Put your foot down on tough contracting clauses
Lessons learned from two executives
Physicians who’ve been burned by certain clauses in managed care contracts have learned it pays off to pay attention to what you’re being asked to sign. Physician’s Managed Care Report asked two executives who have negotiated managed care contracts for more than 10 years to tell us what red flags to look out for, and to share some strategies for managed care contract negotiations.
Our experts: Richard A. Henault, FACHE, president and CEO of New Orleans-based integrated delivery system Methodist Health Alliance and executive vice president for the Methodist Health System; and David Carrish, manager of El Segundo, CA-based consulting firm The Camden Group and former national director of payer contracting for AHI Health Systems Inc., a national physician practice management company.
A synopsis of their advice follows.
1. Look for how office visit copayment changes are handled.
In California, most Medicare risk HMOs capitate their participating providers on a percentage-of-premium basis, Carrish says. As competition for members has increased, many HMOs decided to eliminate the office visit copayment. Because the copayment means additional revenue for a physician group, the HMOs effectively reduced payment for participating groups. At $5 or $10 per visit, for a population that may visit the doctor seven times a year, the amount of lost copay revenue can be significant. As a result, Carrish insists on language that gives the physician group approval before any copay rate changes can be implemented, and/or contract language that states that the capitation rate will be adjusted to make up for any lost copayment revenue.
2. Don’t see it as "us vs. them" proposition.
When Henault arrived in New Orleans in the mid-1980s, one of the first things he did was to quietly arrange meetings with MCOs that were just beginning to enter the then-nonexistent managed care market. "We have positioned ourselves through championing the concept of, let’s work together with managed care and the payer community to become a market-dominant player,’" Henault says. "We try and work with them within boundaries of what makes sense for us and our mission. I see MCOs as adjunct to fulfilling our mission."
3. Be wary of how shared risk pools are calculated.
This can potentially harm both physicians and hospitals, Carrish says. From the physician group perspective, groups that have above-average inpatient hospital utilization are not rewarded under a payment system based upon DRGs when compared to a per diem rate. Under the DRG method of payment, the amount of the claim that is charged to the hospital risk pool is the same amount, regardless of whether the patient was in the hospital three days or five days. On the hospital side, a capitated hospital that agrees to a shared risk pool based only on bed days may be neglecting the costs not related to inpatient stays (for example, emergency room or durable medical equipment) that may be part of the total risk pool. "It should be the intent of a capitated hospital to have its utilization management partner, whether it be an HMO or physician group, manage the entire hospital risk pool as opposed to one component of the pool," Carrish explains.
4. Always insist on a floor for percentage-of-premium contracts.
Some HMOs may back out supplemental benefits they are selling, such as pharmacy coverage. They may also back out broker commissions. This can cut into monthly payments for providers under percentage-of-premium contracts, Carrish and Henault both point out. Carrish suggests clarifying supplemental benefit charges and asking for a floor to prevent losing your shirt on a contract.
5. Look out for "favored nations" clauses.
Some payers ask providers to agree to discounts that are equal to the greatest discount they give to another payer. That’s a mistake, Henault says, because not all payers are equal.
6. Ask MCOs for a breakdown by zip code of the member base.
"A plan with 20,000 members in my back yard may be a lot more appealing than a plan with 100,000 members all over Louisiana," Henault says, depending on where the members live and work.
7. If possible, avoid withholds.
At the very least, ask for a contract stipulation for interest to be paid on withholds that defines a time frame and payment methodology for amounts withheld to be returned to the provider, Carrish says.
8. If you represent a hospital, look for ways to offer non-staff physician affiliates incentives.
Proper alignment of responsibilities needs to occur, Henault says. "We realize in the executive suite that we don’t control utilization; physicians do. The question has become, how do we create a model to work with physicians to be able to create an appropriate economic and clinical alignment of incentives?"
9. Insist on exit language.
"I like to have the ability to exit without cause, usually within 60 to 90 days. When all else fails, you should have the ability to exit," Henault explains.
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