Surviving the Minefield of Managed Care Contracting
By Clifford Stromberg, Rosemary Ratcliff and Julie Mathews Schuetze of the Law Firm of Hogan & Hartson, Washington, D.C.
Edited by Judy E. Hall, Ph.D.
Originally published in January 1997
Return to Developing Your Professional Practice
Almost every psychologist has faced the decision of whether to sign a contract to participate in a managed care plan. Although particular plans and the industry as a whole continue to evolve, managed care is here to stay. For example, a recent KPMG analysis found that during just one year -- 1995 -- pure HMOs increased their market share nationally from 25% to 33%. The PPO segment of the market increased from 22% to 25%. "Point of service" plans changed from I 8% to 16% and conventional indemnity insurance declined from 31% to 26%. Little truly "unmanaged care" remains. This is also true of the mental health component of care. A recent Institute of Medicine report concluded that at the end of 1995, "the behavioral health of nearly 142 million people was managed, with 124 million in specialty managed behavioral health programs and [l 8] million with benefits managed within an HMO." Institute of Medicine, "Managing Managed Care: Quality Improvement in Health" (1996). State Medicaid recipients and federal Medicare beneficiaries are rapidly converting to managed care options as well.
Unless a psychologist is in the now-rare position of having a full practice comprised solely of self-pay patients, or unless the psychologist is willing to compete only for an ever-smaller segment of the market, it will be necessary to be a participating provider in some managed care organizations ("MCOs"). But which ones? Learning to read a plan's proposed contract critically, and to negotiate with a managed care organization over the key terms, are becoming essential skills for the protection of a psychologist's livelihood.
Although a psychologist usually will not want to forego a contract that might attract patients, and may accept some undesirable contract terms in order to participate with an MCO who has a large number of covered lives in the local area, a careful balancing of the risks and rewards of each contract is required. Some contracts simply are not worth signing. The most important step is to read the proposed contract thoroughly and critically. It will be far easier to negotiate changes to a contract before signing, than to work out an amendment later. MCOs' provider relations staff almost always tell providers initially: "The contract is nonnegotiable." This is often not so. While few psychologists feel they have much negotiating power, an MCO probably will pay attention if, for example, you point out a conflict between a contract term and your legal or ethical duties as a psychologist, or if the MCO needs to expand its mental health provider panel to meet accreditation, licensure, or local service standards.
Contrary to popular myth, MCOs' contracts are not merely "boilerplate." They vary significantly. Nevertheless, this Update provides an overview of typically occurring features to look for in a managed care contract, and offers suggestions on how to begin navigating the minefield of contract provisions. As always, advice from a qualified lawyer may be desirable.
ANATOMY OF A MANAGED CARE CONTRACT
Who Are The Parties?
The first question, naturally, is to determine who are the parties to the proposed managed care contract. In many cases, a psychologist will sign a contract directly with the MCO. Increasingly, however, the contractual arrangement is more complicated. A group, IPA, network manager, or physician-hospital organization (PHO) may sign the MCO's contract on behalf of the psychologist, in which case the psychologist may be asked to sign a "participating provider" agreement. This contract between the psychologist and an "intermediary organization" will usually obligate the psychologist to abide by any contract approved by the organization. Recognizing who the contracting parties are will help identify issues such as whose rules govern, how the psychologist will be paid and by whom, who can change the rules, when the psychologist can terminate participation, and who else can terminate the psychologist's participation.
For example, a psychologist may have signed a contract with an IPA stating "Provider agrees to participate in managed care contracts entered into on his or her behalf by the IPA, and agrees to comply with the terms of alt such contracts and with payor rules.” Under such a contract, the psychologist has agreed in advance to be bound by MCO contracts and the particular payor's rules, but has no assurance that he or she will be notified of the terms of such contracts or rules when the contract takes effect or as they change. This is perilous if the psychologist continues to provide services -- only to be advised long after that the services are no longer covered. At a minimum, you should add to the contract "terms of such contracts ... of which Provider has been notified in writing." This is fair to both sides.
What Kind of an MCO Is It?
Typical MCOs include health maintenance organizations (HMOs) and preferred provider organizations (PPOs). Indemnity insurance plans now frequently include some managed care components. A psychologist who agrees to participate in an MCO's health plan usually is expected to accept as a patient any member of the MCO who lives (or, sometimes, who works) in the area and is appropriate for treatment. HMOs and indemnity insurance plans are licensed by the states in which they operate. States maintain basic information about licensed HMOs and insurance companies and require that they comply with minimum standards, such as fair billing practices and mandated health benefit requirements. Regulation of PPOs varies by state: state oversight is detailed in some states and quite loose in others. Knowing the type of MCO you are dealing with can be important to assessing your legal rights and obligations under state or federal law.
Health Maintenance Organizations. The distinguishing feature of HMOs is that they undertake a global obligation to provide whatever care an enrollee needs in return for a fixed per-member-per-month premium. This gives them a powerful incentive to control costs of care. Accordingly, an HMO typically requires that patients select a primary care physician ("PCP") from the HMO's network (or "panel") and obtain referrals from their chosen PCP before obtaining services from specialists in the HMO's network. There are several different types of HMOs, including "staff' models such as Kaiser (which historically has delivered care almost exclusively through employed health professionals) and network or IPA-model HMOs, that use looser constellations of participating providers. Typically, referrals are required for mental health services, and HMOs refuse to pay for services rendered to a member by a provider who is not a contracting or "participating" provider. Most HMOs negotiate discounted payment rates with participating providers.
Another distinguishing feature of HMOs is that they are required by accrediting bodies and state licensing agencies to perform an array of functions such as credential checks of their providers, and systematic review of high-risk or high-cost services and other quality of care indicators, in an effort to track and improve their members' health and control costs. (As psychologists well know, at times these two goals conflict.) Many HMOs review providers' record keeping practices and impose utilization review, prior approval, and medical necessity requirements. These managed care activities often result in more administrative requirements for participating providers, and, as a consequence, may increase a psychologist's cost of providing care under the plans. This should be considered when reviewing the proposed payment rate an HM0 is offering.
HMOs usually require their members to pay a copayment" upon each visit to a participating provider. Copayments such as $10 are an alternative to the traditional indemnity insurance requirement that members pay coinsurance, which is usually a percentage of the provider's charges, such as 20%. As a condition of participation in an HMO, psychologists and other providers usually are prohibited from charging patients more than the copayment or the applicable coinsurance (if any).
More and more HMOs and indemnity insurers are offering a point-of-service ("POS") option to members, which have proven very popular with consumers. Many view it as a combination of the best features of HMOs and indemnity insurance by allowing the enrollee to choose--each time care is needed--whether to use a participating provider at low or no cost, or to pay somewhat more to use any other provider of covered services. For example, members who usually pay a$5 copayment for each visit to a participating provider, may be required to pay 30% coinsurance when receiving care from a non-participating (or "out-of-network") provider. Depending upon the level of coverage offered, and the number of patients who have the POS option, the psychologist may find that continuing as a non-participating provider would be preferable.
HMOs usually have a provider relations department or provider contracting department, or both. They can be the best source of assistance and information if a provider has questions or a dispute with the HMO about issues such as contract terms, billing and payment, covered services and appeals, or member eligibility.
Preferred Provider Organizations. PPOs operate like a combination of an HMO and a traditional insurance company. A PPO member may or may not be assigned a PCP who has general responsibility for the member's health care. Usually, referrals for specialty care are not required. The plan is structured so that members have financial incentives, such as lower copayments, coinsurance or deductibles, to obtain their care from participating providers. When a benefit plan provides no coverage for care provided by non-participating providers, it may be called an exclusive provider organization ("EPO"). EPOs differ from HMOs in that HMOs usually require referrals or other coordination between a member's PCP and specialists, and EPOs do not conduct as intensive utilization review or conduct quality activities. While some HMO providers assume financial risk (discussed in greater detail, below), PPO and EPO providers almost always are paid on a discounted fee-for-service basis, sometimes subject to a risk-based "withhold" pool.
PPOs are relative newcomers to the health insurance industry and are significantly regulated only in some states, although the trend is toward greater regulation. If they are specifically regulated, state PPO laws often impose requirements on PPOs that are similar to HMO requirements. For example, if HMOs are required to have an "appeal process" for a provider who is not accepted for the panel, PPOs may be required to do so as well. In an increasing number of states, financial incentives to providers from PPOs are specifically regulated.
ERISA Plans. Many people now receive their health care coverage through an entity that is neither an insurance company, HMO, nor PPO. They receive their coverage from their employer, who pays a majority (or the entire cost) of care without a traditional "insurance" arrangement. Such plans are called "self-funded," "selfinsured," or "ERISA" plans (after the Employee Retirement Income Security Act, the federal law that regulates such plans). Generally, only larger employers can afford to self-finance such coverage. Self funded plans may set up a managed care arrangement that operates somewhat like an HMO -- with a closed network of contracted providers, sometimes requiring PCP referrals for specialty services. Often such arrangements will involve a network or group that contracts directly with the employer to provide services to employees
Such self-funded plans are regulated primarily by ERISA, which was established by Congress to create a uniform federal framework for benefit plans. Accordingly, these self-funded arrangements typically are not subject to state regulation, such as mandated benefits, freedom of choice laws, or beneficiary appeals. (This exemption from state laws, which is dictated by the federal law, is called "ERISA preemption.") Instead, ERISA plans must comply with federal ERISA rules on fair procedures governing issues such as benefit decisions, claims payment procedures, member notification and appeals
Many ERISA plans hire a third party administrator ("TPA") to "administer" the care rendered to members and the payment arrangements with providers. TPAs often conduct utilization review and may deny claims based on medical necessity. Often, therefore, decisions on coverage will be made by the TPA, rather than by the ERISA plan itself
Networks and Managed Behavioral Healthcare Organizations. Many psychologists may find that they are not contracting directly with an MCO, but instead become a participating provider through an intermediary organization. Sometimes this intermediary organization is the group the psychologist practices with or has some affiliation with; in other cases, it will be a network of providers, comprised of either individuals or groups or both, that contracts with several MCOs to provide mental health services. Such networks, when they become fairly large and sophisticated, are known as Managed Behavioral Healthcare Organizations ("MBHOs"). MBHOs often act like a single-service HMO -- a managed care organization that offers only one type of service: mental health services. (These arrangements are often called carve outs" because they carve out responsibility for managing mental health services from the general responsibility of the health plan to coordinate medical care needs.) Although references to MCOs in this Update are intended to include MBHOs, contracting with an MBHO raises special considerations for psychologists.
A psychologist must be aware of whether and when the MBHO contracts with other MCOs for the psychologist's services. MBHO’s typically contract with several MCOs to provide mental health services to all or a defined portion of the MCO's patients. This means that the contractual relationship between the psychologist and the MBHO must address how an MCO's rules and benefits interface with the MBHO's rules. The psychologist may be agreeing to participate in and abide by the rules of any MCO that contracts with the MBHO, or not to grant lower fees to any other plan, or not to serve a competing plan in a given area, or not to "denigrate" the quality of care provided by a plan. The psychologist must be sure that the contract explains how the psychologist will be notified of the contracting MCOs' identity and rules, as well as when the MBHO's rules supersede the MCO's rules. For example, if the MCO has pre-certification rules for inpatient mental health admissions that conflict with the MBHO's rules -- concerning whom to call, how many hours ahead, or what diagnoses will be acceptable bases for a covered admission -- can the psychologist rely on the MBHO's standard procedures, or must the psychologist refer to the individual MCO's provider manual`? Failing to clarify this at the outset may result in approval of an admission from the MBHO--but ultimate denial of the claim by the MCO for failure to comply with the MCO's procedures.
An additional problem is that some intermediaries extract discounts from their providers and then make those discounts available to numerous MCOs. Consider the following example: a psychologist contracts with HMO to provide mental health services at the psychologist's standard rate of $60 per hour. The psychologist then is solicited by an MBHO which says it contracts with MCOs and can provide the psychologist with a substantial patient base if the psychologist agrees to accept $35 per hour from all of MB HO's clients. The psychologist joins MBHO and later starts receiving payments from 1-1M0 at $35 per hour. Unbeknownst to the psychologist. MBHO has contracted with HMO and the psychologist has unwittingly agreed to accept $25 less per hour from HMO.
To avoid such secondary discounting, the psychologist should require the network/MBHO to provide a list of MCOs before the psychologist signs the contract and the names of new MCOs as soon as the payors contract with the network/MBHO. An alternative may be to ask for a contract term allowing the psychologist to refuse to participate in individual MCOs, at the psychologist's option. However, the psychologist must be sure that such refusal will not then prevent the psychologist from contracting with or accepting payment from the MCO directly. (Typical sections of the contract to check are the "Non-Competition" section, the "Non-Solicitation" section, the "Conflicts of interest" section, and the "Payment Terms" section.)
BECOMING A PARTICIPATING PROVIDER
Selection and Credentialing.
An MCO's freedom to accept and reject providers for its panel is greater than most providers think (so long as the MCO meets service obligations, satisfies accreditation requirements and does not discriminate). While some states have enacted "any willing provider" laws, these laws usually merely require the MCO to contract with providers who are willing to meet the plans terms -- terms which many providers may find impractical. But each state law is different, so some protections may be available.
Most MCOs now require a detailed review of professional credentials and other background information prior to accepting a new participating provider. Although the focus of credential verification (or "credentialing") has been on physicians, MCOs are increasingly conducting comprehensive credentialing of all types of providers, including psychologists. Areas reviewed during credentialing typically include licensure, relevant education and training, professional work experience, areas of specialization, certifications, hospital privileges as well as information about the provider that may affect the provider's ability to deliver care, such as past substance abuse or licensure actions. In addition, most health plans reverify provider credentials ("recredentialing") every two years; the provider's contract may require the provider to comply with recredentialing processes.
Courts can hold MCOs liable for the actions of their participating providers. As a result, a cautious MCO will review a provider's history and check credentials prior to contracting and regularly thereafter. The result, however, is often a fairly burdensome disclosure process for a psychologist. For more on the legality and scope of provider credentialing, see C. Stromberg and R. Ratcliff, A Legal Update on Provider Credentialing, 7 THE PSYCHOLOGIST'S LEGAL UPDATE, June 1995.
The primary accrediting organization for MCOs, the National Committee for Quality Assurance ("NCQA"), has issued accreditation standards for MBHOs, and has specific guidelines on how MBHOs should conduct credentialing of their mental health providers, including psychologists. See NCQA Draft Accreditation Standards for Managed Behavioral Healthcare Organizations, April l, 1996. The NCQA standards include guidelines for what credentialing in formation mental health providers will be required to provide to an MBHO.
The Application
A psychologist seeking participation in an MCO, including an MBHO, typically must complete a detailed application. The application usually requests the psychologist to provide information such as education, training, licensure, and malpractice history. NCQA requires MBHO applications to include a statement by the applicant regarding reasons for any inability to perform "essential functions of the position," lack of present illegal drug use, history of loss of license, history of disciplinary actions, and an attestation regarding the correctness of the application. See NCQA MBHO Standard CR 4.
Whether an MCO would exclude a psychologist based on, for example, a prior disciplinary action, is not always clear. MCOs typically have their own policies and procedures for determining provider eligibility. However, if a psychologist knowingly provides false or misleading information in the application, an MCO can be expected to terminate the psychologist's participation, could conceivably bring an action against the psychologist for fraud, and could use this against a psychologist in a liability action.
Disputes have arisen regarding credentialing inquiries into providers' prior use of alcohol or drugs. Some take the position that such inquiries are a violation of the Americans with Disabilities Act ("ADA"), on the ground that drug dependence is a "disability" that should not penalize a person in job-related decisions. (Of course, current substance abuse could be a valid criterion for non-selection). If a psychologist is asked to provide information about current or past use of alcohol or drugs and believes his or her answers may jeopardize participation with the MCO, the psychologist should consider seeking legal advice regarding whether the inquiry complies with the ADA and how to respond. Of course making an issue of drug use may also trigger further inquiries on related subjects, or result in non-selection.
Credentialing Information
After receiving a psychologist's application, the MCO will seek verification of certain information. NCQA requires that MBHOs verify at least the following with appropriate primary sources: current, valid, active licensure; clinical privileges in good standing at the institution designated as the primary admitting facility; a valid DEA or CDS certificate (if the provider prescribes medications); education; board certification (if appropriate); work history; current adequate malpractice insurance; and professional liability claims history, including claims resulting in settlements. NCQA MBHO Standard CR 3. MCOs and MBHOs may check with certain recognized monitoring organizations, such as the state licensing board or the National Practitioner Data Bank, and may check for prior sanctions by Medicare or Medicaid.
NCQA also requires MBHOs to conduct an initial visit to the office of applicants to review such issues as the physical accessibility and adequacy of the facility in which the care is provided (including private offices) and the adequacy of clinical record keeping practices. See NCQA MBHO Standard 6.
Although provider participation decisions usually are not based on only credentialing information, a provider will probably be excluded if the applicable information cannot be verified. Of course, if the lack of verification is caused by an uncooperative primary source, such as a licensing agency or graduate school that refuses to provide the necessary information, the MCO may request the psychologist's assistance, and should not exclude the psychologist for this reason alone. An MCO also may exclude a psychologist based on a history of liability claims or a problematic work history. Practice requirements also vary. Psychologists may ask an MCO for their credentialing criteria; some will provide them while others are reluctant to do so. Often, they will decline, believing that such standards are part of their proprietary business information.
Recredentialing
Although not all MCOs require current psychologists to be recredentialed, recredentialing probably soon will become routine for all MCOs. Typically, recredentialing occurs every two years and includes reverification of the information obtained during the credentialing process. The office visit may be more rigorous, as an MCO may want to review the record keeping for its members. In addition, MCOs increasingly are tracking information for each provider, such as data on member complaints and satisfaction, compliance with the MCO's quality improvement activities, utilization management experience, and clinical record keeping practices. MCOs frequently review such information at the time of recredentialing, and may use it to determine whether a psychologist can continue to participate in the MCO, or to negotiate a different payment arrangement. If an MCO finds some deficiency, it may condition continued participation on the provider's agreement to obtain continuing education, participate in mentoring or supervision, or comply with a plan for improvement. Whether the MCO legally can set such conditions will depend upon the legal terms of the contract between the provider and the MCO, but usually contract non-renewal is a permitted sanction for failure to comply. (Many MCO contracts allow the MCO to terminate "without cause.") Some state laws offer providers some protection by prohibiting arbitrary termination without some minimal "due process," such as notice of the reasons and an opportunity to respond.
KEY CONTRACT PROVISIONS
Scope of Services and Coverage
The contract usually states that the psychologist agrees to render "covered services" to MCO members or enrollees (i.e., patients). The term "covered services" typically means those health care services that are medically necessary and that patients are eligible to receive by virtue of their employer's contract with the MCO. When reviewing this description of covered services, the psychologist should ensure that the contract specifies the scope of covered services the psychologist is expected to provide, and that he or she is licensed or certified to render the services described in the contract. Otherwise, the psychologist runs the risk of agreeing to perform services that are not within the scope of the psychologist's license or abilities. For example, if the contract requires coverage of hospital services, the psychologist either must hold hospital privileges or arrange for services by another panel provider. One solution is to ask that the services be limited to the psychologist's area of specialty, or to "mental health services within the scope of psychologist 's license, training and current practice."
The contract should specify the hours of coverage that the psychologist must be available to render covered services, and the geographic location in which the psychologist promises to provide services. Psychologists particularly should be aware of provisions requiring immediate, constant, or 24-hour access to all services, as many psychologists may not be able to satisfy these standards. Group practices are typically better equipped to provide 24-hour coverage; however, an individual practitioner may be able to comply through an agreement with existing MCO providers by developing a rotating on-call schedule, or by maintaining an answering service and/or beeper system that allows patients to contact the psychologist at any time.
Representations
The psychologist and the MCO generally give representations" and "warranties" (which really just
mean promises) to each other in the managed care contract. A party attests to the truth of specific facts concerning the party and the party's business. It is essential that the psychologist understand the content of what he or she is representing to the MCO in the contract. For example, a managed care contract may require a psychologist to attest that he or she has a specific certification, such as a license to practice psychology or a sub-specialty. Do not attest to any untrue or inaccurate facts. Making an inaccurate representation typically constitutes a breach of the contract, which gives the MCO the right to deny payment to the psychologist -even for covered services provided to the MCO's members -- and to sue the psychologist for breach, fraud or other claims.
Typically, the contract will require both parties to represent that they are in compliance with all laws and have all permits and licenses necessary to perform the services required by the contract. Psychologists should ensure that the contract covers only the state in which the psychologist is licensed, and must avoid inadvertently agreeing to provide services in a neighboring state in which the psychologist does not hold a license. Usually, if a psychologist only renders services in his or her state of licensure, no licensure issue will arise from treating residents of another state who visit the psychologist's office.
Psychologists also often are asked to represent that they hold all required insurance and are not currently a party to any licensure proceedings or other similar action (e.g., state board or criminal investigation). You should consider whether the managed care contract requires you to represent that you have disclosed any legal action that is pending or "threatened" against you. Such terms are vague, and might require disclosure of any ongoing disputes with current or past patients. If the contract contains such a general representation, the psychologist may want to insert language that clarifies that the provision only applies to written complaints or to complaints filed in court or with a licensing board.
A psychologist often must represent that all information provided in the psychologist's application to become an MCO participating provider is true and correct. To avoid minor inaccuracies or errors creating a legal breach or defect, the contract should just say that all "material" information in the application (e.g., that the psychologist has a current license to practice psychology) is correct. If he/she is off by one year in the stated date of completing an internship or working in a prior job, that may not be "material."
A managed care contract may require the psychologist to update any information provided in the application if that information changes. Such a provision results in an ongoing obligation of the psychologist to notify the MCO, which may be difficult or burdensome, depending upon what information the psychologist has provided in the application. Usually, the updating should only apply to important information that changes, such as practice location or licensure status.
Assignment
Most managed care contracts allow the MCO to assign (i.e., transfer) the contract to another party (often an "affiliate" of the MCO). Conversely, managed care contracts generally do not permit the psychologist to assign the contract to another professional. This is not surprising, since the contract is for the services of the particular psychologist, and that individual had to meet important criteria, such as in the credentialing process, to become a participating provider. Nevertheless, it is important to be aware of assignment provisions, especially if the psychologist contemplates forming a group, or selling his or her practice, with the managed care contract as an asset of the practice. In this case, transfer of the contract might not be completely impossible, but extra time will be needed to negotiate with the MCO the transfer of the contract and the new provider or group members must be credentialed.
For managed care contracts that allow the MCO to assign the contract, the contract should at minimum require notice to the psychologist when such assignment occurs. A provision requiring notice may help the psychologist avoid belatedly finding out that he or she is contractually bound to a new payor that he/she may not like or with which the psychologist specifically decided not to contract. Additionally, if the contract allows an MCO to assign to an affiliate, make sure the contract describes who that affiliate is. A psychologist may not know two MCOs are even "affiliated" until the contract with one is assigned to the other. (In any event, most managed care contracts contain a general termination provision that would allow the psychologist to terminate the contract should the MCO assign the contract to an entity to which the psychologist objects.)
Disputes
To avoid the high costs of litigating contract disputes in court, many MCOs include a requirement that disputes be submitted to arbitration or mediation. Arbitration or mediation provisions may state that the successful party in any such proceeding is responsible for all of the proceeding's costs, or that each party will bear its own costs. These differ in effect because an individual psychologist may understandably be deterred from asserting even a valid claim if he/she must risk playing "double or nothing" on costs.
Most psychologists find arbitration or mediation acceptable: such proceedings are less formal, less expensive, and come to a resolution more quickly than court proceedings. Additionally, the parties are less restricted in what evidence can be presented or who may testify on a party's behalf, and arbitrators can fashion flexible results.
However, the psychologist should be aware that an arbitration or mediation proceeding does not afford all of the rights or protections that the parties would have in court. For example, arbitrators usually are lawyers or other professionals, while a court action could be decided by a jury, which may be more favorable to a psychologist than to a big MCO. Further, because an arbitrator is not required to follow legal precedent (i.e., established case law), the arbitrator can decide a dispute using his or her own discretion, and often has an inclination to "divide the baby."
Thus, a psychologist should carefully consider the forum which he or she would prefer for any disputes under the managed care contract, before accepting a non-court alternative such as arbitration. Generally, as compared with costly litigation, arbitration does favor the "little guy."
Length of Contract and Renewal
Managed care contracts usually are for a term of one or two years and provide for automatic renewal unless one party notifies the other of a decision not to renew the contract. Psychologists should be aware of evergreen" contracts that give the psychologist the right to terminate the contract only upon a certain number of days notice prior to the end of a term. An example of an evergreen provision is: "This contract renews for another year unless Provider terminates in writing thirty days before the renewal date.” If the psychologist misses the notice cut-off date, then the psychologist is locked into the contract for another year (unless the contract can be terminated for some other reason -- see Section VIII, below for more on termination). Given how many contracts there are and the busy schedules of psychologists, it is very easy to miss the dates. Also, be aware that the MCO may let the contract automatically renew year after year because it wants a broad network. A psychologist may want to renegotiate payment or other contract terms in future years, and may want to have his or her right to renegotiate spelled out in the contract. Although there is always a balance between flexibility and security, the psychologist may be better served by a contract that can be terminated by either side at any time upon reasonable (e.g., 60 day) notice.
Indemnification
Indemnification provisions in a managed care contract often are long-winded and appear confusing. In essence, one party to the contract (A) promises to compensate the other party (B) for any damage, loss, or injury caused by A's or A's employee's actions. Such compensation usually includes damages granted in a verdict plus court costs and attorneys' fees.
The psychologist should keep in mind two important points concerning indemnification provisions in
managed care contracts. First, the psychologist should agree to indemnify the MCO only for the psychologist's or his/her employees' own acts or omissions in performance of the Agreement and not for any acts or omissions of others (including patients) beyond the psychologist's control. This is particularly important when the psychologist is a member of a group. Second, indemnification provisions should be two-way: the contract should state that the MCO indemnifies the psychologist for damage, loss, or inquiry caused by acts or omissions of the MCO, its directors, officers, employees or agents. Avoid indemnities that protect you only if the act was "solely" that of the MCO, since proving that could be very hard.
Promising Too Much
As an overall matter, the psychologist should be aware of contract terms that set an unreasonably high standard with which the psychologist must comply. Words such as "assure," "guarantee," and "ensure," fall into this high standard category. Better language includes promises to "take reasonable steps" or "use best efforts."
For example, some managed care contracts require a psychologist to commit to providing "all appropriate care" or to assuring "access to all needed care." The psychologist should try to limit such commitment to those needed services that he or she actually provides on a regular basis. After all, one psychologist cannot "ensure" patients' access to a whole sequence of care, especially when it goes far beyond what that psychologist typically provides. For example, how can a psychologist "ensure" that a patient will have access to all care in the hospital, including treatment for a heart attack? Such a provision becomes much more acceptable if it says that the psychologist agrees to use his or her best efforts to ensure access to appropriate treatment facilities or other mental health specialists.
Payment
Getting paid by an MCO for services to a member usually is not as simple as providing the services and then submitting a bill to the MCO. The psychologist must have followed all the requisite steps prior to rendering the service and upon submitting the bill in order to collect payment from the MCO. Consequently, understanding the approval and billing steps and procedures is essential prior to signing the contract.
Verification of Beneficiary/Enrollee Eligibility. Psychologists agree in managed care contracts to provide covered services to a specific group of individuals, namely members ("beneficiaries" or "enrollees"). If a psychologist renders services to a member of the MCO who is not eligible to receive such services, the MCO can be expected to refuse to pay -- even if the patient told the psychologist the services would be covered. Therefore, it is important for a managed care contract to include a commitment by the MCO to verify promptly whether a patient is eligible to receive services on the date of service, and to tell the psychologist.
A typical contract provision includes an agreement by the MCO to maintain a hotline so that the psychologist may determine over the telephone whether a patient is eligible to receive services. Alternatively, the contract may state that the psychologist may rely on a patient's membership card. In any case, the contract clearly should identify how a psychologist may verify a patient's eligibility and the duty, if any; the psychologist has to verify such eligibility before any services are rendered. If the contract does not include this information, the psychologist should be sure to ask the MCO for a written description, such as in a letter, of the MCO's policies on how providers can confirm members' eligibility.
Sometimes, a psychologist is asked by a patient, "Will this be covered?" and an untutored and empathetic psychologist may be drawn into giving reassurance ("don't worry"). This should be studiously avoided. Remember that the plan, not the provider, makes the ultimate coverage decisions
"Medical Necessity," Precertification and Ongoing Utilization Review. Almost all MCOs cover only "medically necessary" services. (In contracting with psychologists, some expand this to include "medically and psychologically necessary.") There has been extensive litigation over what constitutes "medically necessary" ' and in the wake of this, most MCOs qualify the term to mean care deemed necessary by the professional and deemed by the MCO to be appropriate, cost-effective and consistent with its quality assurance and utilization review plan. In effect, this gives the MCO broad discretion. In practical terms, the psychologist will look to the MCO's precertification and ongoing UR/QA("concurrent review") decisions for guidance on medical or psychological necessity decisions. More and more MCOs are making available upon request their internal medical policies that describe their medical necessity requirements for certain services. If you are aware that an MCO with which you contract will make such information available, you should request a copy for your own and your patient's education.
A managed care contract should contain provisions concerning reasonably prompt precertification (i.e., prior approval of a patient's coverage) by the MCO. Precertification goes a step beyond verification: while verification of eligibility tells the psychologist only that a patient currently is eligible to receive covered services, by precertifying a patient's coverage, the MCO approves the provider's rendering of a specific covered service to a specific patient. Precertification gives the psychologist the security of knowing that the MCO is obligated to pay for the services that will be rendered to a patient -consistent with practice and UR/QA guidelines.
Of course, the managed care contract should provide an exception to the pre-certification requirements for emergencies. Increasingly, MCOs are also creating a different pre-certification procedure for "urgent" care -- care for a condition that does not rise to the level of an emergency, but is more urgently needed than routine care. Emergency and urgent care precertification frequently is an area of dispute between MCOs, patients and providers. A psychologist should carefully review the MCO's definition of "emergency" and "urgent" care to avoid unnecessary denials for non-emergency care, keeping in mind that a psychologist should always provide treatment consistent with professional standards of practice, even if payment is not assured. When the definitions themselves are vague, ask other providers about their experience with this plan.
Referrals/Commitment to Use Panel Providers. MCOs, especially HMOs, often require a psychologist to obtain a referral from a patient's PCP prior to providing care to the patient, and to refer members only to other participating providers of the MCO. Failure to obtain the necessary referral typically results in the MCO not paying for all or a part of the care rendered. Ensuring that referrals are made to only participating providers can be challenging, as providers drop out of MCOs on a frequent basis. Lists of participating providers that have been relied on in past referrals may become outdated quickly.
To avoid referring to a non-participating provider, the psychologist should make sure the managed care contract specifies how the psychologist may determine the participation status of other providers on a real time basis. If the contract fails to clarify this, be sure to get some other written description, such as a letter from the MCO's provider relations department, stating how a provider's participation status may be verified with the MCO. Many MCOs now have a phone number designated for this purpose. When confirming participation, be sure to document the name of the person who provides the information, and the date of the call to the MCO.
Fee Schedules versus Risk Assumption, The contract should state clearly how the psychologist will be paid. Payment will likely be one of two methods: feefor-service, or per-member-per-month capitation. If the psychologist is to be paid on a fee-for-service basis, the contract should clearly state either the amount of the agreed upon hourly or per visit rate, or should indicate what document or attachment to the contract lists this amount. Be sure to read the section carefully for whether the amount will differ depending upon the treatment provided (family therapy versus individual therapy) or the length of sessions (45 or 50 minute hours). Depending on the psychologist's practice, he/she may also want to ascertain payment policies for specialized procedures such as brief therapy, neuropsychological testing, marital counseling, and telephone consultations. These have been areas controversy.
Per-member-per-month ("capitation") payments are risk-shifting payment arrangements. An MCO may pay a psychologist -- or group or MBHO -- a set monthly amount which will vary not on the basis of the number of sessions the psychologist has provided to members, but instead on the number of patients assigned to the psychologist or group for treatment. (For general care, but rarely for mental health, these rates may be "adjusted" depending on age, sex, and other variables.) The MCO will pay a small amount every month for each patient, without regard to the level of care required.
Among the questions the psychologist accepting capitation will want to ask the MCO, are: (I) is there a minimum number of patients for whom risk must be assumed: (2) how are patients assigned (e.g., randomly, or by clinical criteria) ; (3) is there a capitation adjustment mechanism if the age-sex-severity of illness mix of assigned patients is adverse; (4) is there a limit on the provider's financial exposure in a given case (either by a contractual "kick out" or by reinsurance); (S) is there upside" gain-sharing if savings on care are achieved; and (b) with what other providers will your risk be shared?
Because of the financial "risk" and the experience necessary for providers to manage such arrangements, per-member-per-month payments usually are used only with a group or MBHO that has agreed to be the provider of certain mental health services for all (or a significant segment of) members residing in a particular region. Some MCOs use a less "risky" payment arrangement that is a combination of fee-for-service and per-member-per-month by paying a small monthly payment and then reimbursing for services rendered based on a significantly discounted fee-for-service schedule.
Whether the payment is fee-for-service or per-member-per-month, the contract should also clarify how the rates may change. Some contracts authorize the MCO to change the payment rates annually, and therefore will refer to an "annual payment schedule." The contract should state how the psychologist will be notified of future changes in the rates, whether the psychologist can reject the payment change, and the effect of a rejection by the psychologist. For example, the contract should say something like, "MCO will provide Psychologist a copy of the annual payment schedule at least thirty days prior to the effective date, at which lime Psychologist may accept or reject the payment schedule. Failure to respond by the effective date is deemed to be acceptance of the payment schedule. If Psychologist rejects the payment schedule by notifying MCO in writing prior to the effective date, the payment schedule shall remain in effect and either the Psychologist or the MCO shall have the right to terminate this contract as provided under Section X. " Look for provisions, such as this one, that give the MCO the right to change rates automatically, and be sure to carefully review each mailing from the MCO for any changes to the payment arrangement. Even if termination does not have to be in writing, a prudent psychologist will record it in a letter to the MCO.
Copayments, Coinsurance, Deductibles and Balance Billing. As discussed above, HMOs typically require their members to pay a copayment -- a fixed fee such as $10 -- for each visit to a participating provider. Most HMOs do not require their members to pay coinsurance or deductibles. If the HMO offers a"point-of-service" option, a coinsurance or deductible requirement may apply. PPOs and all other insurance plans usually require patients to pay coinsurance and a deductible. Usually deductibles are a fixed amount, such as $250, that the member must pay out of his or her own pocket for any health care received in a year before the health plan will pay anything.
The importance of these member-contribution requirements is that (1) the payment amount to the psychologist from the MCO may be reduced by the amount the member is expected to contribute, and (2) the psychologist may have an obligation to collect the member's contribution. Thus, a psychologist's compassionate waiver of this copayment on a routine basis can violate the payor's rules. Imposing an obligation to collect copayments is becoming more common in HMO contracts because HMOs sometimes view copayments as a method of deterring members from seeking unnecessary care. Read the provision carefully to determine whether the MCO is conditioning its payment on the psychologist' s collection of the member contribution. If the contract indicates that the psychologist is required to collect the member's contribution, failure to at least if make a reasonable effort to collect the member's share could result in a denial of payment from the MCO and could be viewed as a violation of the contract, or in rare cases as an effort to obtain more patients by "fraud".
Almost all contracts will ban "balance billing," i.e., they will say that the provider agrees to accept the contract rates as payment in full (except for copayments or coinsurance) for covered services. If the last clause is left out, be sure to write it in. Obviously, if an MCO excludes coverage for marital therapy, the psychologist who is providing covered psychotherapy should not be precluded from reaching an agreement with the patient and spouse to provide marital counseling, as well, when the patient and spouse agree to pay for such non-covered services themselves.
Ensuring Rights to Payment. Some managed care contracts will state that the MCO will pay the psychologist directly. Others will have amore complex arrangement, such as payment to the psychologist's group, or through a TPA administering the health plan. However the payment is structured, the ultimate payor should promise to pay the psychologist. At minimum, an MCO should commit to pay "clean claims" within a certain time, typically within 30 to 45 days after receipt of the claim. A clean claim is a bill from a psychologist that contains all required information and does not require any follow-up by the MCO. (Obviously, this is a subjective judgment routinely made by the MCO's staff, which have an interest both in good provider relationships on the one hand, but in deferring payment for as long as possible on the other hand.)
When the MCO is not paying the psychologist directly, the contract should state that the other party to the contract with the psychologist will use its best efforts to ensure payment is made to the psychologist within a specified period, such as 30 to 60 days after receipt of a claim. It is unfair to impose numerous requirements on the psychologist without the MCO having an obligation to help the psychologist to get paid. But remember, technically, an MCO may say, "Our employer group, XYZ Co., pays you directly."
In addition, the contract should state that the psychologist has the authority to take action against the other party if payment is not made. For example, the psychologist should be able to terminate the agreement upon reasonable notice after non-payment and to sue or institute arbitration for any past due unpaid fees.
THE ONGOING CONTRACTUAL RELATIONSHIP
Rules and Changes
A managed care contract will require the psychologist to comply with the MCO's internal policies and procedures, including those concerning quality assurance, utilization review, claims processing and review, and member grievances. Psychologists should review carefully any provision of the contract that addresses compliance with rules because MCOs often bind providers not only to the current set of policies but also to any future changes, whether or not the provider is aware of the changes. This is a dangerous practice and technically can be viewed as a violation of a basic rule of contract law (i.e., that there must be a clear "meeting of the minds" on terms). Yet MCOs view this practice as essential to their ability to "manage" care. Usually, MCOs attempt to finesse the legal problem by stating that they will make available their current rules and promptly advise you of future changes.
To avoid unknowingly violating policies or procedures, the psychologist should seek a contract provision that says the psychologist will be bound by new or modified rules only after (1) receiving a copy (or at least written notice that new or revised rules have been issued) and (2) having the opportunity to terminate the agreement if the psychologist believes that the new or modifed rules constitute a major change in the agreement. Ideally, a psychologist should agree to be bound by only reasonable" changes to the MCO's policies. This "reasonable" limitation may enable the psychologist to argue later that a provision is so unreasonable that it would eviscerate the agreement, or that a provision should be unenforceable because it is contrary to the psychologist's ethical obligations.
Non-Competition/Non-Solicitation
A non-competition or non-solicitation provision typically restricts a party's ability to do business with others in the same field. In a managed care contract, such a provision may affect a psychologist's ability to contract with other MCOs, or may affect a psychologist's ability to continue patient relationships with members of the contracting MCO after the contract is terminated, or both. Read the provision carefully to determine whether it addresses other MCOs or patients. If it addresses MCOs, it probably restricts the psychologist from contracting with the MCO's competitors during the period of the contract and therefore may be very disadvantageous. Such provisions are not uncommon in "exclusive" arrangements, whereby the psychologist or group of mental health providers agree to arrange for all necessary care for a specified group (or all) of the MCO's patients in return for a special pricing arrangement. However, in most individual provider contracts with MCOs, such a provision is not acceptable.
Also, read carefully any provisions addressing restrictions on future relations with members of the MCO. They could interfere with providing care to patients who establish a relationship with you. It is not unreasonable for the MCO to refuse to pay the psychologist for treatment rendered to members of the MCO after the termination of the psychologist's contract with the MCO. It is unreasonable, however, to prohibit the psychologist from continuing a professional relationship with members of the MCO. Indeed, it could be unethical patient "abandonment" to cease services to a patient who needs them immediately, simply because the psychologist is no longer a participating provider in a plan.
If the MCO is a PPO or offers a POS option, the psychologist should determine whether the contract would prohibit the psychologist from receiving payment from the MCO as an out-of-network provider after the contract terminates and the psychologist is no longer a participating provider. If the contract prohibits such payment, this may be a serious disadvantage for the psychologist because patients would be faced with the choice of continuing treatment and having to pay 100% of cost, or going to virtually any other psychologist and receiving at least some level of coverage from the MCO. Ideally, the contract would permit continued payment on an out-of-panel basis, at least until care can responsibly be transferred to another provider or plan.
The non-competition and non-solicitation provisions in the contract should allow the psychologist, at minimum, to (1) notify patients of the termination of the psychologist's relationship with the MCO, and (?) continue treating members of the MCO if the psychologist does not bill the MCO (but instead, with consent, bills the patient).
Amendments to the Contract
The contract should address how its terms can be amended and what notice must be provided to the parties of the contract. Typically, the psychologist will have no right to modify the contract, but the MCO will be empowered to amend it. The psychologist should ensure that the contract requires the MCO to notify the psychologist of any amendments before they can become effective. Ideally, the psychologist should have the right to reject the amendment. If the contract allows the psychologist to terminate the contract without cause upon 30 days written notice and the MCO must give the psychologist 30 days notice of any amendments, the psychologist can be assured that he or she can at least terminate the contract if the MCO wants to impose an unacceptable change; this gives the psychologist at least some bargaining power. If the amendment notice period is shorter than the termination notice period, the psychologist can ask that they be made the same length, or will have to decide whether he or she is willing to suffer through a changed contract term for the extra 15 or 30 days until the contract can effectively be terminated.
If the contract does not allow the psychologist to reject the amendment or to terminate the contract without cause, check the termination provisions for the bases the psychologist can use to terminate the contract. To avoid being forced to comply with onerous changes, the psychologist should ensure that, at minimum, the contract allows the psychologist to terminate if a "material" change is made to the terms of the contract.
PATIENT RECORDS AND CONFIDENTIALITY
Gag Clauses
Some HMO contracts say, in essence, that providers should not "bad mouth" the plan to patients. This issue of "gag clauses" has received much attention in the last year. In fact, at least 17 states have enacted laws that prohibit MCOs, and sometimes any insurer, from restricting contracted providers' discussions with patients regarding appropriate treatment.2 The publicity regarding this issue has forced MCOs to remove many of the most egregious gag clauses from their provider contracts. However, "gag clauses" take many forms, and many MCOs still have contract provisions that restrict a provider's discussion of the MCO, its procedures, or its benefits. Some of the most difficult "gag" clause issues arise in the context of discussing mental health treatment decisions with patients. Above all, a psychologist will want to remain free -- indeed, may have a legal and ethical duty -- to advise the patient of the risks and benefits of alternative treatment options. Psychologists should look carefully for such provisions, and attempt to have any unreasonable restrictions on professional communications removed. Following are two examples of provisions that may not appear to be obvious gag clauses, but may result in a restriction on a provider's discussions with patients.
Loyalty provisions are still common. Such provisions require the provider to "be supportive of the procedures and philosophy of the MCO" or to "portray the MCO in a positive light to members and the public." Some are even more specific, authorizing the MCO to terminate the contract if the provider makes disparaging remarks about the MCO. Psychologists who are subject to such contract terms risk legal action or termination of their contract, or both, if they explain an inherent bias the MCO has against covering mental health treatment -- or if they merely complain to the patient (or in public) about the failure of the MCO to make coverage decisions or payment for services in a timely fashion. Mental health providers often find themselves in the position of having to explain why a patient's MCO doesn't cover mental health care as generously as the patient's prior health insurance -- an explanation that may convince the patient to disenroll and inform the MCO that the psychologist explained how indemnity insurance "is better." Some MCOs' contracts still appear to prohibit such conversations between the provider and patient. Whether such restrictions on a provider's speech are legally enforceable is not entirely clear. Psychologists should attempt to delete such provisions.
If a loyalty provision is in the managed care contract, psychologists may want to consider offering an alternative provision such as the following: "Provider and MCO agree not to make unreasonably disparaging comments regarding the other party in communications with members or the public. As the term is used in the preceding sentence, "disparaging comments” shall not include explanation to a patient of treatment options, or coverage or payment limitations, nor explanation of procedures such as prior approval and utilization review for medical necessity. Such a provision offers the MCO comfort that a contracting psychologist will be a "loyal" business partner by not "unreasonably" disparaging the MCO. However, even this vague standard creates some risk that a psychologist's off-hand comment or legitimate dispute with an MCO will be construed as "unreasonable" and a contract violation by the MCO.
Proprietary information restrictions are in most contracts. Such provisions routinely prohibit either party (the MCO or the psychologist) from revealing to anyone else any "proprietary" or confidential information of the other party. Although a proprietary information restriction may not seem problematic, in practice it may interfere with patient conversations regarding the MCO's payment arrangements or medical review policies. Many MCOs consider their payment arrangements unique and proprietary, particularly if they have competitors that would be eager to learn the details. Similarly, MCOs often consider their internal policies regarding medical necessity, experimental treatments, and pre-certification authorization to be proprietary. Two problems result: (1) the psychologist may not be aware that something is proprietary" if the contract does not list the information that can not be disclosed, and (2) even if the psychologist knows certain information is proprietary, the psychologist may believe it is irresponsible not to inform the patient of the information. This is particularly true for mental health clinicians, given the unique issues of trust and transference in psychotherapy. Despite the public distaste for gag clauses in general, some restrictions on disclosure of proprietary information probably are not unreasonable. At minimum, the psychologist should ask for clarification of what information is considered "proprietary" under the contract.
The gag clause in the contract may state that the contract will terminate if the psychologist violates the restriction. Most contracts, however, are not so clear. Instead, many contracts give the MCO a right to terminate the contract "without cause" -- usually upon 30 or 60 days written notice to the provider. As a result, the MCO may take the position that it can sue the psychologist for breaching the gag clause, and terminate the contract. The result could be that the psychologist is denied all future payment, and may be forced to sue the MCO to get payment for services rendered. (In fact, MCOs rarely sue providers, but they do use those clauses as a deterrent.) Even if the MCO refuses to remove a particular gag clause, the psychologist may be able to get some clarification from the MCO (preferably, of course, in writing) about the meaning of the contract term, and perhaps some reassurance.
Confidentiality
MCOs typically require their members to sign a very general confidentiality release form (sometimes called a "waiver") that states that the MCO can review any information from any provider of medical services who has rendered care to the patient. Sometimes such releases are limited to "information necessary to administer coverage." Although standard in the insurance industry, such blanket, advance releases have been challenged in court and sometimes have been found invalid. The issue of when and for what purposes an MCO can access patient-specific information, including patient files, is the subject of a Congressional legislative effort, which may result in a uniform federal rule. Currently state laws should protect a provider that relies on an apparently valid release, but psychologists should be aware that such general confidentiality waivers do not always afford total protection. Far example, a patient may become irate when he finds out that his employer's health plan knows he has been receiving mental health or substance abuse treatment, and may sue the psychologist for breach of confidentiality. Despite the fact that the psychologist may convince a judge that she reasonably relied on the MCO's general confidentiality waiver when she turned over her files to the MCO, the psychologist may have been forced to expend the effort and cost of litigating the issue.
A cautious psychologist will explain to each new patient the fact that the MCO requires the psychologist to make his or her files available (if that is the case), and that the psychologist will have to provide a diagnosis to the MCO to warrant continued coverage for treatment. Ideally, psychologists should also provide this information in writing. A psychologist can take several steps to minimize the awkwardness of this discussion, such as explaining candidly the information to be provided, and offering to discuss the issue further if the patient has more questions. This will ensure that the patient is aware of the process from the outset, and may help avoid future disputes.
TERMINATION
Termination: "For Cause" versus "Without Cause"
The managed care contract should explain how the contract can be terminated by each party. Although termination may be addressed in one section of the contract, it probably will prescribe different rules for how the psychologist may terminate the contract, and how the MCO may terminate the contract. The common terms, and their pitfalls, arc discussed below. For more discussion of terminating patient relationships, see C. Stromberg, et al., THE PSYCHOLOGIST'S LEGAL HANDBOOK § 8.24 (Council for the Nat'l Register of Health Serv. Providers in Psychology 1988). For a discussion of the legality of terminating providers for reasons such as over-utilization or inefficiency, economic considerations, competency, or caseload, see C. Stromberg and R. Ratcliff, A Legal Update on Provider Credentialing, 7 THE PSYCHOLOGIST' S LEGAL UPDATE, June 1995.
Every psychologist should be aware that, regardless of the termination rights in the contract, the psychologist's professional obligation to ensure proper termination of patient relationships and to avoid abandoning patients is broader than the contract. Even if the MCO properly terminates the contract and the psychologist can no longer receive payment from the MCO for services rendered to the patient, the psychologist must still properly resolve patient relationships.
For-Cause termination provisions typically allow termination only far certain specified reasons. Common bases include (1) loss of license or any other event that prevents the psychologist from being able to render professional services, (2) fraud or misrepresentation, such as billing for services that were never
provided, (3) failure to cooperate with the MCO or to comply with the MCO's policies and procedures, and
(4) abuse or neglect of a patient who is a member of the MCO. If the contract allows termination for breach of the contract, it should also state that the breaching party should receive notice of the breach and should have the opportunity to cure the breach within a reasonable time (such as 30 days), and that the contract will not be terminated if the breach is cured within that time period. If the contract can be terminated when a licensure or disciplinary action is brought against the psychologist, read the provision carefully for whether termination occurs when the psychologist is found guilty of an offense (not necessarily an unreasonable condition) or when action is brought (an unreasonable condition, as every psychologist knows who has had a disgruntled patient complain to the licensing board). Generally, for-cause termination provisions should be bilateral: the psychologist should have the right to terminate if the MCO makes misrepresentations to the psychologist, or fails to pay as promised. Also, the psychologist may want the termination provision to clearly state that the psychologist can terminate the contract if the MCO makes any material changes to the contract. A material change would probably include a substantial change in payment, or assignment of the contract to some other MCO.
Without-Cause termination provisions typically allow either party to terminate the contract --for any reason, or even no reason -- after providing written notice at least a certain number of days in advance, such as 30, 60, or 90 days. Written notice is a letter stating that the party is terminating the contract effective as of 30 (or 60 or 90) days after the date of the letter. Read the provision carefully to ensure that the psychologist has the same right to terminate without cause as the MCO has. The advantage of such a provision is that the psychologist has the security of knowing that he or she can get out of the contract if relations sour, if the MCO imposes new or onerous conditions, if payment rates are decreased, or if the psychologist otherwise regrets the decision to contract. The disadvantages of such a provision include the risk that the MCO will terminate for no apparent reason and refuse to recontract -- and the fact that the psychologist may be put in a poor bargaining position over rates and terms because the MCO can threaten to terminate if the psychologist makes any waves.
Continuing Obligations After Termination of the Contract
The contract should indicate whether any contract terms "survive" (i.e., continue to apply) after the termination of the contract. Typical surviving terms include terms requiring the psychologist to maintain patient records for a certain period, indemnification provisions, confidentiality restrictions, and arbitration provisions, all of which are probably not objectionable to most psychologists. However, as discussed above, non-competition and non-solicitation provisions can be onerous, and usually are included among the provisions that survive the termination of the contract. These post-termination obligations should be carefully reviewed.
CONCLUSION
This Update points out many of the key terms that psychologists must consider in MCO contracts, and some ways that managed care contract provisions can create difficulties or impose burdens on a psychologist. Some MCOs are realizing that they need to "partner" with their providers and establish good working relationships; accordingly, they offer providers reasonable contracts. But the reality is that most psychologists will find they have little bargaining power when it comes to negotiating the terms of the contract. Nevertheless, every contract will present a mosaic of potential benefits and risks. In order to weigh the net value of the contract, a psychologist should try to assess some of the key issues outlined above.
NOTES TO LEGAL UPDATE #9: SURVIVING THE MINEFIELDS OF MANAGED CARE CONTRACTING
'Compare Kinzie v. Physicians Liability Insurance Co., 750 P2d. 1140 (Okla. App. 1987) (necessary defined, as per the dictionary, as "indispensable" or "essential"); Victum v. Martin, 326 NE 2d. 12 (Mass. 1975) ("used in light of the facts known at the time"); Fialkowski v. Associated Hospital Service, 318 NE 2c1. 26 (Wis. App. 1 982) (physician's decision does not alone establish medical necessity); Sarcheti v. Blue Shield of California, 729 P2d. 267 (Cal. 1987) (medical necessity "refers to services reasonably intended for treatment and ... suggests an objective standard, not one under which the physician himself decides whether his intentions conform to good medical practice"); Jacob v. Blue Cross and Blue Shield of Oregon, 758 P2d. 382 (Ore. App. 1988) (medical necessity means "appropriate and consistent with the diagnosis and which, in accordance with accepted medical standards in the State, could not have been omitted without severely affecting the patient's condition").
These states include Colorado, Delaware, Georgia, Indiana, Maine, Maryland, Massachusetts, Nevada, New Hampshire, New York, North Carolina, Pennsylvania, Tennessee, Vermont, Virginia, Washington and Wisconsin.
©1997 The Psychologist's Legal Update. Reproduction in whole or in part is forbidden without the publisher's written permission.
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