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Renegotiating Rates: Part 2

Therapist creating a case to request an increase on their reimbursement rates from insurance

This blog is the second installment of a two part blog series that covers how you would renegotiate your payment rate with the insurance company. In our first blog we covered a high level process that would help you gain your bearings and find some basic information that you would want to have when starting down the road of renegotiating your rates with insurance. It is important to make sure that when you are renegotiating your rate with insurance that you are reading your contract, talking with your colleagues, and doing some preliminary research before reaching out to the insurance company for a pay increase.

This blog post will give you a deep dive into the nuts and bolts for asking for a pay raise from the insurance company. It is important to move slowly through this process to make sure you understand every element of asking for a pay raise, so that you have the best chance at receiving a pay increase from the insurance companies.

Payment Rates Formula

The first step to asking for a pay raise is to understand what numbers matter to the insurance company. If you are not starting by evaluating what the insurance companies care about then you might be in trouble right from the beginning. When asking a large insurance company for a rate increase, we encourage you to care about what the insurance company is going to care about and to speak their language to them.

In this case, speaking the insurance company’s language is understanding the formula that they use to create insurance reimbursement rates. Keep in mind that rates are not generated by intuition or without any logical or mathematical formula. Therefore, when approaching the insurance company about a pay raise it helps to know the formula that they are using to make sure that you are using the same information.

Fortunately, the starting formula for a reimbursement rate is public knowledge. We are going to give you this formula and break down the formula step-by-step so you know exactly what it means.

PAYMENT = [(Work RVU × Work GPCI) + (Practice Expense RVU × Practice Expense GPCI) + (Malpractice RVU × Malpractice GPCI)] × Conversion Factor

If this looks scary to you, that is okay! We are going to break this down step by step for you so it makes sense.

The insurance company cares about three things when evaluating the reimbursement rates:

  1. The value of the work that a clinician does (i.e. Work)

  2. The costs to run a practice (i.e. Practice Expense)

  3. The cost of malpractice insurance and malpractice claims for a clinician (i.e. Malpractice)

The insurance companies evaluate each of those three variables against a Relative Value Unit (RVU) and a Geographic Practice Cost Index (GPCI). Meaning what are the values for each of those variables and how does expenses or cost play into each variable, respectively.

The values explained above are all known parts of the equation that can help you build an informed case for an increase in reimbursement rates. The last variable, the conversion factor, is a confidential variable that is set by each insurance company that allows them to remain profitable and is not relevant to requesting a rate increase.

Keep in mind that this is not just the formula for mental health services, but this is the formula for all healthcare services throughout the country, so it is pretty general.

However, knowing what the variables are can help you build a case for receiving a pay increase from the insurance company. Here are some key questions that you can ask yourself when building a case for higher reimbursement:

  1. Has the value of my time increased or decreased in the last year?

    1. If so, why?

    2. What services have you offered or taken away?

    3. How have you invested in your own training or the competency of your clinicians?

    4. What technological improvements have you made over the last year or years?

    5. How did those technological advances increase the value of the care that you provide?

    6. Can you measure the outcomes in your practice?

    7. Can you demonstrate that clients in your practice do better than going to a different organization?

  2. Has the cost to run my practice increased or decreased in the last year?

    1. If so, why?

    2. Has inflation impacted your practice?

    3. Have you added staff?

    4. Have your technological improvements come with expenses?

    5. How have your clinical outcomes improved relative to your increase in cost?

    6. How do your expenses contribute to providing good care?

  3. Has the risk or reality of malpractice changed in the last year?

    1. Have you had a malpractice claim or not?

    2. Do you think you will have a malpractice suit filed against you or not?

These are the kinds of questions that will directly impact your ability to convince the insurance company that you and your practice should receive a pay increase over the next year or so. By answering different kinds of questions, the insurance company probably will not read your proposal for a rate increase.

Building a Case for a Rate Increase

Knowing the variables of what the insurance company is looking for is helpful, but how do you actually put that together? In this section of the blog we are going to give you the very specific headings that you should have in your rate increase letter that will help guide you in creating your rate increase letter or proposal and will help answer all the questions that you should have.

First, you should start with addressing the letter professionally. This is a real letter or proposal and formatting is important because the insurance company is going to need clear directions to get your rate increase proposal to the correct person.

We recommend starting like this:


Name of Insurance Company (i.e. United Healthcare)

ATTN: Provider Services OR the name of the person you know who can help you

Street Address

City, State, Zip Code

Practice Name

Clinician Name, credentials

Street Address

City, State, Zip Code



Dear Provider Services (or the name of the person you know,

Keep in mind that it is best to make sure that you are acting and writing as professionally as possible. You want the insurance company to take you seriously, and they will only take you as seriously as you take yourself.

Next in the letter you will include the following headings:


Unique Skills, Experience, or Specialties

Zip Codes Served

Service Offerings Other Than Therapy

In the introductory paragraph, you will want to include the rates that you are being paid by CPT code and the rate that you are requesting to be paid by the insurance company. For example you would include a table that looks like this:

Currently Paid According to the fee schedule:

90791 $96.06

90837 $72.13

90832 $45.00

90834 $49.37

Requesting the following increase:

90791 $150.00

90837 $120.00

90832 $100.00

90834 $110.00

In the Unique Skills, Experience, or Specialties section you will want to talk about your clinical experience and education. You will also want to include information about the specialties or populations that you work with. Convince the insurance company that your population matters and it requires more money from them to continue working with that population.

In the final two sections, Zip Codes Served and Service Offerings Other than Therapy, you will want to demonstrate that you are valuable because people come from all around your area for help. Offerings other than therapy show that you are generous with your time and are thinking about how you and your practice can benefit your area. We encourage you to be as clear and passionate about this section as possible.

Best Practices for Contact and Follow Up

In the sample letter above we keep mentioning that you might have a personal contact at the insurance company that you can send the letter to. This is the best course of action. Maybe you met a representative at the insurance company when you were getting credentialed, or maybe you needed help with something and the provider area consultant came to your office to help you with something. Any way that you have met this person you will want to include them in your correspondence with the insurance company. If this person has an inside connection at the insurance company that can help with a pay raise, you will want to include them early in the process and talk with them about how they can advocate for you within the walls of the insurance company.

If you don’t have this connection we recommend finding one as soon as possible. Perhaps you can find them on LinkedIn or some other networking site. You can also find this person by asking colleagues in your area if they know anyone at the insurance company that can help you out.

If your efforts to find a provider area consultant come up dry, then do your best to find the department at the insurance company that handles rate requests. The information for this department is either in the contract with the insurance company or it is found within the provider manual. We recommend checking both of those documents to find the right location to send your proposal.

Once you have sent your letter or proposal into the insurance company we recommend following up on the request every week until you hear a concrete response or until the insurance company has been able to give you a clear idea of the next steps of your proposal.

What to do if your request is denied

If your request for a rate increase is denied, don’t be discouraged. Take a few moments to reorient and reorganize your priorities and think through the various options that exist to earn more money. Take some time and think through how and when you will apply again for a rate increase and then schedule when you would do that.

In the meantime, think through how you can capitalize on other areas of private practice. There is often money left on the table when providers are handling their own insurance billing. If you are looking to increase cash flow, take a look at patient collections and what might be outstanding, have a good understanding of your aging report and whether there are claims that need to be followed up on, and consider hiring a billing expert to help with insurance collections. To find out more about how Practice Solutions’ billing experts might be able to help your practice, contact us!

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