Payor Unilateralism in Managed Care Agreements: Physicians and Other Health Care Providers Beware
In recent years, some managed care companies have become very aggressive in their attempts to reduce payments to health care providers. Their strategies have included:
(1) attempting to achieve de-facto contractual modifications unilaterally through changes in policies and procedures, and
(2) performing claims edits that reduce pay out on provider claims.
Certain managed care companies may attempt to bind the provider to open ended clauses regarding the managed care companies’ policies and procedures, manuals, or other protocols, in an effort to achieve a unilateral amendment to the terms of the contract. Some managed care companies may also attempt to implement reductions to health care providers’ reimbursements arguing that the reduction is based on a policy change from a governmental entity, such as the Center for Medicare and Medicaid Services (CMS). For example, some managed care companies may attempt to reduce reimbursements to providers by attempting to incorporate Medicare Payment Guidelines into commercial health plans. They may also seek to use doctors’ codes to reduce hospitals’ bills when a patient receives services, for example, in an emergency room.
Some managed care companies may also attempt to manipulate claims edits, specifically through non-industry standard proprietary claims edits, which reflect managed care companies’ internal editing policies. They may also use third party claim review companies to attempt to reduce reimbursements to providers for certain services. For example, some managed care companies may argue that the payment for a service is included in the allowance for another service or procedure. Depending on how a health care provider has structured its contractual reimbursements, the provider may argue that the provider agreement requires that covered services be reimbursed per each line item listed on the health care provider’s claims.
The above behaviors by managed care companies may be legally challenged under various legal theories, but how can health care providers attempt to counter these tactics by managed care companies prior to litigation? Health care providers should require that the managed care company supply to the provider all policies and procedures and manuals before the execution of the provider agreement. The health care provider should tailor their provider agreement to only require compliance with those essential and applicable policies and procedures as specified in the agreement. Provider agreements should also clearly state that no change to any policies and procedures, manuals, or CMS, industry, or proprietary standards, may apply to any compensation payment formula or rate, or other terms, in the provider agreement. Further, contract language should provide that any change to the policies and procedures requires notice to the health care provider and the health care provider’s approval prior to implementation. The provider agreement should also contain language providing that the health care provider may terminate the provider agreement if it does not agree with the change.
To prevent managed care companies from using claims edits in this manner and enforce their contracted payment formulas and rates, health care providers should add language to their provider agreements which: (1) prohibits application of “proprietary” or “payor specific” claims edits; (2) states that the managed care company cannot apply coding changes due to payment policies from Medicare, Medicaid, or other industry or proprietary coding standards, to reduce, in any way, payment under the provider agreement; and (3) specifically identifies permitted claims edits under the agreement.
Health care providers should engage qualified health care counsel to carefully review and negotiate their provider agreements. Adopting a three-part approach to managed care contracting — (i) skilled negotiation; (ii) monitoring and investigation of reimbursement issues; and (iii) enforcement against inappropriate payment reduction — is essential in an increasingly aggressive managed care environment.
By Maria D. Garcia
Zumpano, Patricios & Winker
312 Minorca Ave.
Coral Gables, FL 33134
South Florida Legal Guide 2012 Edition