To ensure adequate coverage of their enrollees, managed care plans frequently reach out to physicians to join their networks. Because so many patients are enrolled in managed care plans, physicians might assume that by not contracting, their practice will exclude many potential patients. The decision should be based on sound business strategy.
There are several details to consider before contracting with payers, this information focuses on reimbursements. It’s imperative to review each contract in its entirety before signing. Terms or provisions in contracts that are often overlooked at the time of signing could significantly impact your practice in the long run.
What Does The Contract Mean In Terms of Revenue and Expenses?
The first step is to define your costs of providing services. Knowing your costs will help determine whether a contract is financially feasible for your practice, or whether a contract offered by a payer is fiscally acceptable. While this is not an easy determination, you should have a general idea of the overhead and other expenses associated with running your practice. If the contract does not compensate you beyond your practice expense, you may lose money on the contract. If you think that you are losing money on some of your contracts, it is crucial to determine why and to renegotiate (or terminate) those contracts.
What is Your Reimbursement Under this Contract?
Does the contract provide enough information for you to determine what you will be paid for the services you provide? Does it include a comprehensive fee schedule? If not, insist that the payer provide fee schedules for the (x number) most commonly billed procedures. Also insist that the payer provide you with detailed information on payment methodology. Payer reimbursement policies should be transparent so that you can determine your reimbursement under the contract. If they are not transparent, this may be a red flag.
Can the Payer Change Reimbursement Terms Unilaterally?
If so, does the contract require the payer to provide you notice of any reimbursement changes? Is there a mechanism for you to terminate the contract if you object to the changed reimbursement terms? Unilateral amendments, especially as they pertain to fee schedules, should be negotiated out of the contract.
Does the Contract Allow the Payer to “Rent” You to Other Entities (3rd-Party Administrators)?
This relates to so-called “silent PPOs”, where a physician signs a discounted fee-for-service contract with a payer, and then, without informing the physician, the payer “sells” or “rents” its physician network to a third party, such as a third-party administrator. The third party gets the advantage of whatever discount the payer has negotiated with the physician. This should be clarified with the payer.
SUMMARY
As confusing and tedious as payer contracting can be, you can’t sign a payer contract and “file and forget it” without continuous review. If you do not keep a close eye on payments, you will never know which insurers are not reimbursing according to the contract, resulting in lost revenue for your practice. Additionally, your office should conduct a regular audit (at least annually) of charges and payments, especially after signing a new contract.
DISCLAIMER: This information is offered for general informational purposes only. It is not specific to the facts and circumstances of any person, organization, or practice. The information is not intended to provide legal advice or opinion.