Managed Care Contracting

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Managed Care Contracting


​​​​​​​​​​Pediatricians entering into managed care contracts need to take certain steps before signing a contract: assessing their readiness and the readiness of the practice for managed care; assessing the strengths and weaknesses of the managed care plans they are considering, and selecting a professional advisor to assist in the contracting process.

Once these steps are completed, pediatricians should carefully review the terms and provisions of managed care contracts. Such contracts should clearly define the responsibilities of the pediatrician and the managed care organization. As in any contracting process, it is important to identify which provisions are negotiable and which are not. Pediatricians need to seek legal review from their own attorney before signing any contract. Working with their professional advisors, pediatricians should attempt to eliminate onerous provisions for the agreement and include language that protects their interests and the interests of their patients.

Depending on the market share of the health plan and the services offered by the pediatrician, the negotiability of the contract will vary. Well-established managed care plans that have a large market share typical use form contracts. Newer managed care plans that have little market share and want broad provider participation will be more willing to negotiate terms. Regardless of the specific entity with which the pediatrician is negotiating, know as much as possible about that managed care plan and being sensitive to the issues will enhance the pediatrician's opportunities for successful contract negotiations.

    This section of the contract will contain definitions of key terms. These should be reviewed carefully to ensure that they are not overly strict or vague.​​​​
    Medical Necessity Definition

    Pediatricians should be wary of working in a contract that gives the managed care plan final authority on certain matters, particularly questions of medical necessity. Such provisions should be reviewed carefully to ensure that they do not impede the pediatrician's ability to exercise his or her best professional judgment in making medical practice decisions. Medical necessity is a mechanism that gives legal authority to a health plan to limit the provision of covered benefits to an enrollee.​

    The AAP policy statement Model Contractual Language for Medical Necessity for Children​ provides guidance for payers to adopt more consistent medical necessity definitions that take into account the needs of children. Pediatricians should reference this policy as a guide when negotiating their contracts with health plans.

    All Products Clauses

    The following suggested contract provision is to make clear that the physician is not required to participate in "all products" offered by the health plan. Rather, the physician is only required to participate in the plan specified in the agreement. Under some arrangements, the parties may contract for multiple plans under the same agreement. Without the protection of this provision, the physician is at risk for participating in other products offered by the health plan that may not be beneficial to the physician's practice. Sample contractual text:

    Subject to the limitation​s identified herein, Physician agrees to provide or arrange for the provision of [Medically Necessary] Covered Services to all Plan Members on Physician's Patient Panel in accordance with the provisions of this Agreement and Health Plan's applicable rules, regulations, and policies (collectively referred to as "Program Requirements"), a copy of which has been provided to Physician prior to execution of this Agreement and is incorporated by reference herein. Nothing in this Agreement shall be construed to require a Physician to participate in any plan other that the one specified in this Agreement. The list of Covered Services in this Agreement may only be changed by mutual written agreement of the parties. ​

    Fee Schedule
    ​Fee Schedules are often negotiable, particularly if the pediatrician has a substantial practice or other attractive attributes that give the pediatrician leverage with the health plan. The health plan may try to include a provision stating that the health plan may amend the fee schedule at its sole discretion during the term of the Agreement. Pediatricians should resist such attempts and instead insist on including language that gives the pediatrician the right to approve changes in the fee schedule or to terminate the Agreement if the physician is not willing to accept the health plan changes. 

    It is also necessary to ensure that the health plan follows CPT conventions, recognizes CPT modifiers and does not bundle or downcode the claims in a way that leads to reduced reimbursement for multiple procedures performed during the same patient visit.

    The Fee Schedule should list the services that the pediatrician commonly performs and the related CPT codes and should include a reimbursement rate for each CPT code. In addition, the Fee Schedule should state when services under certain CPT codes are performed during the same patient visit, they will be considered separately for reimbursement purposes, assuming they are documented and Medically Necessary. The Fee Schedule may also list which procedures will not be considered separate under any circumstances. This approach should avoid future conflicts relating to bundling and downcoding.

    Sample contractual text: Physician shall be entitled to payments by Health Plan for the provision of [Medically Necessary] Covered Services to Plan Members. These payments shall be made in accordance with the Fee Schedule. The Fee Schedule may be amended during the term of this Agreement only by mutual agreement of the parties. The Fee Schedule shall be renegotiated each year on or before the anniversary of the effective Date of this Agreement ("the Anniversary Date"). If renegotiated rates for any year are agreed upon after the Anniversary Date, the new rates shall be applied retroactively to the Anniversary Date. Health Plan agrees to adhere to the most current Current Procedural Terminology (CPT), including the notes, guidelines, modifiers, and instructions published therein. Health Plan further agrees that any payment policies that deviate from or are not covered by CPT notes, guidelines, modifiers, or instructions shall be specified in the Fee Schedule. Health Plan agrees not to alter, rebundle, or otherwise edit payment codes unless the edit conforms with the Fee Schedule and CPT. Health Plan agrees that all claims submitted by Physician shall be presumed to be coded correctly unless Health Plan can provide evidence that a claim fails to comply with the Fee Schedule or CPT. If the Fee Schedule is not attached as an Exhibit, or in the event that the Exhibit is not specific enough to put Physician on notice as to Health Plan's payment policies with respect to any Covered Services, Health Plan shall be required to pay the greater of Physician's usual and customary rate or Physician's billed charge for that Covered Service when performed by Physician hereunder. 

    New Vaccines

    ​Pediatricians need to evaluate the immunization benefit and determine how it has been priced. It is strongly recommended that pediatricians negotiate a fee-for-service carve out for immunization. Some managed care organiza​tions pay for immunizations on a separate fee schedule. If immunizations are not covered under an all-inclusive or separate capitation, levels of reimbursement should be identified. Reimbursement should be at least at the level of practice costs, (i.e., the cost of the vaccine, the cost of associated supplies, and the administrative cost). In situations where immunizations are included in the capitated rate and the price of the vaccine increases, or a new vaccine is introduced and recommended during a contract period, an additional amount should be paid by the health plan to ​cover this increase during the contract period.

    Sample contractual text: Physician shall be reimbursed by Health Plan in an amount equal to the sum of the cost of the immunizations and injectables (eg. antibiotics, hormones, etc.) utilized in the provision of Covered Services to Plan members, including the cost of the drugs and supplies associated with such injections, plus a fee of [$______] for each immunization or injection administered by Physician.

    Note: Physicians should be wary of arrangements pursuant to which the immunization reimbursement amount is based on an average wholesale price as physicians may not be able to obtain such favorable pricing from their suppliers. The language in this provision also states that the physician will receive a separate fee for administration of the immunization or injection. (AAP Pediatricians Guide to Managed Care, page 190)

    Verification of Eligibility
    ​​It is important to clarify how eligibility of health plan coverage will be verified in a timely manner. This should include provisions for Health Plan's responsibility for payment when it is the physician has taken the requisite steps to verify eligibility and the Health plan is in error or when services are provided in an emergency situation before eligibility can be verified.

    Sample contractual text:Except in the event that Emergency Services are required or in the event that the Plan Member presents an unexpired identification card evidencing the Plan Member's eligibility for coverage by Health Plan, Physician agrees, as a condition to receiving payment from Health Plan, to contact Health Plan by telephone, facsimile, or other agreed upon form of communication to verify an individual's eligibility as a Plan Member before providing any Covered Service to treat individual or before referring that Plan Member to another provider for the provision of Covered Services. Health Plan will be bound by its confirmation of eligibility as evidenced by the Health Plan identification card or otherwise given in the manner contemplated by this Agreement, unless Physician has actual knowledge that the Plan Member is not eligible for Covered Services. In the event that a Plan Member loses eligibility during a course of treatment, Health Plan shall be required to pay Physician for all Covered Services to that Plan Member until the date on which Physician has actual knowledge that the Plan Member has lost eligibility under the Plan. In the event of an emergency, Physician shall attempt to verify the individual's eligibility as a Plan Member as soon as reasonably practicable. 

    Silent PPOs
    ​A silent PPO is used to describe when physician fees are discounted by a plan that the physician did not contract. Carriers with multiple plans or third party administrators (TPA) may apply the agreed upon discount across all health plans, or the carrier may rent or sell its provider network to other carriers or TPAs. Silent PPOs are considered detrimental to physicians because there is no formal agreement with the other carrier and there are no provisions for steering members to the participating physician as there are under managed care agreements. Also, the physician is not given the opportunity to determine whether to participate in a discounted fee arrangement with the other carrier.

    It is important to carefully review carrier contracts to ensure there are no provisions that allow the carrier to transfer or assign benefits to another health plan. Review explanation of benefits (EOB) to identify whether unapproved discounts have been taken by non-participating health plans.

​​The AAP has provided additional resources for your review:

Questions Pediatricians Should Ask Before Signing a Managed Care Contract
It is important you read and understand your contract before signing it. Consider having your legal counsel review it. These questions should identify areas in the contract to address during negotiations with the carrier.

Checklist to Assess Carrier Contracts
To assist in your review, use a checklist to compare the contract provisions to the items to consider. This review will also identify items to renegotiate at future contract renewals

Waivers- The Basics for Pediatric Offices
Waivers should be considered as a financial policy component for pediatric practices. A waiver is a statement that the responsible party (patient/parent/guardian) signs accepting financial responsibility for a requested medical service which is or may not be covered by health insurance. To assist pediatric practices, the AAP Department of Practice has gathered information on waivers (which may also be referred to as advance beneficiary notices or ABN).​

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