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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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 Lists of participating providers that have been relied on in past referrals may become outdated quickly.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. continued

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