FIRST THING FIRST
A contract is an agreement between two or more parties, there is no contract, even one printed in indelible ink, which cannot be changed.
Many physicians believe that there is nothing that they can do about their payer contracts; nothing could be further from the truth. Contractual provisions can affect payment, organizational procedures and clinical decision-making.
The emergence of managed care has introduced new elements to the doctor-patient mix that require increasingly complex agreements. Physicians must carefully examine the provisions of every contract before signing.
No contract is better than a bad contract.
A good managed care contract, like any other form of business agreement, is clear, consistent, concise and comprehensive.
BASIC CONSIDERATIONS
Payer contract analysis and evaluation involves several basic steps.
- First, the provider should investigate the MCO to assess its service area, stability and reputation.
- Does the MCO pay providers on time in accordance with its contractual obligations? A high rate of reimbursement will become meaningless when payment is constantly wrong and/or overdue.
- Other key questions to consider include: how many subscriber group contracts does the MCO have; are they with small or large employers; where are the participating providers located?
ANALYSIS OF REIMBURSEMENT RATES
Probably the key element of the managed care contract for the provider is the payer fee schedule. The contract should state how, when, and what the provider will be paid.
Does the MCO have the right to change the fee schedule by means of an amendment? Identify all procedures you perform and analyze the fee schedule amounts.
Consider the ramifications of a fee schedule that pays 90% of your charge for CPT® code 99203 but 45% for a surgical procedure that accounts for 50% of your revenue. The reimbursement rates negotiated with MCO’s in your market are a crucial element to a healthy bottom line.
EVALUATE YOUR CHARGES. WHY?
All too often practices have certain codes that fall below contract rates and almost all contracts have a “lesser of billed charges (BC) or contract rate” provision. A recent AMA study showed that physicians billed $5.15 below their contracted fee schedule per code.
TERM & TERMINATION
TERM. Consider this; virtually every payer contract affords the MCO amendment rights, typically 30-90 days, with or without notice. So, in reality you have a 30 to 90 day contract.
It would be wise to negotiate a provision to strike any language that allows the MCO to amend their fee schedule until the anniversary date of the contract. This is easily accomplished with very little push-back from the MCO.
TERMINATION. What are the termination provisions?
- May the MCO terminate the provider only “for cause” (breach of contract or loss of license) or “without cause” (no apparent reason)?
- Does the contract afford the provider with due process rights prior to any corrective action?
- What are the dispute-resolution mechanisms provided?
- Other provisions to avoid include “most favored nation” clauses, which require that the MCO will be offered the best price, or lowest reimbursement rate, that the provider will accept from other plans.
- Finally, the provider should examine the insurance and indemnification provisions carefully. The agreement should contain mutual indemnification provisions which require that the provider and the MCO each indemnify and “hold harmless” the other for liabilities which arise as a result of their respective conduct.
FINAL CONSIDERATIONS
The provider should obtain copies of, and analyze, all relevant documents, especially any documents which the contract incorporates by reference.
The provider should negotiate the terms and conditions of the contract. Start-up MCOs with little market share will more readily negotiate, but even larger organizations will discuss particular provisions with multispecialty groups and/or key providers.
The provider should confirm all representations, additions, and clarifications in writing. No change will be binding unless it is set forth in a signed, written instrument which amends the contract.
SUMMARY
This article is a representation of some key provisions to look out for in your managed care contract. We are not a legal firm and our views should not be taken as legal representation, consult your attorney if need be. We are sure of this; transparency, analysis, communication, and input ensure fairness to both parties and sustainable arrangements into the future.