PROTECT YOUR REVENUE STREAM-MANAGE THE CONTRACTSby Robert Chiffelle Physicians frequently complain of not having any control over their business relationship with health plans. They feel that once a provider contract is signed, they are at the mercy of the plan, and are often frustrated with rate changes and collection issues. This article presents practical advice on contracting with health plans by highlighting areas of importance that can effect your revenue streams. It is not intended to cover all the issues involved in evaluating managed care contracts, due to space limitations and individual contract variability. The key to overcoming these problems is to proactively manage your relationship with the health plan. The foundation upon which this relationship is built is the contract, and it is essential this document be structured in a manner that provides for a mutually beneficial relationship between the two parties. In order for this to work, the physician must understand the key terms of the contract and how they will affect the practice and ability to generate revenue. First, get Organized. Each managed care contract should be kept in a separate folder (I prefer the type with fasteners at the top of the page), with a common "face sheet" that lists the key components of the contract, the page on which they can be found, and the address and telephone number of contacts. The contract, all amendments and the face sheet should be fastened to the right side of the folder as you open it. On the left side should be fastened a "communications log" sheet that lists the date, contact, and issues discussed with plan representatives relative to the contract. All correspondence should be fastened beneath this sheet. If the file becomes too big over time, put the older documents in a supplementary file and note their existence in the communications log. This way the key contractual provisions are readily accessible for use. You will find that an organized system is a very valuable tool for managing contractual relationships, particularly when it is time to renegotiate the contract and you have data to support your case. Beware of Early Termination provisions. Most contracts are for 1 year, and permit either side to terminate them without cause with 30 - 60 days written notice. If the contract is terminated by the provider prior to its expiration date, the physician may be required to provide services at the contracted rate after the termination and until a substitute can be found. In some instances, contracts make the provider liable for paying the difference between his rates and whomever the plan has to contract with to provide service in the interim. Be aware of such language, and the financial penalties that could accrue to your practice in the event they are enacted.
Termination for cause is usually a right reserved for the health plan, primarily for issues associated with a loss of license, insurance or patient endangerment issues. The termination provisions should give the contracting physician a period of time (10 - 30 days) to fix any problems (breach of contract) after receipt of written notification. Watch out for Rollover Clauses. Contracts may specify they will be automatically renewed for another year (or longer) unless the renegotiation is specifically requested in writing prior to the expiration date. This means a continuation of this year's rates into subsequent years. It is not unusual to find this time period as long as 120 days. In such a case, the provider would have to notify the plan by late August to request renegotiation of a contract expiring December 31st. It is a good idea to note in a "tickler file" the contractual time limit to begin renegotiation. If such a time limit is not included in your contract, start the renegotiation process 90 days in advance of contract expiration. This gives you time to prepare and negotiate terms of the new agreement. Be cautious with Contract Amendment language. Contracts should be amended only by the written consent of both parties. However, it is not uncommon to find contracts with a clause permitting them to change rates without the other party's consent, whenever "business conditions" require. Such contracts usually set out a 30-day time limit to contest the changes, and when this time period is over the change is automatically implemented. Your only option at that point is to accept or terminate the contract. This language is usually found under the "amendment" section, but can be hidden under other sections, such as "compensation." When such language is present, your contract effectively becomes a 30-day contract if you elect not to accept the terms. Also note that if the amendment clause is not mutual, additional "products" with terms which you may not want can be added at the discretion of the plan, with your only practical recourse being to cancel the contract. Avoid "Most Favored Payor" clauses. Older contracts may have language guaranteeing the health plan will always receive the lowest rates for contracted services. This means that if the physician signs a contract with another health plan at a lower rate, the existing rates for the contract with the "most favored payor" clause will automatically convert to the lower rate. This can result in a significant loss in revenue, and a barrier to future market share development for the practice. In one notable case, a large physician group signed a contract with a most favored payor clause with a large HMO. Three years later, after the HMO contract had successfully grown to be the largest volume payor for the practice, an opportunity arose to contract with another growing health plan, but at a lower rate. The practice was not able to take this opportunity because it would have resulted in a significant financial loss due to the conversion of the HMO contract to the lower rate.
Understand Coordination of Benefits issues. Coordination of benefits clauses in contracts exist to clarify the financial responsibilities when two or more health plans/payors are involved. In such cases, it is common for the provider to bill both the primary and secondary payor. Contract language should permit the provider to bill both payors at the same time, for the amount owed by each. Avoid language that requires you to first receive payment from the primary provider before billing the secondary payor. Having to wait for payment from one payor before billing a second will result in unnecessary delays in receiving your reimbursement. Be familiar with the collection requirements of each product covered by the contract. Often managed care contracts will cover a variety of products such as an HMO product, a Medicare Risk product, and a Point of Service product. Products are frequently added by amendment, and sometimes differ in reimbursement amount and method. Some, such as Point of Service plans, require the physician to collect all patient fees, while the other products require the provider to collect only a defined co-payment from the patient and bill the plan for the remainder. If the office collects only a co-payment and attempts to bill the point of service plan for the rest, a significant delay in reimbursement will result after the claim is kicked back to the provider. Protect yourself with Indemnification Language. When reviewing this language, it is important that indemnification be bilateral. That is, the health plan guarantees the provider shall not be held liable for the acts or omissions of the health plan or its employees, and the provider guarantees the same thing to the health plan. Note that governmental contracts usually have unilateral indemnification clauses (the provider indemnifies the government, but not vice-versa) which are fixed by law, and can not be changed. Understand the Dispute Resolution process. The contract should have a clearly defined and "graduated" procedure to resolve disputes, where both parties first try to work out problems within defined time limits, followed by arbitration and/or recourse to the court system. Many contracts specify the final decision shall be the result of binding arbitration, enforceable by the court system. In such circumstances, both parties effectively waive their right to lawsuit as a final means of settling the dispute.
When you make the commitment to truly "manage" your contractual relationships with health plans, you have taken a significant step toward protecting your revenue streams and will find the benefits far outweigh the costs of managing the system. Robert L. Chiffelle is a consultant with Wolfe Consulting Group in Phoenix, Arizona. He specializes in managed care and business development activities. Robert's phone number is (602)-324-0456 or email |