Negotiate a Better Managed Care Contract

The beginning of a new year is an excellent time to assess your need to strengthen your managed care contract agreements.

Healthcare billing personnel often begin to view the provider–carrier relationship as an adversarial, often dysfunctional partnership, and improving that relationship may be low on a long priority list of urgent action items.

However, the development of a mutually beneficial working relationship that fosters problem-solving, formalizes respective duties through clear, mutually beneficial contract terms, and encourages open, ongoing communication is critical to the success of every healthcare organization, especially those that are operating in areas where they can simply be dropped from their high-volume plans.

Unfortunately, healthcare providers consistently maintain their inability to negotiate more favorable terms involving reimbursement issues. Instead, managed care contracts are presented on a take-it-or-leave-it basis. Without a doubt, facing the insurance carrier’s size, bureaucracy, and routine can be daunting. Yet, many providers have, with persistence, won important concessions through the negotiation process. In his article “What You Should Know When You Negotiate a Managed Care Contract,” Attorney Neil Caesar, president of The Health Law Center (www.healthlawcenter.com), advises medical providers to negotiate from a position of strength by being on the forefront of quality care and services. His article on negotiation speaks plainly to what is at stake:

“If you cannot differentiate yourself by virtue of risk-taking, scope of services, better outcomes, enhanced patient satisfaction or some other means, then you will be relegated to the bottom of the deep, deep pool of fungible, good-quality caregivers who are told what they will be paid, what services are included in that payment and what administrative and reporting quotas they must satisfy. Conversely, careful negotiation can help you establish working relationships that will make you valuable to managed care companies by offering them enhanced services, prompt availability, a minimum of problems in the relationship and/or higher patient satisfaction. Clear, practical managed care contracts can help you build valuable partnerships with managed care companies.” (Source: Managed Care Magazine, January, 1998, www.managedcaremag.com/archives/9801/9801.legal.shtml)

Consider the following questions as you assess and attempt to renegotiate contract terms with your managed care partners:

1. Does the contract language mimic your most important state insurance legal protections? State mandates such as prompt payment laws, prior authorization protections and appeal/grievance rights have been passed to protect patients and providers from poor claim processing performance. However, many health plans, including ERISA-sponsored group health plans, are exempt from state insurance mandates. Therefore, it is important to negotiate such protections into the contract and insure across-the-board applicability of these protections.
2. Does the contract define medical necessity broadly and specify an agreed upon clinical authority? Insurance policies often define medical necessity broadly. However, once a claim is submitted, carriers utilize clinical criteria to narrow medical necessity to more narrow medical options. Because the clinical rationale for these decisions vary greatly from carrier to carrier, it is important that the contract reference an agreed upon clinical authority. Seek to negotiate a specific medical necessity definition and to specify that the clinical rationale your organization will accept as a clinical authority for quality healthcare. If possible, specifically reference your preferred source for clinical information such as InterQual, Milliman & Robertson, or specialty-specific guidelines for physicians, such as the American College of Cardiology Foundation and American Heart Association Diagnosis and Management of Chronic Heart Failure in Adults, or the American Psychiatric Association Guidelines for the treatment of patients with substance abuse disorders.
3. Does the contract restrict changes to the fee schedule to a specific time frame (ie,, yearly) and require prior notification of changes?
4. Does the contract recognize the provider’s right to appeal and specify standards for appeal review. For example, appeal protections should include timely decision and review by qualified reviewers. Further, if coding denied are problematic, seek to clarify that coding appeals will be reviewed by a certified coder upon request.
5. Does the contract protect the provider from timely filing and lack of prior authorization denials that can be traced back to patient error?