He Fought the State. And Won
Everyone fears collusion until they realize they’ve been negotiating alone. Gabe Freyaldenhoven joins to talk payment power, Medicaid battles, and how staying compliant can actually make you dangerous
When Arkansas rolled out managed Medicaid, most providers braced for losses. Gabe built a coalition, took a board seat inside the system, and pushed through laws that reshaped access and reimbursement for the entire state. As president of RehabNet, he’s helping hundreds of clinics negotiate smarter, bill cleaner, and use their numbers to force real change. We sat down to unpack how it happened and why physical therapists can’t afford to keep playing nice.
ben.barron: Welcome to Half Hour Ahead, Gabe. I’m tremendously appreciative that you are taking some time out of your day to talk to me and share your story with the readers of HHA.
gabe.freyaldenhoven: Thanks for having me, Ben. I love what you're doing here on Half Hour Ahead in the respect that it gets frustrating when we talk about something over and over and over. Let's do something. Let's try to bring about change. I think it's great getting success stories out because quite truthfully, some of the best results we've had is when we stole someone else's idea and tried to replicate it or modify it.
ben.barron: That’s the idea! There are people like yourself doing impressive things that have resonated with the people that control our industry yet aren't a part of it. This space is dedicated to finding and sharing those stories; hopefully someone reading this will be looking to steal your ideas next. As we get started, Gabe, tell the reader a little bit about your professional journey.
gabe.freyaldenhoven: In 2001, I opened my first practice (River Valley Therapy and Sports Medicine) and was blessed to grow quickly. By the time we got to the late 2000s, I found myself working with clinics that were struggling financially or operationally.
ben.barron: It sounds like you quickly established yourself as a top tier business operator and others wanted to learn from you. Can you tell us a bit of how that evolved?
gabe.freyaldenhoven: Well, in 2005, I was elected to the board of RehabNet, which is a messenger model collaboration of clinics. At the time it had about 25 to 30 unique tax IDs that all were working together to do delegated contracting, delegated credentialing, shared resources around administrative processes, continuing education, advocacy efforts. It's almost like a mini PPS inside of Arkansas, if you will.
gabe.freyaldenhoven: So I was elected to the board of that in 2005. Through the relationships I formed, my willingness to sit on the board meetings, absorb everything that I could, and provide the Board with any data, it helped inform decisions. I learned form some great leaders and tried to soak in as much as I could; I like to say I got a little mini MBA.
gabe.freyaldenhoven: As I then continued to build some of these relationships, people would say, "You know, I don't even know what my payment per visit should be." Well, I was a nerd about that kind of stuff, so I’d say, "Well, mine is this." When it exceeded theirs, they wanted to know how I was doing that? And so those conversations would flow.
gabe.freyaldenhoven: Usually it would be conversational until somebody got jammed and then they'd be like, "Hey, you know, I don't have the money to pay my folks. How are you doing this?" And so I would step in and help them analyze their data and plot a course back to profitability.
ben.barron: I love that story, and especially the idea of your mini MBA. I often describe these experiences as going to the MBA School of Hard Knocks.
ben.barron: Let’s go backwards for a moment. Can you explain to the reader what the “Messenger Model” of RehabNet means?
gabe.freyaldenhoven: Absolutely. So when you have an organization of provider groups, you have to very intentionally structure it. One way is the Messenger Model approach, meaning the entity that gets information from the payer and takes it as a messenger to a group of providers. Each individual provider group says "Yes, I will accept that contract" or "No, I won't" or "Here are some terms that I feel like need to be included" and they are a messenger back to the payer.
gabe.freyaldenhoven: Here’s an example. As of today, we've got 110 different tax IDs and around 200 clinics. A national payer was recently setting up a new network in the state.
gabe.freyaldenhoven: They came to RehabNet and said, "Here are the terms of the agreement." Based on the contractual parameters that our members had given us regarding acceptable and unacceptable contracts, we told them, "Based on the contract terms you've given us, you can get 6 clinics of our 200 clinics."
gabe.freyaldenhoven: Well, they need a lot more than six. So then they say, "OK. Where are the rubs?" We communicate the rubs and they keep coming back to us as they change the contract. "OK, now you can get 40 clinics. OK, now you can get 90. Now you can get 160." We're a messenger between the two.
ben.barron: So the messenger model entity is the intermediary between the practices and the payer, which makes sense for the practices, right? Because they're outsourcing their contracting negotiations to someone who has more expertise and represents 200. It sounds like this also avoids worries regarding collusion.
gabe.freyaldenhoven: Exactly. The Federal Trade Commission put parameters in place for how messenger models should work. There's case law out there to look at. We do everything in close collaboration with legal counsel to stay within the bounds.
gabe.freyaldenhoven: The alternative to the messenger model is the MSO model where everyone bills out under one tax ID, but we went with the messenger model, which has clear FTC guidance on what it should look like. What you can do, what you cannot do. As it relates to collusion, though, it's a serious thing but I think the PT industry hears the word, gets scared and runs 400 yards away from it.
ben.barron: Absolutely. It's that word that shuts everything down. We hear the word and then stop working to advocate for ourselves, as opposed to understanding the established guardrails that can avoid legal complications. Usually this results in us going at it alone and failing in negotiating on our own behalf. But it sounds like we can negotiate as part of a larger block of practices. But it's going to be as an MSO or messenger model.
gabe.freyaldenhoven: That's right. That's right.
ben.barron: So RehabNet is getting guidance from the practices.
gabe.freyaldenhoven: Mm hmm.
ben.barron: But the practices don't have to opt in. Each tax ID, one by one, is still making his or her own decision for their business, but hypothetically what the messenger model entity has done is getting that final product closer to whatever the parameters are for that business to be able to say yes. Do I kind of have that right?
gabe.freyaldenhoven: Absolutely. We've gone to each business and said "What is your line in the sand? If they get above this much on timely filing, you're willing to go, but if their timely filing is here, you're not willing to go?"
ben.barron: OK.
gabe.freyaldenhoven: As it relates to each key parameters we have our members guidelines. So, when a payer says, "Here is my contract," we can turn around and cross reference that and go "Based on the parameters our members have given us, six of our 110 tax IDs will sign this agreement."
gabe.freyaldenhoven: What happens is the payer says, "Hey, we need network adequacy and we want every one of your members, or at least 95% of your members. So what are the parameters that we need to put in place to get 95% of your members?” We'll talk through that as a messenger.
ben.barron: Got it.
gabe.freyaldenhoven: I'm a member and I'm the president, but we do not tell one member what the other members are doing. I don't have access to what our other members' line in the sands are. We have a paid executive director who is the only one with access to that information.
ben.barron: It's like the old Hair Club for Men. You're not just a president. You're also a member.
gabe.freyaldenhoven: Exactly. You got it. I love your terminology: “Guardrails.” They are set up in a safe place to keep us from going over the edge. We've had our legal counsel give us black and white guardrails of how to stay compliant. I think as an industry we've got to quit fearing it. We've got to know where the line is. Don't cross the line, but there's nothing wrong with walking up and operating within the bounds of the guardrails.
gabe.freyaldenhoven: And so we have put these guardrails in place to keep our organization from going over the edge and we stick to that. We don't hedge on that.
ben.barron: Yeah, but at the same time, you're not going to stay 400 yards away from that guardrail and make it harder for you to operate a business, provide care for patients and take care of your staff. That's too often where PTs have lived. My theory is we live there because we come into the profession because of our desire to heal, to be caregivers, and to help people become healthier and more active. Sometimes we end up making decisions to do those things at the expense of sustainability, profitability.
gabe.freyaldenhoven: Yeah, you're spot on. And 20 years ago, based on where salaries were and reimbursement was, you could do that still be solvent.
gabe.freyaldenhoven: You probably shouldn't have done that, but you did it. But today’s reality is that those decisions are the difference between making it and not making it. You can't operate that way anymore.
gabe.freyaldenhoven: You have to come up to the guardrail. I think it's true about billing, and I tell our people all the time: “Do not ever bill for something you don't do, but bill for everything you do.” It is equally fraudulent to under-bill as it is over-bill, and it's just who you're committing fraud against.
ben.barron: I love it.
gabe.freyaldenhoven: We have to quit being scared of our own shadow as an industry; we have to realize where the guardrail is. Go up to the guardrail. The guardrail's still in a safe spot. Guardrails are set up in a safety zone to keep you from going into the unsafe zone.
gabe.freyaldenhoven: There are times that we call our lawyer and say "Can we do this?" And they say, "No, no, no, don't do that." Fine. There’s the guardrail. We found it. But we've got to be willing to get close. And I don’t think that's something our industry has done well.
ben.barron: Very well said. I love the part you said about the fraudulent billing. There's a gentleman named Mike Severo, close friend and great mentor of mine over the years, who says "Hey, I just want to be crystal clear here.It's just as fraudulent to under-bill as to over-bill. Only one of those two things will land you an orange jumpsuit."
gabe.freyaldenhoven: Right.
ben.barron: "But it doesn't mean the other one's not just as wrong."
gabe.freyaldenhoven: Sure.
ben.barron: This is some of the education our less experienced colleagues need: you have to value your time. You are providing a valuable service for this individual, for society, for whomever else, and to be paid for that service is just and right.
gabe.freyaldenhoven: True.
ben.barron: Let’s go back a little bit you talked about contract parameters. Rather than starting at the usual spot, payment per visit, you first mentioned timely filing. It’s a good reminder that sometimes we don't think about negotiating a contract as a whole. All we focus on is that payment per visit side of things.
gabe.freyaldenhoven: Absolutely.
ben.barron: When you’re talking to practice owners, how do you think about contract parameters that aren't just payment?
gabe.freyaldenhoven: I love it. So some of the key ones are their utilization management procedures. What's the prior auth process? How burdensome is that? How often does that occur? And who makes that determination?
gabe.freyaldenhoven: If we verify benefits and it says 30 visits, do you really get 30? Or is it you get audited after six and we might give you 2 more? How burdensome is the prior auth? Do we get 12 visits up front and then we ask for prior auth? Or do we have to do PA from day one?
gabe.freyaldenhoven: We look at timely filing, but we also look at what the recoupment period. I had an incident in my practice this week. Insurance company A came back 18 months later and said "We actually realized that the patient had insurance. Company B is primary. We want our money back."
gabe.freyaldenhoven: Well, if my timely filing is up with insurance company B, I can't file insurance Company B. I have to eat it. So we always look at what timely filing looks like and also what their recoupment period looks like.
gabe.freyaldenhoven: One of the things that we also require with RehabNet is that the payers are willing to set up what we call a joint operating committee, meaning RehabNet has a monthly meeting with the upper management of each insurance company we contract with.
gabe.freyaldenhoven: This is an opportunity for us to take macro level issues to them and say "Do y'all realize when this CPT and this CPT are billed together, your claim system kicks it out. There's no CCI edit on it. But your claim system is broken." So now we're talking to somebody who has the authority and ability to change it.
gabe.freyaldenhoven: Also, for the insurance companies where we credential at the provider level, we want to control our effective date. That way we don't have a new therapist starting where we can't hold claims and bill down the road. If they start seeing patients on August 1, we want them to be able to go back and bill as of August 1. We also don't want them to have to wait until January to finally start seeing patients from that insurance company.
ben.barron: Essentially, you’re not giving the insurance company a pass for dragging their heels on credentialing. You might be willing to give them an interest-free loan during that time, but they are going to repay you for that loan. Do I kind of have that right?
gabe.freyaldenhoven: Yeah, you're spot on.
ben.barron: So back to the contracting side of things. Payment per visit, timely filing, delegated credentialing, prior auth and utilization review. Are there any things that we missed that you think are important for folks to think about?
gabe.freyaldenhoven: I'll tell you what. PPS put out a checklist of key factors for contracting, and we used that as our starting point. We simplified it a bit, but I'd love for people to see that over and over and over. That's a huge tool. We use it all the time.
ben.barron: How about advice on the economics of contracting? Do you enable your members to do the math around the impact of utilization review in terms of cost? Or is that too complicated?
gabe.freyaldenhoven: No, just because everybody's process is so different. Now, there is one thing we did recently with a major insurance company in Arkansas and one that we have an existing contract with right now. We went and tried to renegotiate rates and didn't get where we wanted to. So, we turned our focus to "If we can't increase rates, then let's decrease admin burden."
ben.barron: Makes sense.
gabe.freyaldenhoven: And so we did a study around how much it does cost our average member to do a prior auth. And that landed in the $15 to $17 range per episode of care.
ben.barron: So, for easy math, let's say I get paid an average $100 a visit and see an average patient for 10 visits per episode. That’s $1000 per case. In your example, fifteen dollars, or 1.5% of that revenue, is going to the admin burden of utilization review alone.
gabe.freyaldenhoven: Yes. And that's averaged across a company’s entire payer mix. So it's actually higher than that for an individual case that requires prior auth.
ben.barron: Wow! So what you’re saying is that your members are spending 1.5% of their combined revenue on prior authorizations?! That’s a big number! Likely a bigger impact than the recent Medicare cuts!
gabe.freyaldenhoven: That's right. By polling the members, we came to that number to be able to go back to the payer and say "Here's what you're costing us" and we shared data with them that showed they were paying this third party to restrain us, but we actually were restraining ourselves more than the prior auth process gave us!
gabe.freyaldenhoven: We’re now trying to push through a model where they do not require prior auth until the 12th visit. That cuts our PAs down by 80%!
ben.barron: That's a great win! The takeaway is to be willing to negotiate on all the items on your checklist because there's either cost or revenue associated with all of those things. And if you can win on either side of that equation, you're still winning as it relates to the margin of the organization.
gabe.freyaldenhoven: And we haven’t even drilled down to how they do their EFTs. Are they willing to transmit EFTs to our banks in ways where there's a control number in the EFT line item so that we can cross reference a payment to an EOB?
ben.barron: That will allow you to reconcile payments in seconds!
gabe.freyaldenhoven: That's right. So we'll even go into stuff like that.
ben.barron: Amazing stuff... Let’s pivot for a second. I heard about you through Justin Moore (APTA CEO). We were talking about the bright spots in our industry. He mentioned you all had some wins with Medicaid in Arkansas. So, I immediately thought: "How?" No one wins in a fight against the government. Nor do people usually pursue it, because it’s a small portion of the payer mix, has the least access to care and tends to be more medically complex.
ben.barron: I'd love to understand why you focused on this. “How” is tremendously important, but if we were to go pull 100 practice owners out there, Gabe, no one would start with Medicaid. Right?
gabe.freyaldenhoven: Yeah, absolutely. Initially, RehabNet started getting small wins with small payers around 2010. These payers kept making a big deal about how big we were at the time. We represented about 40 of the roughly 400 private practice clinics in the state.
ben.barron: So, 10% of the state’s private practices.
gabe.freyaldenhoven: But the reality of it is that now, with the stroke of a pen, RehabNet can potentially get a payer 2200 providers - PT, OT, speech. That almost gets them network adequacy no matter what, and I think that's a concept in the therapy industry we haven't talked about. Network adequacy. It matters to the payer.
gabe.freyaldenhoven: And as we started understanding some of this, we realized we wanted to grow RehabNet. The more tax IDs we could represent in RehabNet, the more reach we would have with payers. And one of our big growth areas was pediatric clinics. And of course, 95% of their payer mix is Medicaid.
gabe.freyaldenhoven: And at the time it just so worked out that Arkansas Medicaid had a lot of issues, and the pediatric community was loud about it. They were at the legislature. They were in the press about it. And RehabNet kind of gave them a unified voice. We went to them and said, "Hey, we want to start advocating on your behalf. Why don't you join our network? That helps us grow. We'll advocate on your behalf. And let's see if we can get somewhere."
gabe.freyaldenhoven: What we wound up doing was approaching the state regulators who said, "You have to get the noise to calm down. I'm tired of the legislature breathing down my neck all the time." So, we went and had town halls, met with the pediatric providers, and said "OK, we hear you. You're right. It's a problem. We understand the therapy side of it. We understand the regulatory side because we've been doing it for 20 years. Let us be your mouthpiece."
gabe.freyaldenhoven: When we were able to shut off the noise, we took away the the regulator's problem. And all of a sudden we had a voice. And we sat down to work through what felt like complicated problems around billing and coding. And we came up with some solutions that worked.
gabe.freyaldenhoven: At that point, we became a trusted source to them. Fast forward to 2017 when managed Medicaid came into Arkansas. The greater provider community said "We don't want managed Medicaid." We came up with a unique model called a PASSE – or Provider-Led Arkansas Shared Savings Entity. 51% of a PASSE has to be provider-owned. Equity ownership, seats on the board. The other 49% typically comes from your traditional payers. Your Centenes of the world.
gabe.freyaldenhoven: And so as a part of PASSE, one of the providers had to be a provider of developmentally delayed services – and PT, OT, speech therapists met that criteria. We were able to legislatively mandate that a provider of developmentally delayed services has to be on the board of a managed Medicaid insurance company. And as a part of that, RehabNet owns a certain percentage of a managed Medicaid plan. Because I was a glutton for punishment, I took that board seat.
gabe.freyaldenhoven: That gave me a behind-the-scenes view of how payers look at providers. At one point, I'm sitting in the meeting and the CEO of this payer said, "Just send the PTs our base level contract. They will sign anything."
gabe.freyaldenhoven: And it infuriated me. Infuriated me, number one, because he would say it in my presence because he knew I was a PT.
ben.barron: I bet the second reason it infuriated you was that you knew he was right. He wasn't making it up.
gabe.freyaldenhoven: That's right! And at that point, this became a crusade for me. Just to be honest with you, at my personal clinic, we don't see a ton of Medicaid. But I had a moment because I felt like we could use that as a rallying cry and then launch other things from it.
ben.barron: Before we go on, can we go back to where you said that you legislated some of these changes? Does that mean in the State House of Arkansas?
gabe.freyaldenhoven: Yeah. So Act 575 was highly debated because we were going to managed Medicaid and providers were raising cane.
ben.barron: Since this is managed Medicaid, this affects all healthcare providers of any Medicaid service in the entire state. I imagine physicians are the ones that have the biggest voice in that room at the time.
gabe.freyaldenhoven: The way most states start is with the simple Medicaid clients and work up to the complex. But Arkansas said "Nope. We're going to hand managed Medicaid the most complicated clients, and then we'll work towards the more simple ones." And so the more complicated ones tend to involve those with mental disease, medical complexities, and developmental delays.
ben.barron: Yep.
gabe.freyaldenhoven: Because of that, regulators and administrators were scared to death about network adequacy. And I'm like, "What is network adequacy?" Well, they have to prove they have enough PT, OT, and speech therapists in each county. So, I realized that all the commercial payers had network adequacy demands on them, too. They can't set up a plan if they don't have network adequacy. And here with RehabNet growing, we can provide network adequacy.
gabe.freyaldenhoven: That was an “Aha!” moment for me - we've got to get to a critical mass so that we're attractive to these payers. We went on a crusade to get more clinics inside our four walls to band together.
gabe.freyaldenhoven: Because we sat on the board of this Medicaid PASSE, it gave us working knowledge of how Medicaid worked and we could fix problems at a much higher rate than the average person could just because of our knowledge base.
gabe.freyaldenhoven: For example, billing. For Arkansas Medicaid, we bill all PT with one singular code. It's "PT services" and no matter what you do with them, you bill 1 code.
gabe.freyaldenhoven: Well, managed Medicaid can't handle that because they all use the CPT system. So, we provided proposals on how to crosswalk that stuff, which they used. We became problem solvers for the regulators, not just somebody whining, which led to a high level of trust.
gabe.freyaldenhoven: Because of that trust, we were able to work collaboratively to get legislation recently passed that allows adults with Medicaid to be seen in private Physical Therapy practices.
ben.barron: So once again, it sounds like your "wins" weren't necessarily about payment or was it that as well?
gabe.freyaldenhoven: Well, let me back up a step. After the managed Medicaid stuff, they did a rate review in Arkansas. The consultant said according to that rate review, PTs were paid fairly in Arkansas. We strongly disagreed. We had a payment freeze for 11 years at that point, and so we paired up with RehabNet, the ARPTA, AROTA, and ARKSHA. We wrote a joint letter from the four organizations to say we disagreed with the consultant's analysis.
gabe.freyaldenhoven: We got ready to meet with DHS, but that consultant refused to meet. He said, "My data stands on its own. I'm not changing it." Because he didn't show up to the meeting, we were able to basically show the holes in that data without his counter arguments. DHS came back and said, "You know what? Tell you what. Y'all come back with a proposal."
gabe.freyaldenhoven: Originally, we felt like we could justify a 38% payment increase and they said "You know, whether justified or not, we can't pay that." Through some conversations back and forth, we ended up at a 16% payment increase on year one and a 15% payment increase on year two to increase our rates 31%.
ben.barron: That's amazing.
gabe.freyaldenhoven: So that's where the big payment win came from. And so it took us from $87 an hour to about $114 an hour for Arkansas.
ben.barron: That's great. There are a lot of wins there! You got more people access to care, right? Because they're able to go to private practices now.
gabe.freyaldenhoven: Mm hmm.
ben.barron: You were able to gain information that benefits not just you, not just Arkansas, but the profession in general around how payers think and work. And you know, having that seat on the board, you're seeing how the sausage is made, right?
gabe.freyaldenhoven: Mm hmm.
ben.barron: And then there's the payment wins on top of that! That's a lot. That's pretty amazing!
ben.barron: On the heels of all of that, my last question is whether you’ve been able to look back at all that you’ve accomplished with a healthy level of pride? Because from where I sit, Gabe, I don't hear these stories every day.
gabe.freyaldenhoven: It's gratifying, man. I love when private practitioners come up to me at state meetings and stuff and say "You salvaged my business. I wasn't going to be able to stay in business until we got these payment rates." It's gratifying to me.
gabe.freyaldenhoven: The bigger thing, though, is I get to hear stories about people that are affected by these businesses: the patients. And come this August, for the lady who had her total knee replaced and didn't realize Medicaid would not cover outpatient therapy. Now I can look at her and say, "Hey, we can take care of you." And it's just as gratifying.
gabe.freyaldenhoven: The beauty of what we do is that it works! PT works. I'm not selling snake oil. I'm not selling a bunch of crap. It works, and it's incredibly gratifying to know that I have helped increase access to care for my friends and neighbors. That gives me a personal sense of pride.
Ben Barron | SVP @ Net Health | LinkedIn
Gabe Freyaldenhoven | President @ RehabNet | LinkedIn
Great stuff, as always Ben! And Gabe, THANK YOU! I hope state organizations (PT) will view your work as a blueprint to engage payors, improve communication and ultimately drive reimbursement to a more acceptable and fair level.