, create that A-F grade for administrative burden. Talk to other practice owners. Do your research.

Second, run the numbers. Actually run them. Know your break-even point. (This resource on profit margins might help if you're not sure where to start.)

Third, think strategically. What percentage of your business would this become? Does it align with your growth plans?

Finally, give yourself permission to say no if it doesn't work.

Your practice is a business. It needs to be profitable to survive. And that's not selfish: it's reality.

Let's Talk About It

I know this stuff can feel overwhelming. Contract evaluation isn't exactly what you went to grad school for, right? You wanted to help kids, not become a financial analyst.

But these decisions matter. They shape the trajectory of your entire practice.

If you're staring at a contract right now and you're not sure what to do, feel free to reach out. This is literally what we do all day. We help practice owners make smart decisions about payers, contracts, and the financial health of their practices.

And if you want more of this kind of straight-talk about running a therapy practice? Check out the SPOT Growth Podcast. We dig into this stuff every week.

You've got this. Just remember: the best contract is the one that lets you build a sustainable practice that serves families well for years to come.

Not the one that looks good on paper but makes you miserable six months later.