Physiatry Practice Management Resources

This is the first of two columns that will address 10 traps physicians often fall into during the negotiation, execution and renewal of managed care contracts.

In the past, managed care contracts were adhesion contracts provided to the physician by a managed care organization for signature with little, if any, discussion or negotiation. State and federal managed care legislation and patient rights initiatives have had a tremendous impact on managed care contracts and physicians' involvement in such agreements.

You should pay close attention to the following provisions to ensure that you are signing a managed care contract that defines your relationship with the MCO and eliminates the potential for becoming trapped after the contract has been signed.

Undefined responsibilities

Physicians often do not realize that a managed care contract might involve additional responsibilities during the course of treating patients and may include extensive involvement in utilization management, medical management, member relations, credentialing and compliance with the National Committee for Quality Assurance standards.

Typically, an MCO will delegate administrative duties to the physician who is sharing the risk with the MCO (e.g., capitation agreements or risk pool arrangements). Make sure that responsibilities and duties that you are expected to perform and are contingent on your receipt of payment are clearly identified and defined within the parameters of the contract and any attached exhibits.

Prompt payment and balance billing

You should specifically review the prompt-payment provisions in any managed care contract in light of the state law that governs the contract and recent court decisions and legislative trends.

The contract most likely will require the provider to submit a "completed claim" as a condition to receiving payment. Make sure that claim is specifically defined within the contract or an attached exhibit. A defined term will enable the parties to reach a consensus on what will be deemed a "completed claim" for coordination of benefits and the timing and recovery of payments.

A sample definition might include the following language: "Completed claim" is an industry billing form (UB-92, HCFA 1500 or any successor form) which provides the beneficiary's name and identification number, claim date, date of birth, group name and number; provider's name and identification number; dates and location of services, description of procedures, diagnosis code, secondary diagnosis code, most current ICD version, procedure codes, DRG, units, modifiers and amount billed for each procedure, where applicable, and includes itemized claim statements and/or beneficiaries' medical records if requested by payer within 20 calendar days after payer's receipt of a claim.

You should note that some state statutes set forth detailed provisions relating to completed claims and balance billing, which may modify the contract and impact the other definitions and terms in the contract. Most states have statutes that address MCOs, including health maintenance organizations, preferred provider organizations and third party administrators. It is important that you and your attorney understand all applicable state requirements regarding mandatory language for managed care contracts.

Renewal provisions

Remember to include a provision within the contract that fees will be negotiated separate and apart from the renewal terms of the contract. Usually, the contract will automatically renew for additional one-year terms unless one party provides written notice.

An MCO often ties your ability to renegotiate fees received under the contract to the renewal provision, which is automatic unless either party provides notice. Therefore, make sure fees can be renegotiated on a more frequent basis than the renewal provision of your contract.

Reimbursement for services

Managed care contracts provide a full range of reimbursement methodologies including: per diem and case rates; fee-for-service rates; capitation; capitation with "bill aboves" for specific services, such as injections, home visits and nursing home visits; and other risk arrangements. Some states require that reimbursement issues be addressed in written agreements with providers.

While reimbursement is an obvious contract term to review, managed care contracts often conceal the reimbursement scheme in incomplete or over-simplified schedules. Make sure that the contract specifically delineates each type of service entitled to reimbursement and the rate of reimbursement for each service.

"Gag" provisions

MCOs may include provisions in contracts that strictly prohibit physicians from discussing treatment alternatives with patients covered under the plan.

While most states have now banned the use of these "gag" provisions in managed care contracts, it is imperative that you review the contract to confirm that you are not restricted in any way from discussing treatment alternatives with your patients that may or may not be a covered service under their plan.

The NCQA accreditation standards for MCOs also contain an anti-gag provision that requires payers to have a statement of members' rights and responsibilities including "the right to a candid discussion of appropriate or medically necessary treatment options for their conditions, regardless of cost or benefit coverage."

Next month's column will address five more common managed care contract traps related to the protection of confidential information, carve-out arrangements, dispute resolution, MCO insolvency and membership lists and provider directories.