How to avoid singing the managed care contract blues

Contract Language. By Steven M. Harris, amednews contributor. April 1, 2002.

CONTRACT LANGUAGE

A column examining the ins and outs of contract issues

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Last month this column discussed common traps that doctors fall into during the negotiation, execution and renewal of managed care contracts -- namely, traps involving undefined responsibilities, prompt payment and balance billing, renewal provisions, reimbursement for services and "gag" provisions.

Of course, these aren't the only traps physicians can fall into. Here are five more that physicians should avoid as they review managed care agreements.

Confidential information

As a physician, you will, as of April 2003, be subject to the use and disclosure of health care information pursuant to the Health Insurance Portability and Accountability Act of 1996.

HIPAA requirements will also need to be reconciled with other considerations in your managed care contracts. Payers will often try to incorporate broad compliance language in managed care agreements to hold physicians accountable for these standards and requirements. You must watch out for broad-based compliance terms.

You need to be prepared on the substantive HIPAA issues and requirements to ensure a mutuality of accountability for these provisions in your contract.

HIPAA requires health plans, clearinghouses and physicians to use common standards, common implementation guides, and common codes for submission of health care transactions electronically.

Carve-out arrangements

Carve-out arrangements are primarily designed to allow you to provide a specialized type of care such as rehabilitation or behavioral health. You should consider the use of carve-out arrangements to tailor reimbursement to high cost or unpredictable frequency of services.

You should also carefully review your contract to ensure that you understand any carve-out relationships that you may have with the managed care entity.

This is an important point if you are providing services to a large health care system that may find it burdensome or against its policy to refer patients to a specialist for certain types of services, particularly when the health system also provides such services.

Managed care entity's insolvency

Unfortunately, when an insolvent payer fails to reimburse a physician for unpaid claims due for services rendered, there is generally no other source of payment available to the physician. To reduce the likelihood of unpaid claims due to the plan's insolvency, you should consider following these guidelines:

Continually evaluate and monitor the plan's financial condition.
Include effective contract termination provisions that provide for immediate termination if the payer appears insolvent.
Avoid payment delays and losses prior to insolvency.
Consider the use of payment advances, deposits or other payment security.
Understand state law reserve requirements and the state insurance insolvency parameters.

Lists and directories

Most payers require patient eligibility determinations before services are performed and reimbursement is remitted to the physicians. You should make sure that the plan maintains current membership lists so that patient eligibility can be verified prior to delivering services. You should seek to include a provision within the contract stating that payment for services is rendered in reliance of the payer's identification authorization system.

Additionally, your managed care contract should require that the payer update its physician and provider directories at regular intervals and supply you with updated directories.

Any issues regarding reimbursement to you or the degree of risk to which you are subject often turns upon your rights and duties regarding referrals, admission, or other transactions with other participating and nonparticipating physicians.

Dispute resolution

An alternative dispute resolution provision should be included in your managed care contract so that the parties have a mechanism to resolve disputes when they arise.

You should consider including one of the following ADR methods in your contract: an internal administrative determination or appeal as a prerequisite to any further process; nonbinding, conciliatory dispute resolution processes, such as mediation, and binding adjudicatory alternatives to litigation, such as arbitration.

Any one of these ADR methods probably would avoid the cost, delay and unpredictability of litigation.

You should check your state law regarding any limitations on the use of arbitration because some states have placed limitations on the use of arbitration when the dispute involves professional liability.

Mediation or an internal administrative process may give you greater control over the identity and qualifications of the decision-maker.

Your ADR provision should include specific language identifying the ADR method, how the mediator is chosen, and minimum qualifications of the mediator. The location of the ADR should be identified as well as the allocation of cost between the parties for the ADR.

While most disputes can be referred to arbitration or mediation after a conflict arises, the best time to agree to an ADR process is before a dispute occurs.

Harris, a partner at McDonald Hopkins in Chicago, concentrates on health care law and has counseled physicians, physician networks and health care groups nationally. The author and publisher are not rendering professional advice and assume no liability in connection with its use. He can be reached at 312-280-0111, or by email (sharris@mcdonaldhopkins.com).