Don't Get Burned by Your Managed Care Contract
ACR Bulletin
June 1995
Commentary
By Neil B. Caesar,
President of The Health Law Center (Neil B. Caesar Law Associates, PA), Greenville, SC
Many radiologists focus only on the few provisions in a contract that they find particularly interesting-what is the payment rate, when will I be paid, how many patients may I expect? It''s easy to gloss over the dry, boring language elsewhere in the agreement.
This tendency is strongest with the contract''s "boilerplate"- standard provisions, usually found near the end of the document. After all, many radiologists conclude, the boilerplate is where the same old legal mumbo-jumbo is recited ad infinitum, ad nauseam. It is wise to avoid this trap. The boilerplate can hide many costly and burdensome provisions in managed care agreements. Here are five examples:
Integration Clauses
Most managed care agreements contain an integration clause, a statement that the document contains the entire agreement of the parties. "Well, of course," you may say. But this means that anything not explicitly stated in the contract probably doesn''t count. If that friendly MCO representative shook your hand, looked you in the eye and assured you that you would be able to get your money within a week (because it was so important to your decision to sign up with that plan), that promise probably means nothing-if it''s not in the contract. Even if you saw a key provision in the rule book or in the plan''s quality assurance manual, you probably can''t rely on it unless it is mentioned in the contract.
Gather everything that is important to you, whether told to you by the plan''s medical director or noted in a rule book or manual. Ask your attorney to incorporate those elements into the written agreement, explicitly or by specific reference.
These sorts of contract dangers are equally important in other kinds of managed competition arrangements. Many promises are being made by hospitals, insurers and consultants touting allegedly wonderful alliance arrangements. If a management services organization promises to provide cost savings of 10 percent on group purchases and hold billing and collection fees down to 7 percent or 8 percent, don''t rely on these assurances unless they are specified.
Renewal/Termination Clauses
Ignoring boilerplate is particularly dangerous with renewal and termination provisions. Most managed care agreements provide for automatic renewal if the parties decline to state their intent to terminate prior to some specific notification date. The contract typically does not allow the radiologist to terminate whenever he or she chooses. When "termination without cause" is permitted, it is often available only to the managed care plan. For most contracts, the only time to get out of the relationship (absent its breach) is on the anniversary date. But, in order to withdraw at that time, the radiologist must provide notice of this intent before a certain date. Pay attention to this date!
One mid-Atlantic radiology client learned this lesson the hard way. They had negotiated a fee schedule that was profitable for certain services, unprofitable for others, and acceptable in the aggregate. However, another radiology group on the MCO panel had previously secured most of the high-tech radiology activity, leaving my clients with a disproportionate number of mammograms and x-rays. Because these services were not paid any reasonable level on the fee schedule, my client was determined to renegotiate its rate, or quit the contract when it terminated at the end of the year. But when the administrator called the plan representative at the beginning of March, he was told the period for termination notice had ended in February. The radiologists faced another year with an unprofitable contract because they missed the deadline.
Try also to utilize these notification periods to gain leverage for renegotiation. If certain provisions in a relationship are problematic, you may want to notify the managed care plan of your intent to terminate unless certain changes can be mutually accommodated. A plan sometimes has more incentive to negotiate these changes when it knows it will lose you unless it takes prompt action.
If the plan fails to accommodate you, you must, of course, decide whether to live with the problems or terminate the relationship. One word of advice: be very careful with bluffing. If you say you''ll terminate a relationship if changes are not made but you stay with the plan, you''ll not be taken seriously in any future negotiations. This is a situation where an experienced health care attorney can help.
Finally, try to negotiate a right to terminate the contract at any point, with sufficient notice. This right should be mutual, and the notice period should be identical for both the physician and the managed care plan. If the physician is unwilling to accept the risk of termination with no reason, and this certainly is a problem for some physicians, then the doctor should still seek termination rights for specifically enumerated causes. These may include, for instance, failure to pay promptly, failure to remit withholds within a reasonable time, failure to provide preapproval on a sufficiently timely basis, or failure to notify the physician when patients drop the plan.
This clear right to terminate can also give you leverage for effective renegotiation to end these problems, and may permit you to salvage a presently unacceptable managed care relationship.
Jurisdiction and Venue Clauses
Many of the managed care plans in your area probably are based outside the state where you practice. Contracts presented by this type of MCO often provide that the laws of the corporate headquarter''s state will govern disputes. Unless your attorney is certain that the other state''s laws are more favorable to you, negotiate for jurisdiction to be governed by your state''s laws. Your attorney will be more familiar with protections available to you locally.
Also, in the unlikely event that litigation should become necessary, your lawyer probably will not be licensed in the other state. If proceedings take place in your state, you''ll save the additional expense of hiring co-counsel, and local judges may look favorably on a local doctor who is allegedly "victimized" by a big, mean "foreign" corporation. Finally, don''t forget the added costs of travel and time away from practice when pursuing litigation in another state.
Assignment Clause
Another problem arises with assignment clauses found in many agreements. These provisions typically allow a managed care company to sell (assign) your contract to a third party. This right defeats your efforts to ensure a compatible relationship by negotiating terms that make sense for the specific health plan.
If the managed care company trades you to another plan- for example, a less physician-friendly, more hard-line organization- you are stuck. To make matters worse, if your contract does not permit you to terminate your relationship with the plan when you want to, you may be trapped in the new relationship for a long time.
Try to get the assignability clause removed from your contract. A compromise might be to limit assignment to subsidiaries and affiliates wholly owned by the managed care plan (or its corporate parent). Another compromise would be to give you the right to terminate the relationship (with a certain amount of prior notice) in the event of assignment.
I have confronted a new wrinkle to this problem over the past two years involving tax-exempt organizations. Some managed care organizations have resisted limiting their assignment rights because they were considering creating a tax-exempt entity and wanted the right to assign the contract to that new entity. I have found this to be a recurring problem especially with physician-hospital organizations. Their concern is that evolving laws might require the MCO involved in such a conversion to assign its rights and entitlements outside its own corporate family; thus, the "wholly-owned affiliate" idea I suggested above would not suffice. In these cases, I have negotiated precise language in the assignment clause, permitting only the type of transfer required by tax-exempt conversions.
Indemnification or "Hold Harmless" Clauses
Most MCO contracts include a "hold harmless" clause. These provisions typically force you to pay legal costs and any settlements or judgments in malpractice cases in which both you and the plan have been sued. While these clauses frequently are present in contracts, they are dangerous. Your malpractice insurance will rarely pay the costs incurred by the MCO in any litigation. This ironically exposes you to the MCO''s liability more than your own. Worse yet, your malpractice carrier may deny you coverage in such a suit because you contractually eliminated the insurer''s ability to seek contribution from the MCO. It is wrong to believe that an MCO''s coverage decisions, screening protocols, and panel restrictions can''t affect patient care. Plaintiff malpractice lawyers certainly disagree!
Be adamant about removing this provision from your contract. If the plan won''t budge, and you still feel you want to sign with it, you can try to get written approval of the arrangement from your malpractice insurer. If your carrier won''t accept the risk, tell the MCO about the reasons for your inability to accept the provision. Most plan representatives seem unaware that these clauses increase your risks. Often, clear evidence that your insurer views the provision as troubling will encourage more flexibility from the MCO.
Looking at the boring boilerplate is certainly a chore. But somebody on your team, or your health lawyer, needs to do it carefully and thoroughly, because many important contract rights and dangers are hidden there.
The opinions expressed by the author of this Commentary are not necessarily those of the American College of Radiology.
