Read the fine print before signing that contract
Determine what you’d gain, what you could lose
If you’re like most physician practices, you deal with 10 to 20 managed care plans already, with more moving into your marketplace. And if you’re a typical physician, you aren’t very happy with any of them.
Before you sign on the dotted line with the next company that offers you a contract, stop and look at the long-range effect the contract could have on your practice.
Physicians should never accept a managed care contract until they carefully evaluate whether it makes sense to do so, says Jay Williams, principal of Arista Associates, a health care consulting firm based in Northbrook, IL.
"Every contract should stand on its own and every one should be evaluated individually," he says. Read every paragraph, every line, every sentence, and every word of every contract, Williams says. Most of the time, the language is standard, but there may be some surprises in store. "Sometimes you find the strangest things buried on page 42, subparagraph 3-21," he says.
For instance, Williams worked with one physician practice that looked at the managed care plan’s fee schedule and determined it would be profitable for them. However, there was a paragraph toward the end of the agreement that stated that in no case would reimbursement exceed 85% of the Medicare fee schedule.
Are there tricky clauses?
The clause rendered the fee schedule worthless and the contract unprofitable to the physician practice, Williams adds.
"A lot of physicians get stuck on the fee portion of the contract. In my opinion, the most important thing to look out for is language. It may be beneficial to give up a few dollars in fees in order to have a contract that contains language you can live with," says Todd Welter, president of R.T. Welter and Associates and consultant to the Medical Group Management Association based in Englewood, CO.
Among the clauses to read carefully are those that spell out how you can be terminated, list your obligations under the contract, and explain what is necessary for getting authorization and getting paid.
Consider using an outside source to evaluate your contracts. "A lot of times a physician is the last person who can determine whether a contract is good for him. Someone from the outside can better see the potential downside risks," Williams says.
It pays off to negotiate; virtually all contracts have some softness in some areas, he adds. "Too many doctors are afraid if they question anything or make changes or request more information, they’ll lose out. That’s not true. If you never ask, you’re not going to get a better deal. It’s like buying merchandise in a Mexican bazaar. They give you a price, and many times you can negotiate a better price."
If the insurer wants you more than you want it, you have a good opportunity to renegotiate the contract until it’s in your favor, Williams adds. For instance, some large specialty groups that have a good reputation have a lot of leverage because they have a loyal patient base the insurers want to cover.
Watch out for high-pressure techniques
"The amount of leverage a physician group can have with a payer depends on the market, the group’s reputation, and how aggressive it has been in recruiting and retaining patients," he says.
Never let an insurer push you to sign a contract, Welter advises. It’s not unusual for a physician to get a contract accompanied by a letter that says it has to be signed in a short time.
"The networks seem to be in such a big hurry that it’s almost humorous. Most of the deadlines are a lot of baloney. The time frames are manufactured by the payers. It’s to their benefit to get it done quickly," Welter says. A contract with a short deadline could contain clauses the insurer doesn’t want you to examine.
"A good contract takes time. Physicians should take the time to make sure it’s OK. If they’re in a hurry and don’t do due diligence, they could suffer in the long run," he says.
No practice should have more than 20% of its business tied to any one managed care company, according to Welter. That way, if you lose the contract, you aren’t in a tremendous bind, he adds.
If you have no experience in managed care, negotiate for some risk-sharing on the part of the payer until you get a chance to learn the system and get your feet on the ground," Williams says.
Here are some other tips for evaluating a managed care contract:
- Ask how many new patients you can expect to get and if they will give you a guarantee of new business.
- Look at whether signing on with the plan will help you take a lot of business from the competition.
- Look at the risks of not being in the plan. For instance, if every employer in town is contracting with a big managed care payer and you turn them down because you don’t like the rates, you may risk losing some of your business.
- If you are tied to a local hospital, look at what problems you might face by not participating in plans that contract with the hospital.
- Make sure there is a clause that gives you 30 days notice if the company makes material changes in the contract. "A lot of insurers are able to change the contracts unilaterally and the physician has nothing to do with it," Welter says.
- Make sure you know who your patients will be, how often you can expect to see them, what you will be reimbursed for each procedure, and what your costs are.
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