Cover Story

Managed Care Ripoffs

Don't sign a sucker deal

Read contracts carefully before putting your name on them. If you don't, you may dive head first into a big mistake.

By Susan Harrington Preston
Senior Editor

The two letters came from the same insurer, but they carried very different messages. One, sent to the practice of California internist Martin L. Serota, said that the state's insurance commission hadn't approved a premium increase that year, so the insurer couldn't raise doctors' reimbursements. The other, which concerned Serota's personal coverage from the same insurer, announced a premium hike of 20 percent.

"We canceled that provider contract," remarks Serota, who received the letters in 1997, shortly before he began negotiating contracts for his practice, the 22-doctor Greater Pinole Physicians Group in Pinole, CA.

Since then, Serota has developed an eye for less-than-watertight wording in managed care agreements. Take this notice of fee changes, sent to Greater Pinole in 1999: "We are confident that this new schedule will continue to make [our plan] a preferred PPO among our provider community," the insurer wrote. "[We] strive to reimburse our physicians at an equitable rate."

Sounds like a fee increase, doesn't it? Not so: A close look at the new fees revealed a 3 percent rate cut.

Many doctors are deaf to the drip-drip-drip of contractual money drains—not because they can't hear, but because they won't listen. Too often, doctors sign managed care agreements without reading them; other times, doctors don't keep copies, so they can't verify whether the terms are being met. Sometimes, doctors don't even tell their office manager which contracts they've signed.

Physicians also fail to seek advice from readily available resources, such as their state medical associations. "We have an attorney who reviews contracts for a flat fee and then reports to the doctor what they really mean in English," says Teresa Devine, who heads the health care financing department of the Texas Medical Association. "The contract review helps doctors know what questions to ask, so they can determine whether the contract is going to work for them. Once they've signed a contract, it's too late."

If you dive into your contracts blindly, don't be surprised if you experience a hard landing. "Doctors think businesspeople are going to treat them fairly because they themselves are fair," remarks Serota.

Think again.

Is that contract worth signing?

There are plenty of things doctors can—and should—do before signing a health plan contract. The first is to challenge the assumption that every contract is worthwhile. "Doctors sometimes feel they must sign no matter what the terms," says Barry S. Pillow of HCI HealthCare in Greensboro, NC. "But if a contract isn't reasonable, doctors need to have enough gumption to say No."

Finding that gumption is a lot easier if the insurer's business is no more than 10 to 20 percent of your revenues. It also helps if you can throw a little weight around in negotiations.

"You're worth it to a plan if you're one of the critical groups that it needs to be successful," says Pillow. "If you know that much of your patient population includes the people a plan is trying to recruit as members, that can help you." You can get an objective sense of your market power by doing some research.

Consider the insurer's goals, too. "Look for holes in their coverage," says attorney Charles Bond of Berkeley, CA. "See if they're lacking doctors in your specialty, or whether they need more physicians overall."

Don't worry about giving offense by getting tough in negotiations. "Business relationships are very different from personal relationships," notes health care consultant Rebecca Anwar, who works in Philadelphia with The Sage Group. "Businesspeople respect people they can't trample. As long as the negotiation is done in a professional manner, and doctors have reasonable arguments and data to back up what they're asking for, I think it strengthens their position to bargain hard."

Still, Pillow points out, even large groups may have to walk away from a contract to get the insurer to come to the table. "In one practice I work with, one of the big insurers insisted that the fee schedule and contract were non-negotiable," he says. "There was one major employer in the area, and a lot of its employees received medical services from this particular group. So we wrote the employer that we couldn't live with the contract."

For nine months, both sides stood firm. Finally, the insurer gave in—partly. "We were able to negotiate what we felt was a fair fee schedule for the practice and the insurer," Pillow says. "We didn't get everything we wanted, but it was a much better contract."

The RVU rate is only the beginning

Your first concern in any provider contract is whether the fee schedule is adequate.(For more details on how to analyze the financial aspects of health plan contracts, see "When to ditch a contract," Aug. 9, 1999). are other things to consider.

The provider's manual, for instance. "Most managed care agreements have language to the effect that 'you agree to follow the rules of our policy as set forth in the provider manual,'" says consultant Joette Derricks of Healthcare Management Solutions in Camp Hill, PA. "But many insurers won't give their manuals to doctors."

The remedy? Insist. "Sometimes you have to threaten not to sign a contract in order to get a copy of the manual," says Pillow. It may take pressure even then. "I've asked for provider manuals every time I've signed a contract, and I've never gotten one," says orthopedist Franklin J. Dzida of Downey, CA. "I don't think even the insurers have them."

Once you manage to get the manual, you may find you want to clarify some provisions within it. Notes Derricks, "The manuals can be very vague on policies involving payment, coverage, and utilization."

You need clarification, because the provider's manual can help answer essential questions about the contract—questions you need answered to understand what the contract is worth. For example:

• Are the fees based on Medicare's most recent RBRVS values? "Sometimes, insurers base their fees on out-of-date values," says Tracy Ann Jones, business operations manager for the Greater Pinole Physicians Group. "One insurer we know of is using 1994 RBRVS values. So, although it's paying 100 percent of 1994 Medicare fees, its reimbursement is the equivalent of only 75 percent of what Medicare is paying currently, based on the present RBRVS values."

• Does the insurer use standard CPT codes? "A lot of times, insurers don't like the descriptions of the CPT codes," says Derricks. "So they'll use the descriptions from the Medicare codes or write their own as the basis for determining payment. Or they use a mix of codes—whatever's most beneficial to them. But they don't voluntarily tell you that."

• How does the insurer notify doctors of payment changes? If you can find out how and when payment changes will be announced, your staff has a better chance of keeping track of them. Otherwise, fee adjustments may go unnoticed.

• What's a "clean claim?" Insurers say they'll pay "clean claims" within, say, 30 days, but they won't define "clean." Claims that seem clean to you but are rejected add up to payment delays. So try to get a definition of a clean claim. If you can't, write your own and append it to the contract. Or put your definition in a letter to the insurer and request a response if it doesn't jibe with theirs.

What's a reasonable expectation? "If the claim can go through the system without any manual intervention, then it should be considered a clean claim and it should be paid within 30 to 45 days, depending on the state," notes Derricks. "Otherwise, insurers can just sit on the claims for two or three months before they pay them."

"Gotcha" clauses: dollar drains in disguise

Look out for money-sapping clauses, too. Attorney Charles Bond, for one, has seen some whoppers. "Doctors routinely sign payer contracts with 'hold harmless' clauses that require them to pay defense and indemnity costs for the insurers when patients sue over treatment denial," says Bond, whose Berkeley, CA, law office works solely with medical practices. "This clause allows the plans to say that if the doctor really believed the care was necessary, he should have given it. So by not proceeding, he made himself liable. Not only is the potential award huge, it almost certainly would not be covered by the doctor's malpractice or any other kind of insurance.

"When a hold-harmless clause shows up in a contract, the physician should X it out and initial it before signing," says Bond. "Most plans will accept that."

This is just one of many contractual slipknots that can tighten a financial noose around your neck. Indeed, Bond talks about a "hall of fame" of ruinous contract issues. Here's a sampling:

• Withholds. "We routinely see contracts that give plans the power to withhold unlimited amounts of money," says Bond. "I work with a group in the Midwest that had a contract saying the insurer would set aside 5 to 10 percent for risk sharing, but that it could withhold more if it needed to. This group's withhold went up to 18 percent before the doctors started to fight it. And then, all they got from the insurer was accounting double-talk. Such a withhold clause is like the doctor saying 'Sure, you can keep my money.' "

If you must live with a withhold clause, be sure it has a fixed ceiling.

• Changes in payment rules. Sometimes, the worst traps are the ones the insurer tries to slip in after the contract is signed. "We just got a letter from an insurer that says, 'Oh, by the way, we're going to implement a new program where, if you don't submit claims within 90 days, we're not going to pay them,'" says business manager Jones. That could mean the practice wouldn't receive any payment at all if a claim was lost and had to be refiled after the 90 days. "Obviously, that program is not part of the contract," says Jones.

Before you sign the contract, try to specify how and when insurers will notify you about changes in the fee schedule and payment rules. It's much easier for your office staff to keep up with changes if notification comes in a letter rather than, say, attached to the end of an article in its newsletter.

Try to make sure that notifications of any fee changes include all types of changes, not just new rates for specific procedures. You should be told about such things as adjustments to the RBRVS values, codes that are newly bundled, and new documentation requirements to support your claims. "Insurers have to notify us about these things in writing, and if we see something like it, we'll immediately call them on it," says Jones. "The whole point of negotiations is to have solid contracts so they can't change the rules in the middle of the game."

• Prior overpayments. In the past several years, insurers have begun taking a fresh look at past reimbursements and deducting prior "overpayments" from current claims. The AMA terms this tactic "retroactive denial."

So far, only Maryland has a law specifically designed to address this problem. The law limits the "lookback"—the time span during which an insurer can recoup overpayments—to six months after the claim is paid.

If you live elsewhere, you can try to insert your own lookback clause when you renew or renegotiate your contract. Or you can require that repayments be handled separately from current reimbursements so that the company can't deduct overpayments at will. Whether insurers will accept such clauses, however, remains to be seen.

• Bonus compensation. If your contract offers a utilization-based bonus, the insurer may not want to disclose its bonus formula. Even if it does, you may wind up fighting for the money.

Consultant Chris Zaenger of Professional Business Management, based in Barrington, IL, tells of a doctor who calculated that the bonus due him from his PHO was $30,000. The PHO said it didn't owe him a bonus, but the doctor had the formula because he was a director of the PHO. "If he hadn't had the formula," Zaenger notes, "he would never have known he was entitled to the money."

• Who says when to quit. Be aware that insurers may drag their feet on releasing doctors from contracts, so try to establish a contractual way to do so cleanly.

Consider what happened to the Greater Pinole Physicians, which canceled its contract with one health plan on 30 days' notice. In response, the insurer demanded signatures of all the doctors under contract. Rather than arguing, the group complied. But the insurer then said that if the contract wasn't broken "for cause," the required notice was 60 days, not 30. The insurer counted the 60 days as starting from the date it received the doctors' signatures. Greater Pinole's attorney sent a letter to the insurer stating that the 60-day period began on the date of the original letter.

The insurer, however, stuck to its guns: In the letter it sent to patients discussing the termination, it gave the later date. So billers and receptionists took a lot of heat when patients learned that the contract was no longer in force.

.

How big a fish are you, and in how big a puddle?

You can gauge your market power—and hence your negotiating power with health plans—by researching two things: the percentage of your community's patients who go to your practice, and the percentage of a given insurer's members in your region who go to your practice.

Regional demographics—total population, age, gender, race, ethnicity, occupations, and so forth—are available on the Web at the US Census Bureau's site (www.census.gov). Until the Census 2000 results are published, you can supplement the 1990 Census data with an interim estimate of population by age and by county (available on www.census.gov/population/www/estimates/co_ca.html).

Once you've gotten a fix on the total patient population in your area and its characteristics, you need to compare that information with data from your practice's billing records.

Say you're part of a group of seven internists working in Kalamazoo, MI. You'd start your research on the Census Bureau's interim-estimate site. Click on the most recent date under "Michigan," which takes you to population estimates for Michigan counties for 1998, the most recent data available. Kalamazoo County had nearly 230,000 residents in 1998. Of those, some 147,890 were 18 to 64 years old. If each of the seven doctors in the practice has 2,000 local working-age patients on his panel, your group is caring for about 9 percent of the county's working-age patients. That's a very respectable proportion—not enough to let you threaten to walk away from a contract as a bargaining tactic, but enough to give you a shot at winning contract changes.

You can also use city population estimates (www.census.gov/population/www/estimates/cityplace.html). Let's say your billing records show that your patients all live in the city of Kalamazoo, and the Census estimates Kalamazoo's population to be about 76,200, or 33 percent of the county's population. Assuming that 52 percent of the city's population is between 18 and 64, as it is countywide, you can determine that your group is treating 14,000 of the 45,700 working-age adults in the city—about 31 percent.

You're not done yet, though. The figure tells you you're important for the city of Kalamazoo, but how important is Kalamazoo to the insurer? To find out, you need the insurer's market share.

Sometimes you can get that information just by asking. "We've found that insurers will often tell you their market share by ZIP code or by region," says Rebecca Anwar, a health care consultant who works in Philadelphia with The Sage Group.

Alternatively, you can go to your state's health department or to its insurance commission. "They may just have market share by city, but it's also possible to get more specific information," Anwar says. "If most of your patients come from, say, five ZIP codes, you can get a pretty good feel from the insurance commissioner what companies have the greatest market share in those areas."

 

. Don't sign a sucker deal. Medical Economics 2000;11:190.