Payer contracting, and the revenue model.

In-network vs out-of-network strategy

The first strategic call. The trade-offs are stark:

• In-network — contracted fee schedule with the payer. Lower rate per client, but predictable reimbursement, faster auth approvals, broader referral access. Clients with in-network coverage choose in-network programs all else equal. Commercial in-network rates for residential are commonly $500–$900 per day, with significant payer-by-payer variation.
• Out-of-network (OON)— no contract with the payer. Reimbursement is based on the client's OON benefit (usually a percentage of usual-and-customary or a billed-charge approach). Higher reimbursement per client when paid, but slower payment, more denials, more clinical justification, and payer rate-disputes are common. Clients with strong OON benefits (PPO plans) drive OON economics; clients with HMO plans cannot use OON benefits at all.
• Hybrid — most established programs run hybrid. Contract in-network with 2–4 anchor payers; treat OON for the rest. Hybrid is operationally complex (different workflows for in-network vs OON) but maximizes revenue per bed-day.

For a new program, the right answer depends on geography (which payers dominate locally), client demographic (commercial vs Medicaid), and capital position (OON requires deeper cash to absorb slower A/R).

The VOB workflow

Verification of Benefits (VOB) is the first revenue-critical workflow every program has to nail. It determines whether a client can be admitted, how long, and at what reimbursement.

1. Inquiry arrives at intake (call, web form, referral)
2. Insurance card information captured — typically front and back photo or fields collected verbally
3. VOB call to payer or VOB via payer portal — verify active coverage, level of care benefits, in/out-of-network status, deductible / out-of-pocket status, prior-authorization requirements, length-of-stay limits
4. Internal financial summary generated for the prospective client — typically "here's what we believe the financial exposure looks like"
5. Initial authorization request submitted if required by the payer
6. Admission scheduled

VOB-to-admission conversion is one of the most important metrics you'll track. Strong intake teams convert 25–45% of completed VOBs to admissions; weaker teams convert under 15%. The difference is largely process discipline and follow-up rhythm.

Single-case agreements

A single-case agreement (SCA) is a one-off contract with a payer for a specific client. Common when:

• You're OON but the client needs in-network access (often an HMO client)
• The payer has no in-network options in your geography
• The client has a documented medical necessity that the payer is obligated to facilitate

SCAs are negotiated case-by-case. They typically come in at a rate between OON and in-network — often 60–80% of your usual OON billed charges. They're also the most common path to getting on a payer's radar before formal in-network contracting.

Getting loaded with commercial payers

Commercial in-network contracting typically follows this path:

• Letter of intent or application— submitted to the payer's network management team. Many payers have online portals; some still operate by email or fax.
• Credentialing — payer verifies your license, accreditation, insurance, leadership credentials, and quality metrics. 60–120 days typical.
• Rate negotiation— happens after credentialing approval. Payers start with their lowest published rate; negotiation depends on your geographic uniqueness, programming differentiation, and the payer's in-network coverage gaps.
• Contract execution — finalize fee schedule, covered services, prior-auth requirements, claim filing limits.
• Load date — typically 30–60 days after contract execution, after which you can start billing as in-network.

Total time from initial application to in-network billing is commonly 6–12 months per payer. The big-five commercial behavioral health payers are Optum (UHC behavioral arm), Anthem (now Elevance Health), Aetna, Cigna, and BCBS plans (state-by-state). Each is its own multi-month project.

Medicaid and Medicare

State Medicaid contracting varies dramatically. Some states (and their managed-care organizations) are open and friendly to new behavioral health providers; others are functionally closed to new contracts. Medicaid rates are lower than commercial — often 50–70% of commercial — but volume can be significant in states with strong Medicaid SUD initiatives.

Medicare contracts cover much less of the behavioral health continuum than commercial — Medicare doesn't pay for residential SUD treatment as a covered service. Most behavioral health treatment centers don't pursue Medicare contracting for that reason.

Payer mix targets

A common payer mix for a hybrid program at steady state:

• 30–50% in-network commercial (highest volume, lower rate)
• 25–40% out-of-network commercial (lower volume, higher rate)
• 10–25% Medicaid (state-dependent; can be much higher in states with strong Medicaid programming)
• 5–15% self-pay or single-case agreements