Don't sign that contract! (Yet)

A veteran negotiator tells how to avoid the pitfalls in health plan contracts and win the best deal for your practice.

By Scott P. Rigby, MD

The contract between a physician and health insurer determines the rules of engagement for all interactions. Unfortunately, most physicians sign these contracts without understanding—or even reading—the terms.

Although bargaining for a fair and equitable contract with a third-party payer may not be easy, the benefits are gratifying and long-lasting. I've had several opportunities to participate in contract negotiations and would like to share a few of the more important points.

Understanding terms and termination

Every contract has a section that addresses the term, or length, of the contract as well as the provisions for termination. Although the term can be as long as three years, one-year contracts are most common. Negotiating for the shortest possible time frame is in your best interest, in case you need to bail out of a restrictive or low-paying contract.

One-year contracts usually contain language indicating that they're automatically renewable on the anniversary date. So unless you take advantage of the negotiation period (a one- to four-month period prior to the anniversary date, during which the contract can be amended or terminated), you'll be locked into the same agreement for another 12 months.

The contract should also include provisions that specify how to terminate the agreement before the renewal date. Termination can be either with cause or without cause. The "with cause" option is based on a breach of contract by either party, and is most often a 30-day deal. You might have as few as 30 or as many as 180 days to break the agreement without cause. In both cases of termination, you must continue to treat your entire panel of patients until the contract is officially void. Some contracts obligate you to treat patients until their care can be transferred to another physician.

Of course, cancellation provisions cut both ways. The insurance company has the right to end the contract with or without cause as well. The company might reserve the right to cancel, for example, if you're convicted of a felony or lose hospital privileges. Watch out for contract language that is vague and puts you at a disadvantage—e.g., a clause indicating that breach of contract can occur if the insurer "determines that the physician is unsafe for the practice of medicine." Amend such language whenever possible.

Getting paid for services

Health plan contracts traditionally contain language specifying that physicians can bill patients directly for certain items or services that the insurer doesn't cover, such as copays, deductibles, coinsurance, and wellness visits. In the changing market, many physicians are using these noncovered services provisions to bill patients for other items, such as educational materials, completing forms, and telephone consultations. If charging for such services is essential to your practice's profitability, make sure that the contract allows you to bill for them.

Deadlines for claims filing is another important point to consider. The contract may give you as few as 90 or as many as 365 days to submit an initial "clean" claim to the insurer. And although the majority of claims are now sent electronically, with as little as a two-week turnaround time until payment, the occasional claim gets lost and must be resubmitted. Or sometimes a claim is not sent at all because of an oversight or other error. Seek a contract that allows for the longest reasonable claim submission time.

Some contracts also specify the time allotted the insurance company to pay clean claims; usually this is within 30 days, as required by many state laws and Medicare regulations. Seek a contract specifying that the insurer owes you a penalty if it pays you after the agreed time period.

Reimbursement: Read the fine print

Perhaps the most important section in a 30-page insurance contract is the one that indicates what you'll be paid for your services. I'm amazed by how many physicians sign contracts without carefully reviewing this section.

Here are several caveats:

• Never sign a contract that doesn't include a fee schedule—or at least an explanation of the methodology used for determining reimbursement. Some contracts specify that reimbursement is based on "120 percent of current Medicare allowable"; others make reference to their own "weighted fee average" schedule, with each CPT code reimbursed at a different percentage of Medicare allowable. In the latter case, you'll need a copy of the complete fee schedule to track and audit payments.

• If the fee schedule is based on a fixed percentage of Medicare allowable, the contract should refer to evergreen rates, meaning they're based on current year Medicare and are renewable each year as the Medicare rates are changed. That wording eliminates the possibility that the contract claims to reimburse at an attractive "120 percent of Medicare allowable," but is basing that percentage on rates that are seven, eight, or nine years old.

• If the contract indicates that you'll be paid the "lesser of billed charges or the approved fee schedule," the company will pay your actual charge if the amount is less than the contracted rate. In other words, if the insurance company is willing to pay $50 for a CPT code and you bill $40, you'll get the lower amount. Make sure that you don't shortchange yourself. (See "We're not leaving $250,000 on the table anymore," Sept. 9, 2002.)

• Some insurers will agree to reimburse physicians based on a "percentage of charges," especially in cases concerning non-RVU codes (i.e., wellness visits). All contracts should indicate how both non-RVU and RVU codes are reimbursed.

• Know how much the plan will discount your charges. Some doctors are surprised to learn that the adjustment or negotiated discount—as noted on the explanation of payment (EOP) form—is indeed negotiable. You or your representative should play an active role in this negotiation.

Dispute resolution and notification of change

A disagreement between you and a payer can be settled without the emotional turmoil, legal fees, and other traumas of going to court if your contract has an option of arbitration. The arbitration process kicks in if a disagreement cannot be resolved within a set period of time, usually 60 days.

Some questions to consider regarding arbitration clauses include: Does the action abide by the American Arbitration Association rules? How are the individual arbitrators chosen? Are the costs of arbitration borne equally? Are the decisions of the arbitrators mutually binding?

It's not uncommon for a contract to specify that the insurer can modify the agreement at any time—as long as you've been notified of the changes and haven't opposed them, in writing, within 30 days. Make sure that the contract says that all such correspondence must be sent by "certified mail with return receipt."

Ask a health care attorney or consultant to review all insurance contracts and modifications. At a minimum, simply being able to identify some of the more common hazards can decrease the likelihood that you'll sign something you may later regret.

The author is a practicing internist and founder of Medical Office Consultants ( www.medical-office-consultants.com), a reimbursement consulting firm in Kent, OH.

 

Scott Rigby. Don't sign that contract! Medical Economics Oct. 10, 2003;80:49.