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Severing payer contracts: How physicians can leave a health plan


The decision to leave a health plan is often still a difficult one, especially with the dominant health plans in your market. However, if you do decide you are through, here is how you can get out of your agreement and start your new life as a non-participating provider.


Robert E. Schiller, JDIs your health plan cheating on you? Is it leaving you out while inviting others to participate in new products? Is it steering business away to other providers, either with patient cost-share differentials, or “transparency” programs purporting to identify cost-effective providers? Does it fail to return your calls? Does it woo you with sweet-nothings about collaboration or quality bonuses, while lowering your fees? 

You probably don’t need a lawyer to tell you this, but these could all be signs that the relationship is over, and it is time to move on.

Unfortunately, the decision is often still a difficult one, especially with the dominant health plans in your market. However, if you do decide you are through, here is how you can get out of your agreement and start your new life as a non-participating provider.

Review your contract

Contract termination is governed by the terms of your participation agreement with the health plan and by applicable law. You must always carefully review the terms of the participation agreement and all subsequent amendments, as well as any relevant statutory or regulatory requirements.

In this rapidly changing healthcare environment, it is becoming increasingly important to think strategically and critically in terms of your health plan participation. Whether you are actively considering dropping participation with a health plan, it would be a worthwhile exercise to review your current contracts and chart what your relevant rights are.

If you cannot locate a copy of your contract or are not sure you have all of the amendments, contact the health plan and request a copy of the full agreement, as amended. They should provide it without objection.

Find out when you can cancel

All contracts require a reasonable notice period prior to the effective date of a termination. Many may limit your ability to get out of the agreement to one date per year. If you miss the notice period, you could be stuck in the agreement for another year.

Often, provider participation agreements are set up as “evergreen” contracts that automatically renew each year on the anniversary date of execution, or some other date established in the agreement, unless either party provides written notice of non-renewal a specified number of days in advance of the renewal date. You do not need to provide a reason to the health plan for your decision.

However, this right is only exercisable once a year, so once you have decided to quit, you could still be stuck in a bad relationship for the better part of a year before you are able to extricate yourself by this method. And if you fail to identify and meet the advance notice requirements, you could be stuck until the next anniversary date. 

Some participating provider agreements have a “termination without cause” provision, meaning you can notify the health plan that you would like to end the contract as of a certain date, but you are not required to provide a reason. In some cases, this right may be exercised at any time. In others, it might be linked to the anniversary date of the agreement (in which case, it is really nothing more than a non-renewal clause in different words).

Breach of contract

All contracts will have a provision permitting you to terminate the agreement if you believe the health plan has breached a material term, and the health plan fails to cure the breach within a specified period of time.

The problem with relying on this provision is that you have to identify a breach and give the health plan an opportunity to cure. The health plan may avail itself of the opportunity to cure the alleged breach, or may choose to dispute that it is, in fact, in breach.  As a result, you may not be able to terminate the agreement on this basis or you may be subject to lengthy and perhaps costly delays. There also may be dispute resolution provisions in your agreement, requiring you to exhaust internal (or even external) processes before you can terminate the agreement for a breach.

In the end, it is a much more cumbersome process than a non-renewal or termination without cause. This may be ok when there are clear issues, and you are ready to pick a fight (and bear the cost of that fight, including legal fees) but most providers would prefer to avoid having to rely on this type of provision. 

On the other hand, it is not limited to a particular date each year. There will be circumstances where it may be the only alternative.

Additional termination rights

Many agreements may contain one or more provisions triggering an additional right to terminate. 

These may be grounded in a statute or regulation or simply be the result of a negotiation between the parties. For example, a contract provision may provide that a regulatory change or a unilateral amendment to the provider’s participation agreement that has an adverse effect on the provider may give rise to an additional right to terminate the agreement.

For example, if the health plan unilaterally reduced its fees by 2%, the provider might have a right to terminate the agreement in the middle of a contract year in response to that reduction. However, you should be aware that some of these types of terminations may require some serious calculation on the provider’s behalf to determine, for example, that the change had a “material” adverse impact, however that term is defined in the agreement.

Terminating one line of business

In some cases, the agreement may permit the provider to terminate participation with one or more of the health plan’s lines of business, while remaining a participant with all other lines.

As with all of the other non-renewal and termination rights discussed above, it is important to know the terms of the provision and to identify any notice requirements or other pre-conditions early on, so you do not lose the benefit of the provision.

You should also determine whether the health plan is permitted to terminate you from the remaining lines of business in response, and whether your practice is positioned to weather that consequence as well.

Mistakes can be costly

Of course, having an appropriate basis to terminate or non-renew an agreement is not helpful if you get the mechanics wrong, so make sure you also consult the terms of your agreement that govern the provision of “notices.”

Make sure notices are sent to the right contact and address and by the proper method of delivery. Health plans are notorious sticklers when it suits their own purposes. If they believe it is in their best interest to keep you in the network, they are not above refusing to accept a termination notice that is defective in any way.

Don’t put yourself in that position. If it is unclear where the notice should be sent, contact the health plan and request the answer, preferably in an email so you can maintain a record.   

Typically, the provision will indicate that notices may be delivered in person, by overnight courier or by certified mail, return receipt requested. Don’t settle for first class mail, even if the agreement says it is acceptable. You will have no proof it was received. 

Notices should be sent far enough in advance so that they are received at the health plan prior to the deadline for notices. If the contract calls for 180 days prior written notice, make sure you have provided enough time for it to be received at the health plan at least 180 days in advance of the proposed termination or non-renewal date.

Unless the contract expressly states otherwise, it is not sufficient that it was postmarked by that date. It must be in hand at the health plan by that date. 


Robert E. Schiller is a Partner at Garfunkel Wild, P.C., in Great Neck, New York. Send your practice management questions to medec@advanstar.com.


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