Make sure you read payer contracts slowly and carefully

ByDavid M. Glaser, JD

When I was a young lawyer, it was common for medical groups to send proposed payer contracts for review. Now, it is more common for groups to sign the contracts with little or no review, assuming that the contracts are mostly non-negotiable.

Signing a payer contract without scrutiny, however, comes with considerable risk. Payers often include terms that can have a dramatic effect on your practice. You will want to know about the traps before you sign so you can either choose to negotiate, refuse to sign the contract, or at least be aware of the potential problem.

Below are a few examples of terms to watch for in payer contracts.

Prior approval of new services. Some contracts will deny coverage to any new service absent prior approval from the payer. This may limit your ability to offer a new ancillary, or even a new type of physician service. I have had clinics make significant investments in ancillaries, such as an ASC, without realizing their payers had the ability to refuse to pay for services in the new facility.

Requiring credentialing before paying for a new practitioner. In the old days, you could assume that if you got a new physician, credentialing would occur retroactively. Payers covered services from the practitioners start date as long as the practitioner was later credentialed. Now, many payers will only cover services if the credentialing occurs before the physician starts.

Incorporation of instruction manuals. Nearly all contracts now incorporate the insurers manual or handbook. This means that simply reviewing the agreement doesn’t tell you all of the rules you have agreed to. Without reading the manuals, you may miss the fact that the payer refuses to recognize services “incident to” your services or has some other unusual requirement or limitation.

Explicit documentation requirements. While many people assume that “if it isn’t written, it wasn’t done” is the law, as described in past blog entries, for Medicare, as long as you can prove you provided as service, the fact that the documentation may not comply with the E&M Guidelines doesn’t mean you have an overpayment. Some private payers, however, have included specific documentation requirements.

Notification requirements. Many contracts place a duty on you to notify the payer if certain events occur. In particular, the beginning of an investigation by a board, a hospital or another insurer may trigger a reporting obligation. This can be counterintuitive because you may think that until the investigation is complete with a finding that is negative, it is unfair to have to report it. While it may seem contrary to the principle of “innocent until proven guilty,” if you sign a contract that requires you to give notice, and you ultimately fail to give the notice, then the payer may be able to take action against for the failure to make the report, even if you are cleared in the actual investigation.

The ability to unilaterally change the terms of the agreement. Some contracts allow the payer to make any change to the contract they wish. Such a provision is particularly troubling if you are not allowed to terminate the contract at will. Even if the contract allows you to terminate within a fixed amount of time after notice of the payer’s amendment, notice of amendments is sometimes buried in junk mail and missed by practices.

Requirement to “cooperate.” Many contracts have terms that are vague, but generally require you “cooperate” with the plan. Depending on what the plan asks you to do, such a blanket agreement can be a bit scary.

Agreement to release quality data. At first blush, agreeing to share quality data seems innocent. But what if the data is misleading or poorly assembled? I have seen plans release “quality” data where the rankings were incredibly unfair. One plan ranked clinics for “keeping patients safe.” What was the “safety” percentage of generic medications you used. If you used a higher percentage of generics, then the plan deemed you “safer.” Language in the contract may make it more difficult for you to challenge a plan that uses bogus data.

The bottom line is that whether you choose to read them carefully yourself, or seek assistance from your lawyer or consultant, you want to take the time to know the terms of your contracts.