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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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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