Negotiating a doctor-friendly contract
How to avoid unpleasant surprises before you sign on the dotted line
From the June 1999 ACP-ASIM Observer, copyright © 1999 by the American College of Physicians-American Society of Internal Medicine.
By Bryan Walpert
Before her current position as a hospitalist in Birmingham, Ala., she was the managing partner for a Jonesboro, Ga., internal medicine practice. While there, she saw plans cut reimbursements for some items in half with practically no notice, bury respiratory therapy and other ancillary services in the price of a single office visit and attempt to get doctors to assume all the malpractice risk for any decisions the HMO made.
Dr. Rauch decided to fight back. She learned how to analyze contract provisions and eventually figured out which ones were worth a fight. It wasn't easy, but she eventually bargained for the right to get out of her contract should prices go up and for the right to carve out higher prices for gynecological exams.
It can be difficult to negotiate a doctor-friendly contract. But experts say it's worth the effort to bargain. "Most of [the provisions are] negotiable, despite what you hear, if you are in a strong bargaining position," said Stephen Upham, MD, a family practitioner and medical director of Grove Hill Medical Center, a 72-physician multispecialty practice in New Britain, Conn.
While larger groups tend to have more leverage when it comes to negotiating, your position in the market can be just as important. In Dr. Rauch's case, her group was small (it varied from three to six providers), but there were few enough doctors in the area at that time that she had some clout, particularly because of her strong patient satisfaction results and lower utilization numbers. But as more doctors came to the area, "the health plans were coming back and saying this is your contract— it or leave it," she said.
Sometimes, leaving it may be the better decision. No contract may be better than a bad one, experts say. "A distressing number of physicians will sign any contract that comes by their desk," said Douglas Hough, PhD, partner with Arista Associates, a consulting firm in Fairfax, Va. "You have the power to say 'no.'"
Most importantly, experts advise, read the contract carefully before making a decision and watch for the following provisions:
Number of patients. If you're hoping a contract will deliver new patients, make sure that they exist. "Health plans ought to be able to tell you that they have this group of patients in this area who are our members and this is the number of providers in the area," said Stephen Sadowski, manager at ECG Management Consultants in Wakefield, Mass. "If they're not prepared to give you that information, that's probably a warning sign."
When you're getting numbers, don't simply ask how many patients are in the metropolitan area. "Find out how many of existing or targeted enrollees are within a five-mile radius of the practice," Mr. Hough said, noting that's the typical market for an internist. "This indicates to the payer you're actually interested in this and sophisticated enough to get the information."
Be aware that some contracts require physicians who sign on for one plan to accept patients from any other plans the insurer has or might create in the future—even if those rates are lower. "Physicians have to either understand that or negotiate the clause out of their contracts," Mr. Hough said.
Fee schedule. Some plans will try to negotiate a discount on your existing charges. "They're trying to get the most out of each provider that they can," Mr. Sadowski said.
Do the calculations to determine whether the contract is worth it. The value of new patients, for instance, is the number of visits per year (often 2.5 for a non-Medicare patient) times the typical revenue from a visit, minus the cost of the visit in nurse time, supplies, etc., Mr. Hough said. Consultants can help with these types of calculations.
If you're negotiating risk pools, make sure there's upside potential. In other words, if the plan imposes utilization targets, you want to make money for achieving them and not just lose money for failing to meet them, Mr. Sadowski said.
Some contracts prohibit you from going to the patient for money you can't collect from the plan. But if the plan goes belly-up and it owes you $80,000, you want the right to bill the patient, said Gary Matthews, principal with The HealthCare Advisory Group in Atlanta.
Services. Know the services you're required to perform. For example, primary care gatekeeper models operate by limiting primary care physicians' ability to refer to specialists, Mr. Sadowski said. "If you're used to taking every bad sunburn and referring it to a dermatologist, that may not be the case anymore. You may have to treat it yourself."
On the other hand, some plans will want you to send out for lab and imaging services. "You may have services on site that you can't use," Dr. Upham said.
Know, too, what's included in your office visits. Dr. Rauch said some plans tried to include ancillaries like respiratory therapy, EKG and venapuncture in the price of an office visit. Once on the bargaining table, the plans eventually backed down.
Indemnification provisions. Some plans have gotten doctors to sign indemnification provisions that allow the plan to recoup lawsuit losses from its doctors even if the suit was against the plan itself or another physician, Mr. Matthews said.
If you can't eliminate the indemnification provision, "you at least want to make sure the physician is responsible and held liable only for any losses that the plan would incur due to the specific behavior of that physician," Mr. Matthews said.
Plan length and termination. Markets change and the plan that's this year's darling could land in bankruptcy court next year. "I would be reluctant to commit for much beyond a two-year period of time," Mr. Sadowski said.
The health plan, of course, will want the right to terminate the contract for any reason. You should fight for the same right. At the very least, you should be able to terminate the plan if you're not getting paid or paid on time.
Frank Matricardi, managing member of Phoenix Healthcare Consulting in Manhattan Beach, Calif., said that doctor groups can often get termination rights with a 90- to 180-day notice for specific circumstances: for example, if the plan cuts reimbursements or fails to pay on time. But if you want to be able to terminate without cause, you'll probably have to settle for more lead time.
Experts say that the termination clause is often your biggest bargaining chip. Matthews Ward, vice president of Med Cap Resources Inc., a consulting firm in Richmond, Va., said that typically, physicians ask to cancel contracts not because they actually want to stop working with a health plan, but because they want the contract changed. While it may seem like an extreme way to negotiate contract changes, Mr. Ward said that most health plans respond to the tactic.
Make sure you know your obligations to patients when the plan terminates you and how you'll get reimbursed for continued visits, Mr. Sadowski said.
Eligibility information. Find out how difficult it is to determine whether a patient is still a member of the health plan, suggested Laurence D. Wellikson, FACP, a College Regent and principal at MedQuest Partners, a health care consulting firm in Irvine, Calif. "The risk of treating somebody who is not eligible is that you have no way of getting paid."
Utilization management. "What's the ratio of physicians to nurses at the health plan? Are they just nurses following protocols or are physicians involved?" Mr. Sadowski asked. "Certainly, if there are some utilization controls that the third party has in place that counter your medical judgment, that's not a contract you want to sign. You should have a solid understanding of those utilization protocols."
Often such protocols are negotiable if your group has its own in place and is not just refusing the plan's. Mr. Matricardi recommended that physician groups negotiate to run their own utilization management programs instead of relying on the health plan's--as long as it can handle the administrative burden and can be compensated for taking over that function.
"You have more control over it," Mr. Matricardi said. "The decision as to whether or not to authorize referrals to specialists or hospitals is best made at the local level where care is rendered."
'By reference' clauses. Often a contract will refer to a booklet or set of rules that are not in the contract itself, anything from utilization management procedures to rules stating how accessible you must be to patients or how much notice a plan must give to audit your charts. In some cases, new health plans will refer to documents that haven't even been written yet. If possible, try to see these items before you agree to them, Mr. Matthews said.
Unfortunately, plans will often refuse to let you see these manuals until you've signed, a paradox you may not be able to resolve unless your group is big enough or important enough to the plan. "If you're a solo physician, chances are very likely that you will not be afforded the opportunity to review anything other than the contract," Mr. Matthews said.
One option is to request a 10-day opt out clause that allows you to cancel the contract without penalties. If you negotiate such a clause, spend that time reviewing any information you could not see before.
Pharmacy risk. Some plans will want your group to take on pharmacy risk. For example, ProHealth Physicians, a 150-physician primary care group in Connecticut, has two health plans for which it recently started taking pharmaceutical risk. It must now keep pharmacy expenses below a certain target to avoid losing money.
"Most medical groups would rather not take pharmacy risk. If you asked me, we would rather not take it," said James W. Cox-Chapman, ACP-ASIM Member, an internist and the group's chief medical officer. "That's a risk we've been forced to take by the health plan if we wanted other parts of the package. We'll put forth our best effort. If we're unable to manage the risk despite our best effort, then we'll put it back on the table for next year's negotiation.
"If you have to take pharmacy risk, Dr. Cox-Chapman noted, monitor how much you're being charged for drugs. The pharmacy expenses are based on the health plan's costs for those medications, and the health plan will often get rebates for certain drugs from pharmaceutical companies, Dr. Cox-Chapman said. So make sure you're being debited the cost of the medication after the rebate, not simply the average wholesale price.
Foundation Medical Partners, a 50-physician multispecialty group in Nashua, N.H., faced exactly that problem. "We had a situation where what we were being quoted as our per-member-per-month price was based on the average wholesale price of medication, which didn't reflect the deal the insurance company got on that medication," said Stephanie Wolf-Rosenblum, ACP-ASIM Member, medical director for the group.
Hidden money. Dr. Wolf-Rosenblum found that in some cases, patients weren't choosing a primary care physician until they needed a referral to a specialist. Her group wasn't getting paid for those patients, yet the patients were paying premiums from the moment they joined the health plan.
"If the patient doesn't designate a primary care provider and then chooses us afterward, we want the per member, per month fee from the time they signed the plan," Dr. Wolf-Rosenblum said.
Patient education. Dr. Wolf-Rosenblum also found that health plans are not properly instructing patients to accept the referrals of their primary care physicians. As a result, many patients insist on getting referrals to specific specialists they may have heard about from friends.
However, Dr. Wolf-Rosenblum's group belongs to a PHO that negotiated rates for its physicians. Even if a patient's preferred specialist is on the same health plan, he might be part of a different network of physicians that negotiated its own rates. As a result, that specialist might be more expensive. Moreover, the specialist might order an MRI from a different hospital, which would prevent Dr. Wolf-Rosenblum's PHO from benefiting from the procedure.
That puts primary care physicians in her group in a bind: If they insist on referring to the in-network specialists, patient satisfaction may decline. If they comply with the patient's request, referral costs might go up. Either one could put the physicians in a weaker bargaining position when the contract comes up for renewal. Dr. Wolf-Rosenblum says doctors wouldn't be in this bind if insurers were more willing to explain the limitations to patients, rather than try to keep patients by advertising how flexible their plans are.
Changes. If the plan wants to amend the contract in any way, both parties ideally must sign for any changes to take effect, said Hirsch V. Gupta, MBA, CPA, president of Healthcare Financial Group, a Northbrook, Ill. consulting firm that also teaches courses on managed care issues and strategies. At the very least, he said, you should have 60 days to respond, and both parties should have the right to terminate the contract if they can't come to an agreement.
In addition, avoid provisions that would, for example, allow a plan to retroactively change its utilization management program and ask for money back that it has already paid you.
Finally, in the event of a dispute, you're better off with a provision that lets you go to court rather than arbitration, Mr. Gupta said. Though arbitration is faster and more informal, you can't get punitive damages. In addition, Mr. Gupta said, "invariably arbitrators are conscious of who is paying their bills."
Bryan Walpert is a freelance writer in Denver.
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