Should You Stay or Should You Go? The 3-Step Audit for Your Insurance Contracts

I was sitting in my office last week, looking over a client’s aging report, and I felt that familiar tightness in my chest. You know the one. It’s that feeling you get when you realize you’ve been working twice as hard for half the pay.

I don’t know about you, but I’ve spent way too many hours looking at columns of numbers, trying to make the math make sense. I talk to clinic owners every single day who are drowning in “busy-ness.” Their waiting lists are out the door, their therapists are booked solid, and yet, when they look at the bank account at the end of the month, they’re scratching their heads.

“Where did the money go?”

I’ll tell you where it went: It went into the “Contract Trap.” (Yep, I’ve written about that here if you want the backstory).

We recently tackled this exact dilemma on SPOT Growth Episode 38. We called the episode “Should You Stay or Should You Go?” because, honestly, choosing to stay in a bad insurance relationship is a lot like staying in a bad dating relationship, you keep hoping they’ll change, but they just keep forgetting your birthday (or in this case, “forgetting” to pay your claims).

If you’ve been feeling like your practice is a treadmill that’s set just a little too fast, it’s time for an audit. Not the scary IRS kind. The “Is this payer actually helping me grow?” kind.

Let’s dive into the three-step audit that will help you decide if it’s time to break up with your low-paying payers.

Step 1: The “Real Talk” Math (Stated Rate vs. Effective Rate)

I’m going to let you in on a secret that most insurance companies hope you never figure out. The rate they put in your contract, the “Stated Rate”, is almost never what you actually take home.

I’ve seen it a thousand times. A payer offers you $75 for a 97110 code. You think, “Okay, I can make that work.” But that’s the Stated Rate. It’s the shiny sticker price.

The Effective Rate is the number that actually matters.

To find your Effective Rate, you have to look at what actually hits your bank account after the “insurance tax” is applied. And no, I don’t mean literal taxes. I mean the hidden costs of doing business with that specific company.

Think about it this way:

• Payer A pays $70 and pays every claim within 14 days without a peep.
• Payer B pays $85 but denies 20% of your claims on the first pass, requires a 30-page clinical report every 6 visits, and makes my team spend 45 minutes on hold just to check eligibility.

Suddenly, that $85 rate isn’t looking so hot, is it?

I’ve realized over the years that we often get blinded by the highest number on the fee schedule. But if you have to chase that money for six months, your Effective Rate is plummeting every single day.

Pro-Tip: Take your total collections from a specific payer over the last six months and divide it by the total number of units billed. That’s your truth. That’s your Effective Rate. If that number makes you want to cry into your morning coffee? Well, that’s a sign.

Step 2: Calculating the “Administrative Load”

This is where things get real. I call this the “Friction Factor.”

Every payer has a different “Administrative Load.” This is the sum of all the extra work your front desk and your billing team (hi, that’s us!) have to do just to get that single claim out the door.

When I’m auditing contracts for our clients at Extra Mile Billing, I’m looking at two major red flags:

1. The Denial Rate

If Payer C is constantly “losing” faxes or claiming they never received a prior auth that you have a confirmation for, they are stealing your time. High denial rates don’t just delay payment; they create a massive amount of “re-work.” And re-work is the silent killer of practice profitability.

2. The Phone Time

Wait! What? You mean I have to call them again?
If a payer requires a phone call for every “glitch,” and their average hold time is 40 minutes, you aren’t just losing money on the rate. You’re paying for a staff member to sit on hold.

I’ll be honest: some payers are just “high maintenance.” If you’re spending 5 hours a week fighting with one specific payer who only represents 10% of your volume, that’s a bad deal. (Sound familiar?)

I’ve talked to owners who were so stressed about their billing that they couldn’t even focus on patient care. If a contract is causing you more gray hairs than revenue, it’s time to weigh the load. You can see how we handle these “forensic” deep dives on our Forensic Billing page.

Step 3: The 3-Question Audit Checklist

Before you go sending out “Dear John” letters to every insurance company in the state, I want you to run through this quick checklist. I’ve found that these three questions help clear the fog and make the decision objective rather than emotional.

Question 1: Does this payer represent a significant portion of my “Feeder” network?

Sometimes we keep a low-paying payer because they are the “gateway” to a higher-paying one. For example, if Payer X pays poorly but is the primary insurer for the largest employer in your town, dropping them might mean losing 30% of your referrals. You have to decide if the volume justifies the low margin.

Question 2: Is the Administrative Load higher than the profit margin?

Do the math we talked about in Step 2. If it costs you $15 in staff time to chase a $60 payment, you’re only netting $45. Could you fill that spot with a private pay client or a higher-paying insurance patient?

Question 3: What would happen if I cleared these spots?

This is the “Scary, Boring, Necessary Evil” question. If you dropped the bottom 10% of your lowest-paying/highest-headache contracts, what would you do with those open slots?

• Would your therapists be less burnt out?
• Could you finally clear that waiting list of kids with “good” insurance?
• Could you offer more specialized, higher-margin services?

I know it feels terrifying to think about “losing patients.” But remember: You aren’t just a clinic; you’re a business. And a business that can’t keep its lights on can’t help anyone.

Squarespace Pro-Tip: Use Summary Blocks to Keep Resources Visible

Since I know many of you are running your practice websites on Squarespace (like we do!), I want to share a quick “win” for your site.

When you start doing these audits and maybe even changing your “Accepted Insurances” list, you’ll want to keep your patients informed. But don’t just bury that information in a boring PDF!

Use Summary Blocks.

Summary Blocks allow you to pull content from your blog or a “Resources” gallery and display it beautifully on your homepage or your “About” page.

For example, if you wrote a post about “Why we are moving to out-of-network for [Payer X],” you can use a Summary Block to make sure every new parent sees it before they book an evaluation. It keeps your past resources visible and helps with your SEO! (Check out our All Resources page to see how we organize our own content).

Final Thoughts: You Don’t Have to Do This Alone

I know this is a lot. Auditing contracts feels like one more thing on a never-ending to-do list. But I promise you, once you do it, it feels GREAT. My clients who have finally “fired” their worst payers often tell me they feel like a weight has been lifted.

If you’re sitting there thinking, “Aaron, I don’t even know where my fee schedules ARE, let alone how to calculate an Effective Rate,” don’t panic. Phew! That’s what we’re here for.

At Extra Mile Billing, we don’t just “push buttons” and send claims. We look at the big picture. We help you find the leaks in your bucket so you can stop running so fast and start growing sustainably.

If you want a partner who’s been in the trenches and knows exactly how to handle those Humana denials (we’ve got 7 fixes for that right here), let’s chat.

Feel free to reach out to us here. We’d love to help you run the numbers so you can decide: Should you stay, or should you go?

You’ve got this!

– Aaron and the Extra Mile Team