In healthcare getting appropriately reimbursed from managed care payers involves a complex process that extends from providing and figuring the cost of the care to accurately capturing, charging, and coding the cost of that care and sending the claim to the payer. Essentially, however, how well that cost of care is reimbursed begins with one thing: the contract.
Just how clear and well defined contract payment language is can directly impact reimbursement. If not sufficiently defined, standard terms found in any contract can result in delayed, reduced, or lost payment. Likewise, complicated language should be thoroughly scrutinized to limit risk of adverse results.
Because health insurance payers generally are the parties that draft managed care contracts, much of the leverage that exists within a contract resides with the payer. Providers, however, are not without muscle. Those that truly take the time required to fully understand the contract should find that protecting reimbursement is worth the extra effort.
Here are a few terms that warrant extra careful attention:
Case Rate-Disagreement over outpatient case rates can be especially problematic for providers. The issue surrounds just what services are included, says Lynn M. Guillette, director of contracting for Dartmouth-Hitchcock Medical Center, Lebanon, NH. There are all kinds of extras, such as implants, biologics, and pharmaceuticals, that could be used in a surgical procedure, for example, that may not be covered by the fixed fee that the provider and payer agreed to, Guillette says. A $3,000 surgical case rate, for instance, would not cover the cost of expensive Cochlear implants, she says. "So, you need to be very clear on what's in, what's out on the case rate. And then, how things like lab services or radiology services associated with those case rates might be paid, or not paid. Is it a fee schedule? Does it default to a percent of charges?" she says. "If you're going to agree on a fee schedule or a case rate basis then you really need both terms and contract language that protect the provider and describe what the payment mechanism is going to be to accommodate for those kinds of things."
Stop Loss-Stop loss provisions are meant to protect providers accepting fixed payments for services against unusually large costs for a particular, generally inpatient, case, says Pam Waymack, managing director for Evanston, Ill.-based Phoenix Services, a healthcare consulting firm. This clause effectively stops the loss of the provider at a particular point when the costs of care exceeds an agreed upon threshhold. So, for high-cost patient cases, the contract may reimburse an incremental amount above the regular per diem payment, she says. Issues arise over deciding when the provider has reached the stop loss point. "I have seen contracts where the stop loss provision is so poorly worded that neither party can agree on how it's really meant to be applied," she says. For instance, a contract may have a stop loss provision set at $50,000, but another provision that sets reimbursement for implants at 100 percent of costs, Waymack says. The cost of care for a case reaches $59,900 and includes implants, which cost $10,000. Should the implants be included in the total for the case rate, in which case they would be reimbursed according to the stop loss provision, or separated from the case, and, therefore, the case would not reach the stop loss threshhold? The first instance benefits the provider, while the second, the payer. Such details should be spelled out in the contract, Waymack says.
Affiliate-If loosely defined, this term can devalue the discount that a provider extends to a specific payer, says Robin J. Fisk of Fisk Law Office, New Hampshire. Here's how it works: A provider negotiates a discount with a payer. The payer then sells its discount to its affiliate, who is an insurance broker. The broker then sells that discounted rate to whoever it wants. "This is called a silent PPO," Fisk says. "When an insurance company says, `We're negotiating on behalf of ourselves and affiliates,' you really need to know who those affiliates are. You want the ability to approve them. You want the ability to maybe opt out of them."
Products-Typically, a payer offers several types of insurance from HMOs and PPOs to worker's compensation and high deductible health plans. The issue, says Fisk, is that the products don't all pay alike. An HMO may use gatekeepers to coordinate patient care and require members to pay a flat co-payment; a PPO may not have procedures to ensure coordination of care and may require members to pay high deductibles, she says. If all of these products are entitled to the same discount, payment is effectively lowered for those claims that may be more difficult to collect on or collect at all. "One of the things that really needs to be spelled out is what products are included in your contract, and whether or not all products are entitled to the same discount," Fisk says.
Medically Necessary-A medically necessary service is distinct from a covered service. In order for a provider to be reimbursed for it, a service must be both covered and medically necessary. Just what constitutes medically necessary should be defined in the contract as specifically as possible, says healthcare attorney Thomas R. Neal. "That needs to be nailed down," says Neal, a partner with Krieg DeVault LLP, Carmel, Ind., where he chairs the health care practice group. If the definition is not included in the contract, then "medically necessary" will mean whatever the payer's medical director says it does, Neal says. What's more, the provider should have the right to appeal cases deemed medically unnecessary by the payer, he says.
Language that Should Raise a Red Flag
In addition to specific terms that require clarification, contracts may include provisions with overly complicated language that benefit the payer. One such provision is the most favored nation clause, says Thomas Neal. The clause includes language that a provider will not give any other payer a more favorable price than it gives to that specific payer in the contract. If the provider does so, then the payer is automatically entitled to the lower price. What's more, the payer has audit rights, meaning it can audit the provider's financial records at any time to make sure the provider is complying with this provision, Neal says.
"That's pretty intrusive," he says, noting that such a clause effectively freezes out competition because prices for other payers would be higher. He adds that there are antitrust issues with such clauses and providers should get professional guidance before agreeing to them.
Another provision to be careful of relates to all products clauses, Neal says. Again, a payer may have various kinds of insurance products. This clause means that any time a payer rolls out any new product in the provider's market, the provider is automatically signed up for that new product. "And guess what?
The new product will probably have a fee schedule that's about 30 percent less than what you think you signed up for," Neal says. The provision also gives the payer the rights to try and get the provider's patients to switch to the new product. "You have to be careful of those things," Neal says.
Neal points out that the managed care contract will not be so obvious as to include these actual phrases, which is why providers need to be aware. "The problem is not so much in the ambiguity of a specific buzz word or term, it's in the unbelievably difficult syntax of several paragraphs that you have to read together in order to understand: What does this mean in operation, how will this work?" he says. "The language can be very convoluted."
Essentially, constructing a strong contract requires incorporating details to try and address the different scenarios that can affect reimbursement. Addressing every conceivable issue is not possible, of course, but providers should try to pinpoint potential trouble spots and, at the very least, make sure the language is comprehensible. "You specify as much as you can," says Pam Waymack. "Identify where you have issues with the payer, where you think you have vulnerability, and try and put in language to protect yourself."
Publication Date: Thursday, August 07, 2008