Negotiating The Maze Of Insurance Contracts

By Michael Metzger, DPM, MBA

I can remember the days of the first managed care organization (MCO) contracts. Typical comments ranged from “Where do I sign and did I sign up before Dr. Smith down the street?” to “Who has time to read these things? I get my UCR fees anyway.” I have tried to target many of the most common items I overlooked in the past. Granted, in some cases, you will not be able to negotiate some items but you should still know what you are getting yourself into. Before you even get into the finer details of a particular contract, you need to keep in mind that the contract was developed and written by the insurance company’s lawyers. Needless to say, it was written for their benefit. Therefore, it is especially important that you review it thoroughly and have a strong understanding of the contract. If you have doubts or concerns, seek out the help of colleagues and attorneys. When reviewing these contracts, I have found it very helpful to start with a table of contents and take a close look at the following sections. Cover The Essential Elements Of The Contract • Review the parties and notice any “all products” clauses. This clause defines the players. Many of the MCOs offer multiple products such as HMO, PPO, EPO, Medicare, Medicaid, etc. Be aware that if you agree to be a provider for one of these products, you may be agreeing to provide all of these services. It is not uncommon to find this in MCO contracts. Until recently, this was common in Texas for Aetna. To you, it may mean that by signing up for a plan that pays 200 percent of Medicare and may give you 20 new patients per month, you have also accepted one that pays 75 percent of Medicare and fills your office with 20 new patients per week. • Be clear on the contract definitions. Nearly every managed care contract has a definition section. From my own experience, I know this is overlooked in reviewing the contract but can be very important. This is often where the terms of medical necessity and covered service are listed. Just be sure everyone is speaking the same language. • Scrutinize the policy and procedures manual. It is not uncommon for a contract to include additional information by merely referring to it in “the agreement.” This additional information (the notorious “policies and procedures”) may include some very important information. You need to get a copy of that policy and procedure manual before you sign the contract. You likely won’t have time to read it cover to cover but a skim would be helpful. • Ensure mutual understanding on the effective dates. Most contracts stipulate that the agreement will not be effective until credentials are approved and both parties have executed the agreement. Whatever the case, make sure the effective date is noted in the contract. Don’t provide services prior to the effective date unless you have a clear understanding, in writing, with the MCO on how you will be reimbursed for the services. Otherwise, can you say “service for free”? • Be aware of the “hold harmless or indemnification” provision. This is one of those things that can be financially dangerous to you. It’s a provision you should fight but in reality, you may have to accept it if you want the contract. Simply put, this means that if you are sued and the MCO is brought into this for whatever reason, you are responsible for its costs. What is the most common situation that would trigger such a provision? If you and the company are sued for a service you provide and there is a settlement/judgement by/against both of you, the MCO will then turn to you and ask for that amount of money. You should check with your own liability carrier to see if you are covered for this. Also be sure that there is a reciprocal “hold harmless” clause to protect you. If you and the MCO are sued for the MCO’s mistake and there is a judgment/settlement against both of you, then the MCO’s insurance will reimburse you and your carrier for any loss. Then again, the best route to go is that each party pays its own way. A Guide To Money Matters • Obviously, you should review any fee schedules and compare them to your usual and customary charges. If a Medicare fee schedule is the basis for this payment, obtain a copy of what is being used. What are the time limitations for you to submit a claim and the MCO to pay it? What is the appeal process? Be sure to understand the policy for the collection of co-payments and deductibles. • Be aware that you may have no recourse against a patient. The contract probably will not allow you to bill or collect monies from a member for any covered services, except for co-pays and deductibles. The patient is also protected from any payment dispute among the plan, the employer groups and the podiatrists. It also means that if the plan goes into bankruptcy you cannot collect from the patient. It is also best if you do not allow retrospective denial of claims for services provided by you in good faith (especially in cases in which a referral authorization has been given to you before you provided treatment). There may be no way around this. This is one case in which you must be able to turn to the patient for payment. If a service is later determined to not be a covered benefit nor medically necessary, you need to find out if you’ll be able to bill the patient without any restrictions. • Review the coordination of benefits especially when the MCO is the secondary payor for services. Most plans will state that if you have received from the primary payor the amount that is contracted for with the secondary payor, then that is all you get. The secondary payor is responsible only for the amount up to its contracted amount. For example, you bill $1,800 for a 28296 and receive $815 from MCO A as the primary. If you have contracted with MCO B, which allows $815.00 for a 28296, do not expect any additional payment from that MCO even if that means plan B pays nothing. • Look out for the most favored nation clause. This means you agree to charge the MCO no more than you do any other organization for the same service. The problem with this is that it may force you to charge a MCO that puts 10 new patients per year in your office the same as an MCO that can put 10 new patients per week in your office. • Be sure that the MCO does not have the right to change your compensation schedule during the term of the contract. Again if this is something you decide to accept, be sure on how it must notify you of the change and what your rights are as far as terminating the contract at that time. Other Key Contract Considerations • What about liability coverage? Providers must provide documentation of liability coverage, including comprehensive general and professional liability and workers’ compensation coverage in amounts customary for the state and as required by the plan. These are variable from $100,000 to $300,000 to $1 million to $3 million. In deciding whether the plan is right for you, weigh the added cost of increasing your malpractice coverage vs. the increase in patient population you expect from the plan. • Clarify the offset and withholds provision. An MCO may require you to agree to an offset provision, whereby it has the right to withhold funds from your practice’s check for a variety of reasons, including incorrect or duplicate payments. If so, then there should also be a time limit such as 90 days for this recourse and only after you have been given the right to appeal and/or reimburse the duplicate/ incorrect payment without the MCO using the offset. The MCOs are getting notorious in withholding amounts they say you owe them without any chance for you to dispute it. • Know the referral process. If you are referred a patient, are you free to do what diagnostic tests in the office you feel are needed (i.e. X-rays) or must everything beyond “talk and touch” be OK’d by the primary care provider (PCP)? In referring the patient out, can you make the referral or must the patient be sent back to the PCP and then he or she makes it? What is the process if a patient needs to be referred out of network? Watch how the contract handles a podiatrist who covers for you. The MCO may require the DPM to either be a member of its panel or at least accept the same compensation to which you have agreed. • Cooperate with medical records provisions. The requirement that providers maintain and retain medical records is standard medical practice. Each state has regulations regarding the length of time records should be kept. It may be six to 10 years in some cases. MCOs will demand access to all medical records as they pertain to the members’ medical service while they are covered. Providers are required to cooperate with a plan to report potential patient fraud, member acts of omission committed during enrollment, information relating to change or loss of employment, third party liability and/or workers’ compensation. As HIPAA becomes the standard, you can expect contracts to have increased privacy and confidentiality provisions and requirements. Understanding The Utilization Management Provisions All MCOs are practicing these utilization management (UM) provisions in one form or another. This is the basis of their promise to save money for the employers. The UM procedures they use can be a nightmare for providers and may throw you in the middle between the patient and the payor. In extreme cases, if the refusal causes injury to your patient, you may be subjected to liability. Look for this key information: • types of services that UM is applied to (especially important in podiatry); • UM techniques used; • information required for the decision; • who is responsible for the UM function (nurse, podiatry, independent contractors, MD); • who is responsible for the actual denial; • how is the denial communicated to you; • if there is a requirement for appealing the disagreeable decision; and • the process for appeals. What About Contract Terminations? Typically, managed care contracts are written with an initial term, usually for one year. However, it is common to see language that provides for an automatic renewal of the contract unless one party gives notice a specified number of days prior to the end of any annual period. Providers should be careful of any automatic renewal provisions. There are essentially three separate termination types found in contracts: termination without cause, termination with cause and immediate termination for cause. You can be sure the managed care company will have the ability to terminate the contract under each of these conditions. Be sure that you have reciprocal rights to terminate without cause, with cause and immediately. Most of this is spelled out in the contract. However, you should be wary of two tricks of the MCOs: • a statement that the MCO is allowed to immediately terminate the contract based on its “sole judgment” of what is in the medical interest of members; and • a statement that it has the right to change the agreement during the term of the contract and if you do not accept the change, the MCO has the right to terminate the entire contract immediately. Also be mindful of any “continuation of services” clauses. Although this may not affect podiatrists as much as the MD with capitated hospitalized and chronically ill patients, you must be aware of any clauses specifying duties and responsibilities for continuing to provide care after the termination date. Ensure mutual clarity on how long you have to provide the service, how you would get paid and what you would get paid. Final Thoughts Appendix A is (almost without exception) the part of the contract that confirms what you are going to be paid. For a bottom line assessment, you should find out exactly what you can expect for reimbursement, at least for your top 10 to 15 codes. Also, remember there is no such thing as an oral modification of a written contract. If you are told “don’t worry, we never exercise that clause,” tell the MCO to cross it out and initial the changes. Remember Nancy Reagan’s famous words. “Just say no” to a bad contract. Dr. Metzger is the founder and principal of Innovative Healthcare Resources, which provides practice management information and consultation, and locum tenens to the podiatric community. For more info, you can contact Dr. Metzger at (800) 495-8959 or via e-mail at You may also check out

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