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

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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. continued

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