The Applied Behavior Analysis (ABA) field is dealing with big financial challenges. Agencies are struggling with rising costs for things like staff, office space, and meeting rules, while payments from Medicaid and insurance companies are going down.
For example, Indiana Medicaid has lowered hourly rates in response, and Nebraska has cut payments for some ABA services by as much as 79%. These changes have many ABA business owners wondering: How can we keep our agencies running without lowering the quality of care for the families we help?
Key Challenges Facing ABA Agencies
Medicaid & Payer Reimbursement Cuts
In multiple states, Medicaid programs and insurers have significantly reduced rates. Indiana and Nebraska have seen reductions as severe as 28–79%, according to the Nebraska Examiner and Indiana Capital Chronicle. In Indiana, ABA spending by Medicaid jumped from $120 million in 2019 to $639 million in 2023, leading to heightened scrutiny and aggressive cost-containment measures.
Inflation & Rising Operating Costs
The cost of running an ABA agency, wages, benefits, rent, utilities, administrative staff, and compliance, has steadily increased. Unfortunately, reimbursement rates rarely rise at the same pace, eroding margins year after year.
Workforce Strain & Utilization Inefficiencies
High turnover rates, burnout, and unbillable clinician time further weaken agency finances. If therapist productivity is low or if cancellations go unfilled, the agency loses potential revenue.
Financial Management Strategies
Improve Billing & Revenue Cycle Management (RCM)
A strong revenue cycle process is essential. Conduct regular audits of your claims workflows, ensure billing codes are current, and consider investing in an RCM platform or engaging expert consultants.
For example, All-Smiles ABA experienced chronic cash flow shortages due to missed billing opportunities and documentation delays. By improving accounts receivable tracking, monitoring denial rates, and reducing days outstanding, they regained stability.
Key metrics to monitor:
- Denial rate by payer
- Average days outstanding
- Collection rate by payer
- Aging of accounts receivable
Optimize Therapist Utilization
Track and improve billable vs. non-billable hours, cancellation rates, average caseload size, and therapist productivity by ensuring fulfillment of the client's authorization. It’s important to ensure the client receives the authorized services they need for progress while also maintaining the organization’s financial stability.
Diversify Revenue Sources & Payer Mix
Reduce reliance on Medicaid by:
- Expanding private-pay options and tiered service levels
- Pursuing commercial insurance contracts
- Applying for grants or foundation funding
- Building partnerships with schools or corporate wellness programs
- Increase Operational Efficiency
Increase Operational Efficiency
Small changes in spending can make a difference when running your practice. Look at high-cost items, like practice management (PM) software, to see if there are cheaper options. Check vendor contracts for hidden fees, extra services you don’t need, or features you aren’t using.
To save and cut costs, start by comparing practice management and data collection software prices with similar options to ensure you're getting the best value. Evaluate whether your billing vendor's rates are fair and assess their performance. Additionally, consider consolidating tech tools to avoid paying for overlapping subscriptions. The key is to reduce expenses while maintaining efficiency, high-quality services, and compliance.
Operational Adjustments for Resilience
Invest in Technology and Practice Management Systems
Automation can streamline data collection, authorizations, coding validation, and reporting. Faster, more accurate claims mean quicker payments and fewer denials.
Strengthen Staff Retention & Training
Keeping experienced staff reduces the recurring costs of recruitment and training. Offer competitive compensation, professional development opportunities, and wellness initiatives to support long-term retention.
Proactive Compliance & Audit Readiness
With Medicaid audits on the rise, Indiana recently identified $56 million in improper payments, and documentation must be thorough and accurate. Train staff regularly on payer requirements and perform internal audits to ensure readiness.
Advocacy & Industry Engagement
Engage in Policy Advocacy & Provider Networks
Joining coalitions and industry associations strengthens your voice in legislative discussions. Coordinated advocacy efforts have influenced state decisions in the past, especially when backed by data and provider testimony.
Use Benchmark Data & Metrics to Build Leverage
Gather detailed data on your costs and reimbursement levels. Participate in industry benchmarking to demonstrate to payers and policymakers where payment structures fail to meet operational realities.
Conclusion & Takeaways
Rising costs and lower payments are making it harder for ABA agencies to stay successful. But there are ways to handle these challenges. Start by checking your cash flow and billing processes to make sure they run smoothly. Look at how your staff and client schedules are managed to improve efficiency. You can also think about adding new ways to earn money and finding ways to grow your services. Talking with other agencies or experts can also give you new ideas and tips to make things better.
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