Printer-friendly format

Negotiation of managed care contracts is one of the most critical and complicated financial issues facing physicians and other healthcare providers. It requires arriving at the bargaining table prepared so that problems can be identified and turned into opportunities. To be successful, there are ten essential items that should be addressed before and during negotiations with the managed care organization (MCO).


1. Establish the goal for entering the contract.

Will the contract preserve or enhance the patient flow? What does the MCO really bring to the practice? How will this contract help the practice achieve its revenue and operational objectives? Spell out in writing the answers to these questions.



2. Learn about the company.

Determine the integrity and stability of the management, earnings, financial strength, network design and the employer groups/clients it serves. The strength of the MCO is an essential component in the bottom-line value of the managed care contract.



3. Be certain how payment will be made.

Spell out case rates, fees for immunizations, fees for lab services and other carve-outs that would not be appropriate to include in the standard reimbursement language. The contract should specify that there will be no changes in fees without appropriate notification and approval. Any reimbursement stated as a percentage of Medicare should specifically state the base year for conversion factors, provide a definition of the RVU and specify if there are adjustments for the Geographic Practice Cost Index (GPCI), etc.



4. Know how to end the contract.

Be certain that the contract does not include an evergreen clause, a provision that the contract is automatically renewed unless a party gives notice to the contrary. The contract should spell out the obligations of the medical practice to patients at the termination of the contract. Annual renewals are preferred.



5. Understand what the plan is obligated to do.

Does the contract guarantee that a certain number of patients will come to the practice through the MCO? What does the contract state concerning timely payments? How is “timely payment” defined? What are the grievance procedures should problems arise?



6. Understand the obligations of the practice.

Must the practice accept all patients that are covered by the MCO? Are there any exceptions? Can the practice limit the number of patients it accepts? Is the practice required to participate in a utilization review program that monitors delivery of care? What are the components of the utilization review program and how does it operate? What reports must the practice submit and how frequently?



7. Identify and review ancillary documents.

Managed care contracts involve lots of documents. It is crucial to review all of the supplementary documents connected with the contract. Surprises often appear in these documents, and they are not always included with the main contract. Provisions in ancillary documents carry as much weight as the contract itself.



8. Beware of inequitable hold harmless clauses.

A common provision in managed care contracts is the “hold harmless” clause. Simply explained, this clause provides that the MCO is held harmless from claims against the practice or its staff. However, it is important that the medical practice also be held harmless against any claims against the MCO.



9. Be certain there is an appeal procedure.

Even if the steps above are carefully followed, disagreements between the healthcare provider and the managed care plan can arise. The contract should stipulate a process of appeal.



10. Distinguish the practice as an independent contractor.

For a variety of legal and financial reasons, it is important that the medical practice be defined as an independent contractor under the provisions of the managed care contract.



Red Flags

In the managed care negotiation process, there are a few items that should be red flags. In addition to the hold harmless clauses described above, also watch out for provisions related to termination of the contract without cause, liability issues and “gag” clauses. The gag clause can be troubling because it prevents the physician from advising or counseling a patient in regard to healthcare coverage options. This is particularly the case when the patient learns that his or her current health coverage is limited, or that a particular specialist is not in the network.

Watch out for contract provisions that force participation in all the products that the MCO offers or that require the physician/group to pay legal fees in situations in which the MCO prevails. Be alert for any provisions providing for financial recoupment by the MCO without notification or explanation.

Serious financial and operational consequences can result from committing to a managed care contract that does not advance the goals of the practice. Obtain legal counsel, consult with accountants, review the contract thoroughly and carefully, and use checklists to make certain that the contract will achieve your objectives. Always meet face-to-face with a representative of the MCO. Most importantly, never settle for anything less than what meets the needs of your practice and its patients.




Sara S. Lankford, CPA, a principal at Nashville accounting firm Carter, Lankford CPAs, PC, can be contacted at sara.lankford@clcpas.com.




November 2007

Tags:

None

Login and voice your opinion!