"Ending a Managed Care Contract"
Termination can be unexpectedly complicated. Knowing your responsibilities — and your rights — will help.
by Gil Weber, MBA
Consulting Editor
Adapted with permission from Ophthalmology Management
© Copyright, 2003. All rights reserved.
April 2003
Most doctors go into a managed care contract with cautious optimism, thinking hopefully about the benefits that should accrue to the practice. Yes, the reimbursements leave something to be desired and staff have to jump through some administrative hoops, but the added patient volume and cash flow are welcome. And typically, things go OK for a while. The relationship isn't perfect, but it's tolerable.
The problem is, this doesn't always last. A third party payer may begin burdening your practice with administrative red tape and subjecting it to significant financial stress.
For example, an HMO may delay, downcode, or even deny an extraordinary number of your claims. A third party administrator may suddenly oblige you to submit electronic claims using a proprietary system that can't be integrated with your regular practice management software, forcing you to make double entries for all of those patients. A vision plan may require you to purchase its frames, or to use an optical lab located in another state. Your staff may end up spending far too much time listening to music on hold while trying to verify eligibility or benefits. A plan may start "losing" your claims with great regularity.
Or, the problem may be as simple as reimbursements that don't justify tying up valuable appointment slots.
Enough!
So you've had enough. You've finally come to the difficult but important conclusion that you don't need access to those patients if seeing them is going to disrupt your practice and cost you money. Like Howard Beale in the movie "Network," you're ready to shout I'm mad as hell and I'm not going to take it anymore!
Unfortunately, there's a lot more to the termination process than simply sending a termination letter. You do have certain rights in this situation, but you also have responsibilities to patients - and to the payer.
To make the best of a potentially bad situation, you'll need to do four things:
- Notify the payer (with help from your lawyer) that you want to terminate
- Decide how you're going to inform patients about the change
- Do whatever you can to avoid losing money until your legal responsibilities to that plan's patients - and the plan - have been met
- Carefully manage the protection of, and transfer of, relevant patient records.
How you go about accomplishing these four steps can make the difference between legal and financial trouble, and getting out with your finances (and reputation) intact.
Notifying the payer
Your first responsibility is to provide proper written notice to the other party. Every provider agreement contains language stating how much advance notice you must provide - typically 60 to 90 days. The two things to remember here are:
- Get legal advice. You'll want to work with your attorney on the wording of the termination letter. Terminations with cause and terminations without cause must be handled a bit differently, and you need to make sure that nothing in your letter puts you at a disadvantage.
- Get a return receipt. It's essential to have proof that your notice was delivered, so pay the small fee to have the post office obtain a signature from someone at the payer's office.
Once you've received that confirmation, then - and only then - should you proceed to the next step: notifying your patients.
Breaking the news
You need to notify your patients that you'll no longer be a provider under that insurance program. What can you say? What can't you say? Well, it depends:
- Make sure you're allowed to tell them. Some agreements may prohibit you from communicating the news to your patients, or limit what you're allowed to say. Check your provider agreement to see if it contains anything along the lines of "the plan shall make all announcements to its members concerning provider terminations." This is not good; the last thing you want is for the plan to control all communications with your patients. (Any letter the plan sends to your patients likely won't be worded to put you in the most positive light.)
- Be careful when asking patients to stay. Obviously you'd like those patients to stay with your practice - to see you as a non-panel provider or switch to another plan in which you are a participant. But a payer is always concerned that former providers will try to convince patients to drop the plan, and some will put language in the contract to prevent any communications that might be perceived as "enticing" patients to switch. Your attorney can advise on what you can and cannot say.
- Think carefully about how much you want to say. If you're free to inform your patients, send a letter to each of them. State that you've reluctantly decided that you cannot continue to provide care through that plan. But think carefully about how much you want to tell them about why you've dropped the plan. You don't want to be perceived as "bailing out" on your patients. On the other hand, if administrative or quality of care issues made it difficult for you to provide the level of care (or the timely care) you felt was in the patients' best interests, that message is legitimate, concerned, and not self-serving. But ask your attorney for the proper way to express that sentiment.
Choosing the right message is very important in the context of any letter, and in terms of anything said to a patient in person or on the phone. - Make sure everyone in the office is on the same page. Staff must know what can and cannot be said. Once your attorney advises you on the "dos and don'ts," share that information with your staff. It may even be wise to write a script.
The end is not always the end
So now you've sent the registered letter and the termination date passes. You breathe a sigh of relief. Free at last, free at last!
Well, maybe not quite yet. Your responsibility to patients doesn't end the day a managed care contract terminates. And you probably have other obligations under the terms set out in the provider agreement.
Most third party agreements contain language requiring physicians to continue care on active cases past contract termination until one of three things happens:
- The current course of treatment is completed.
- The patient loses eligibility.
- The payer arranges for another physician to take over care, and transfers the patient to him or her. (It's always preferable to have a maximum time limit set on this condition.)
These conditions are reasonable - at least in terms of the patient's best interests. The crucial issue is how you'll be paid during any extension.
Will the dollars make sense?
Obviously you'd like to be paid your full, usual and customary fees. Unfortunately, unless you negotiated that when the contract was first written, it's not going to happen. If yours is a fee-for-service contract then you should be paid at the same rates you've been receiving. But if the contract is capitated or sub-capitated, you're facing some potentially serious issues, and you do need to be concerned.
Here's why: Typically, capitated managed care agreements state that after termination you'll continue to accept the same payments per member per month (PMPM) for the duration of any contract extension. That's never acceptable. It makes no financial sense to continue care on a PMPM basis for just a few carry-over patients. Compensation on such carry-over patients should convert immediately to a mutually agreeable fee-for-service schedule. (Ideally, you should negotiate this when you first sign up with a plan. See, "Troublesome Contract Clauses," below.)
If the contract doesn't stipulate such a conversion, I suggest asking the plan to sign a letter of agreement (or letter of understanding) - before you terminate the contract - specifying acceptable fee-for-service rates at which you'll be paid in the event of termination should you have any carry-over patients.
If the plan balks, you're in for a bumpy financial ride afterwards.
Collecting for services rendered
Even if you have a reasonable payment agreement, once you've sent notice to the plan, it will be in no hurry to pay any claims submitted during the 60 to 90 days before your termination takes effect. And once you're terminated it won't rush to pay any outstanding claims. So it's essential that you closely monitor your claims and accounts receivable.
I'd suggest that a few days after the effective date of termination you send the payer a complete list of all outstanding claims for services rendered up to that point. (Obviously you must have already submitted all claims for services through your last day.) Include the usual information: patient names and I.D. numbers, services provided, authorization/referral numbers, dates of service, reimbursements due, etc.
Make the letter a detailed itemization of what you've done, and let the plan know that the purpose of your letter is to facilitate a timely and accurate processing of all your claims in the system. The real reason, of course, is to put the plan on notice (in as pleasant a manner as possible) that you expect to be paid for every one of those claims - and you expect to be paid on time, as per your state's prompt payment law.
Protecting and/or transferring records
It's also essential to check the provider agreement to determine your responsibilities regarding the transfer of medical records:
- If the plan wants copies of the records, make sure it's legally entitled to them. Just because a payer demands the records does not automatically give it the right to them. If a patient hasn't authorized transfer (perhaps in a document signed when he or she first enrolled in the plan) then the plan may not be entitled to those records.
- If the plan wants copies, have your staff make them, but get the plan to cover the cost. Hopefully, your contract doesn't make you financially liable for copying and transferring every record for each of the payer's Members. That could be costly in staff time and copying/mailing costs. Try to get the plan to pay the cost of copying and shipping (or at least share the cost).
Do not let the plan's staff come into your office to do this; it's far too disruptive. Offer to have your staff do the work, but ask that the plan pay reasonable expenses to cover your staff's time, materials, and shipping. - Check with your attorney about your responsibilities for protecting medical records. HIPAA is a concern, and state law will require that you secure those documents for a certain amount of time. Obviously, if a patient gives you written authorization you must transfer records to another eyecare provider. And you're probably required to supply records as part of an audit or upon subpoena. Your attorney can provide guidance.
Closing the books on a bad experience
Terminating a contract can be fraught with peril (especially if you overlooked unfavorable clauses when signing up), but that doesn't mean you should go on suffering. Despite all these potential pitfalls, doctors who've taken the steps to free themselves from such unsatisfactory contractual relationships have expressed relief and surprise. Not only has office stress been reduced, but practice margins have improved.
So don't be afraid to cut the cord. Just proceed carefully. Even if the parting is painful, in the long run, having no contact really is better than being stuck with a bad one.
Troublesome Contract Clauses
The best way to ensure a smooth ride if termination becomes necessary is to make sure the contract contains favorable clauses when you sign it. (Obviously, the following is not intended to be comprehensive legal advice. Always work with your attorney when negotiating a contractual relationship.)
Things to look out for in respect to possible future termination of the agreement:
- You should not be prohibited from telling patients if termination is occurring. You don't want the plan to control what the patient hears and when they hear it.
- Look carefully at the language concerning patient care following termination. If the contract states that the payer will arrange for another physician to take over and that the payer will manage the transfer of care, make sure a reasonable time limit is set. Otherwise, you could be forced to continue caring for the plan's patients for an extended period.
- If the agreement is capitated, try to negotiate a conversion to a fee-for-service schedule effective as of the date of termination.
For example, here's a problematic paragraph from an actual capitated ophthalmology agreement. (This is what you must avoid:)
Rights And Obligations Upon Termination
Upon termination of this Agreement, Physician shall continue to provide Covered Services for specific conditions for which a Participant was under Physician's care at the time of such termination so long as Participant retains eligibility under a Service Agreement, until the earlier of completion of such services, the plan's provision for the assumption of such treatment by another Physician, or the expiration of twelve (12) months. Physician shall be compensated for Covered Services provided to any such Participant in accordance with the compensation arrangements under this Agreement until sixty (60) days following termination and thereafter compensation for continued services authorized by the plan shall be as mutually agreed, but not at a rate greater than Physician's usual billed charges.
In this capitated contract you'd be stuck providing care for up to 60 days at the previous (and now unacceptable) rate. Only if the care extended beyond 60 days would you receive fee-for-service, and only at such rates as you were able to negotiate then. (How much negotiating leverage do you think you'll have 60 days after termination? Answer: None.) - Watch out for optional extensions beyond the date of termination. How bad can it get? Take a close look at the following paragraph - taken from another ophthalmology contract:
Article 15: Term And Termination
15.5 Continuation. ...at the termination of this Agreement ... the plan at its option may extend this Agreement ... by giving written notice to Physician of the extension of this Agreement until... the date which is twelve (12) months from and after the date of the notice, and Physician shall continue to provide Covered Services to Covered Persons... during the extension term of this Agreement regardless of whether the plan can meet its financial obligations to pay Physician for such services....
Did you notice the particularly nasty part that states you agree to continue to provide services regardless of whether the plan can meet its financial obligations to pay you for such services? For up to 12 months? Talk about a sucker punch after the final bell. - Watch out for clauses that state that you agree to provide copies of patient medical records following termination - especially if it says you'll cover the expense of doing so.
Gil Weber, Ophthalmology Management's consulting editor, is a nationally recognized author, lecturer and practice management consultant to practitioners and the managed care and ophthalmic industries, and has served as director of managed care for the American Academy of Ophthalmology.