Managed care contracting – the devil is in the details

July 15, 2019

Do you take an active role in negotiating contracts with managed care companies, or do insurers simply dictate contract terms to you? If you’re part of a Physician Hospital Organization (PHO), Independent Practice Association (IPA) or Accountable Care Organization (ACO), the organization may negotiate managed care contracts on your behalf, and they often have better negotiating power than individual practices. If joining a PHO, IPA or ACO isn’t an option, your ability to negotiate may depend on size of practice, market share of payer, amount of local competition and value your practice provides to payer – in terms of quality and cost. But whether you actively negotiate or not, it’s always wise to review your contract terms and understand how payers contribute to your profitability – and how new contract terms can positively or negatively impact your practice.

Start by making sure you know your state’s rules for managed care contracting, which may be found in your state’s laws or regulations. Your state medical society or legal counsel are good sources for this information. Any contract you sign should be in compliance with state laws. Specifically, find out:

  • Timeframes allowed for insurers to request payment recoupment.
  • Utilization management rules, if any, related to prior authorizations and denials.

The College’s Practice Management Committee has developed a checklist of things to evaluate when you’re presented with a new or revised managed care contract. This is a general guide, and the College recommends consulting your legal counsel for specific legal advice.

  • Reimbursement
    Request a copy of the fee schedule and find out what it’s based on. For example, it could be a percentage of the Medicare fee schedule from a prior year. Make sure the fee schedule is specifically referenced in the contract, as some contracts may not include this. Avoid language that allows the payer to change the fee schedule without the provider’s explicit agreement. Finally, review language stating how rates for new codes will be set.
  • Contract term and termination
    When is the initial term up? When and how does it renew? Under what conditions can you terminate the contract, and are there penalties? Find out when you are eligible to renegotiate and pay particular attention to the termination notification time frame.If you want to terminate the agreement, do you need to give 60 days’ notice or six months’ notice? Some agreements are evergreen, with no expiration. Know what you’re getting into, and if you don’t like the terms, request an adjustment.
  • Contract amendments
    How can the agreement be amended? Ideally, you’d like amendments to be agreed upon with written acknowledgment by both parties unless a change is required by law or regulations. Avoid a provision where insurer amendments go into effect after 30 days if there’s no objection from the practice.

    “With regard to amendments, states may have laws/regulations on how amendments are handled. For example, in New York the insurance department mandates specific language be included in Medicaid managed care contracts,” said Tom Derrico, administrator for Certified Allergy & Asthma Consultants in Albany, NY and member of the Practice Management Committee. “When the insurance department changes the language to comply with new laws or regulations, the insurer has to push it through to all participating providers. The provider’s only option is to withdraw from participation if they don’t like the language.”
  • Recoupment period
    There should be a reasonable limit on how long after a service is rendered that a payer can ask for a refund. At a minimum, payment recoupment periods should not exceed any applicable state or federal rules.
  • Claim submission deadlines
    How many days do you have to bill? 180 days is typical.
  • Payment offsets
    If the payer overpays the practice for one patient, can they resolve it by paying you less for another patient? This is to be avoided if possible, as it complicates posting of payments.
  • Affiliations
    If a provider joins your practice, your contract rates should apply.
  • Coding penalties
    Watch out for a provision that authorizes the payer to deduct penalties due to coding errors.
  • Auto-enrollments
    Avoid contracts that enable payers to auto-enroll providers into new products without prior consent.
  • Beware of repricers!
    Repricers are third-party networks, like MultiPlan, Zelis, Zenith, First Health or TRPN, which solicit physicians by sending agreement offers designed to make physicians think certain forms need to be completed to obtain payment for a patient procedure. These solicitations are frequently disguised as contracts (sometimes global contracts) seeking consent to reprice your claims for reimbursement. Once you sign, they can reimburse you at their lower contracted rate. Be sure to read the fine print on any of these solicitations and get legal review if in doubt of its legitimacy.

Even if you don’t actively negotiate contract rates with insurers, it’s important to read contracts carefully before signing. Understand what you’re getting into and don’t be afraid to ask for better terms on one or more of the areas identified above.

Next month’s College Insider practice management article will do a deeper dive into comparing payers and evaluating your top CPT codes to help estimate the impact of a proposed contract. Stay tuned!