Your Practice Made Perfect
This podcast series provides support, protection, and advice for today’s medical professionals. Brought to you by SVMIC, a mutual insurance company that is 100% owned and governed by our policyholders.
Jul. 13, 2018
Episode 024: Study Up to Sign Off
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Speaker 1: You are listening to Your Practice Made Perfect; support, protection and advice for practicing medical professionals brought to you by SVMIC.
Brian: Hello and welcome to today's episode as we consider a very exciting topic here, I'm sure, and we're going to get into that in a moment. My name is Brian Fortenberry and we're going to be talking about managed care contracts. Now we kind of laughed. I've got Jackie Boswell with me. Jackie, welcome.
Jackie: Thank you very much.
Brian: You know, we kind of giggle at the beginning of oh, the exciting topic of managed care contracts. However, they are very important and we really need to deep dive in them. Before we do Jackie, why don't you tell us a little bit about yourself and about your time here at SVMIC and your experience.
Jackie: Sure, Brian. Thank you. I've been at SVMIC for just over 12 years now. Prior to coming to SVMIC, I worked for Baptist Hospital, which is now St. Thomas Midtown Hospital in Nashville, Tennessee. And I was director of managed care and also during my tenure there managed a 31 physician multi-specialty practice. Prior to that, I spent seven years with Blue Cross and Blue Shield of Tennessee doing hospital and physician contracting.
Brian: Well, with your background in managed care and your time with the insurance company, I might as well just be quiet and just let you talk. You're going to be able to really help us with this and with all joking aside, gonna have some incredibly valuable information. So let's start with ... We talk about managed care contracts, what are they? What are managed care contracts and what do they look like? What are the components of them? Help us out with that.
Jackie: Sure. Each practice, when they start up a practice or want to negotiate with an insurance company, there is a relationship established between the insurance company and the practice. And that relationship is through a managed care contract-
Jackie: Where the practice agrees to manage the care of the insurance company's beneficiary or patients that have coverage through them.
Brian: Okay. So are there a lot of components of this or is it pretty bland and plain?
Jackie: They are. Typically, your average managed care contract is several pages and include the parties to the contract, who is the contract between. Is it between the insurance company and the group or is it with individual physicians in the group? It can work both ways. There are the definitions that define the terms that they're talking about in the contract. There is the body of the contract which includes language about how the relationship will work, and then there are exhibits typically with a contract and the exhibits are typically A, B and C. And will include things like rates or the networks that are included in the contract and then any amendments to the contract that occur while the relationship is in place will also be part of that contract.
Brian: You said that these contracts can be between individual physicians or entire practices. What's more common?
Jackie: Actually we see a little bit of both. It's often beneficial to the practice to have a group contract.
Brian: It's more beneficial that way?
Jackie: It's beneficial-
Jackie: To the practice to have a group contract in most cases. Not always, but most cases so that the insurance company or the payer cannot come back and say that you can only have one physician or we're going to terminate one physician from the contract, but every one else can be in the contract. Or as a practice adds new physicians, they can simply add them to the group contract through an amendment or a new exhibit, and not have to create a whole new contract.
Brian: That does stand to reason. There seems to be probably in that concept, less of an opportunity for paperwork and repetitive things and there's got to be probably some benefit to lumping everyone together like that. You get more negotiating power like that?
Jackie: Actually you do. When you have a group contract, it keeps you from then having to negotiate every single physician's contract. So you can negotiate once with the payer on behalf of the group and finalize the terms of the negotiations, and then the contract can be in place.
Brian: That certainly makes sense. Now, with all of these different terms and parts of these managed care contracts, what would you say Jackie are some of the most important terms of a contract out there like this?
Jackie: Well, what you look at first in a contract is of course the rights.
Brian: If it's not about the money-
Jackie: Yeah, right.
Brian: It's about the money. Right?
Jackie: Right, exactly.
Brian: I got you.
Jackie: Exactly. So you want to look at the rates. It's not just about what rate we're going to get paid. It's how are you going to pay those rates? Is it a contract that's just fee for service? Is it a discount off charges? Is it a percentage of Medicare's rates? RBRVS, RBU contract. So you want to understand the payment methodology and then you want to understand the rights because often a payer will tell you what methodology they're gonna pay you under, but not give you specific rates for each of your codes. So we encourage practices to understand what they will be reimbursed for every single service they provide, which is based on a CPT code.
Brian: Okay. So you said often they're told that, but they don't have specific numbers. One, why do they not give them specifics and two how does someone go about getting that information?
Jackie: Well, it's interesting that healthcare is one of the few industries where you're gonna agree to something but not know what you're going to get paid. It's amazing.
Brian: That's initially what I thought. It's like you're signing a contract and you don't specifically know what the contract says, so that was a little surprising to me.
Jackie: Right. So we encourage practices to understand what their top services are, top CPT codes, and to request those by CPT code from the insurance company. In some states like Tennessee, the insurance companies are required if you ask to tell you what they're going to pay you. So simply asking for that is sometimes good enough. A lot of managers are managing practices who already have contracts in place but aren't sure what the phase are, so we encourage them. If you've inherited a contract, a contract that's been in place for many years, but you don't know the rates just to ask the payer for them and do that in writing.
Brian: Are these rates negotiated on the front end? Is that correct?
Jackie: Typically they are. Some practices think when they're given a contract, they have to accept that contract as it is, and that is certainly not always true.
Jackie: In some cases practices don't have the leverage to do a lot of negotiations, but they can negotiate the rates or the terms of the contract.
Brian: So it's more like buying an automobile than it is milk at the store then. I mean you do have some power to negotiate that rate.
Jackie: If you ask. I've had a lot of reps from the payer companies say, "Well, we didn't increase the rates because no one ever asked."
Brian: I got you.
Jackie: So we encourage you to ask and if you don't ask, you won't get it.
Brian: Well that makes sense and the fact that this is a managed care contract, generally with a contract you have that is a binding obligation on the part of say the insurance company and the physician or the practice. So let's kinda transition then in that theory. Are there obligations of the insurance company in these contracts? Obviously, there would have to be and what are those obligations?
Jackie: Those should be looked at carefully. What are the obligations of the managed care company, because things like how are we going to determine what's medically necessary. Does the payer determined that or does the practice determined that? And some payers may say, "We don't have to cover it if we don't think it's medically necessary." But you the provider, it doesn't mean you shouldn't provide that service. You should maybe still provide that service. We've just determined under our guidelines that that's not medically necessary, so they're shifting the risk from the insurance company. So you want to be careful about those kind of terms. They will describe that they have a responsibility to be financially soluble and you want to be sure that the company is a good reputable company. But you want to look at those obligations of the insurance company very, very closely.
Brian: That certainly gives us a look at the obligations of the insurance companies and likewise, a contract being an agreement between two parties, there's these obligations of the practice or the physician. What would they be and what does that look like?
Jackie: Well, certainly the physician would be obligated to maintain their license in good standing and the insurance company in the contract will require notification if that changes. If the status... If there's any restrictions put on the provider... the physician's license. The physician also has an obligation to maintain malpractice insurance at certain levels, which is typically 1 million, 3 million.
Jackie: They have an obligation to certainly see the patients' beneficiaries in a timely manner. And some insurance companies even require that the physician be available to the patient 24 hours a day, seven days a week at 365 days a year.
Jackie: So it's important that the physician ... Certainly that can be met through call coverage. So ... And another thing that they are requiring is that the physician have admitting privileges at a hospital that participates with that insurance company or at least an agreement with, for example, a hospitalist organization to admit their patients.
Brian: Are these obligations on both parts, whether it be the insurance company or the practice or physician? Are those obligations that you talked about, are they fairly standard? I mean, is that the standard thing or does that vary by insurance company and vary by practice or physician and are there even standards within certain practices or certain insurance company or is just about everything negotiable?
Jackie: Well, most of the terms of the contract are fairly standard within contracts. Certainly commercial insurance companies have a little more leeway to negotiate those terms of the contracts. Then, for example, a Medicare advantage company that has to meet certain guidelines from Medicare or Medicaid, managed care organization that has to meet certain guidelines from Medicaid. So your commercial insurance companies will have a little more flexibility than your government insurance companies.
Brian: That stands to reason.
Brian: They tend to be a little more obligatory, I guess I should say when it comes to that. We've already talked about the negotiating power of these rates and these terms on the contract. How willing are they to really do this? Is it as simple as we were talking about earlier? Sometimes just asking or is there more in depth negotiating and arm twisting that has to happen?
Jackie: A lot of the insurance companies will automatically say, "No, we're not going to negotiate with you."
Brian: So that's our first response.
Jackie: So that's typically the first response. So don't give up, keep asking. And I encourage practices to put that in writing... put that request in writing that you would like to negotiate the contract. Many times it comes to the practice being willing to terminate a contract with an insurance company-
Brian: I got you.
Jackie: Before they will actually come to the table. But you want to make that decision very carefully, that you are willing if they call your bluff, that you can afford to terminate that contract. And before you make those decisions, there's a lot of preparation that should be done by the practice before they make that decision. We are going to put that in writing, that we'll terminate a contract.
Brian: So it does really come down to a business decision that you really have to weigh the pros and the cons of going down the road of this. Because if you're willing to go all in and say, "We will terminate this.", if they call your bluff, then if you don't terminate it at that point, then they kind of know they have you. Right?
Jackie: Right. They do. They know they have you, and sometimes if you think, "Well, I'm going to back out of the termination." They may not allow you to do that.
Brian: That may hold you to that. Okay.
Jackie: They may hold you to that. So again, you wanna make that decision very, very carefully.
Brian: Let's kind of go that direction for a minute. How binding are these contracts and can you get out of them? Can you cancel them and what's involved in that and how hard is it?
Jackie: Typically when you sign a brand new contract with an insurance company, those will have a term of usually a year to three years. And after that year or three years, that initial term as we call it, then often those contracts will automatically renew and we call those evergreen contracts. So they will automatically renew year after year unless one of the parties terminate. And so those termination provisions in the contract, it's important to understand those because they often require notice up to a year before you can terminate. I was recently working with a practice that had to give 12 months notice before they could terminate. Often it's more like 90 days or 180 days.
Jackie: So you wanna do your background work and your research and your analysis ahead of time so that you can give proper notice if you do need to terminate the contract. And you want to give that in plenty of time to allow for negotiations before you have to actually give that termination, if negotiations are necessary.
Brian: That's exactly what I was thinking. I was thinking if you're using this possible cancellation as a bargaining tool, you have to start planning far enough ahead of time that if you are going to terminate it, you've met that standard that they've set aside. Is that termination agreement negotiable on the front end of these contracts, like being a year versus 90 days kind of deal?
Jackie: The termination clause is negotiable. It's not often one of those things that you will negotiate right off the bat or ahead of time and you went away. Do you want a shorter termination period or longer termination period. Because a longer termination period might allow you to give proper notice to your patients, complete any sort of treatment that that patient is under or give them an opportunity to select a new plan during their open enrollment that you do participate with.
Brian: Do the insurance companies on the other side, do they have the right to terminate the contract as well with the physician? I'm assuming they do, and what would make them do that?
Jackie: They do. They will certainly look out for themselves and allow themselves to terminate the contract. Typically, there's a termination with cause and a termination without cause. Certainly termination with cause, in most cases the payer can terminate the contract immediately. For example, the physician loses his license. Termination without cause typically will invoke the notification period of the 90 days, 180 days or 12 months.
Brian: I gotcha. So as we get ready to wrap up our discussion here Jackie. When physicians practices or executives in practices begin to look at these managed care contracts, that is a vital part I would imagine, of the business of healthcare these days. As they're starting to look at this, where do I focus? What is the most important parts that I should focus on and what are the other areas that I could kinda go, "Those are good bargaining chips, but not an absolute gotta have."
Jackie: The first tip I would give to a practice executive going into contract negotiations is ensure that you have a full copy of the contract, that you have the total contract, because it's often surprising that practices do not have copies of these contracts because they've been in place so long. So if you don't have a full copy, ask the payer for a full copy of the contract along with all amendments and then understand your practice. I tell practices know more about your practice than the payer knows, know what percentage of your practice is with that particular insurance company. So do they make up six percent or do they make up 40 percent, because that will change your negotiation strategy. And then prepare to meet with the payer in person and if you can have a physician involved at any point, that will also improve your leverage with the insurance company.
Brian: That's sound advice. You know, I didn't even think it while we were talking about... You're going to have multiple managed care contracts between providers and one that is 60 percent of your practice versus four percent of your practice. Obviously, you're going to pay a little more attention to the 60 percent. Jackie, I really appreciate you taking the time to come in and give us a nice look at managed care contracts. And I feel certain that the information that we've gathered today and going to be beneficial. By the way, if someone needs more information or guidance on managed care contract, they can contact... Is it MPS?
Jackie: Yes. They can contact the Medical Practice Services department or me directly.
Brian: Very well and we will put more information to that in the show notes of this podcast as well. Jackie, once again, thanks for being here.
Jackie: Thanks for having me.
Speaker 1: Thank you for listening to this episode of Your Practice Made Perfect with your host, Brian Fortenberry. Listen to more episodes, subscribe to the podcast and find show notes at svmic.com/podcast. The contents of this podcast are intended for informational purposes only and do not constitute legal advice. Policyholders are urged to consult with their personal attorney for legal advice as specific legal requirements may vary from state to state and change over time.
The contents of this Podcast are intended for educational/informational purposes only and do not constitute legal advice. Policyholders are urged to consult with their personal attorney for legal advice, as specific legal requirements may vary from state to state and/or change over time. All names have been changed to protect privacy.
About our Guest
Jackie Boswell is an Assistant Vice President in SVMIC’s Medical Practice Services Department. Her background includes over 25 years as a medical management executive including hospital and physician practice administration. She obtained a Bachelor’s degree in Computer Information Systems from Murray State University and a Masters Degree in Business Administration from Belmont University. She is a Fellow in the American College of Medical Practice Executives and has served as Finance Chair for MGMA’s Financial Management Society and as the ACMPE Forum Rep for the Tennessee MGMA. Jackie is a member of the Board of Directors and Finance Committee at Three Rivers Hospital in Waverly, TN. She also serves on the United Way Allocations Committee in Humphreys County.
About our Host
Brian Fortenberry is Assistant Vice President of Underwriting at SVMIC where he assists in evaluating risk for the company and assisting policyholders with underwriting issues. He has been involved with medical professional liability insurance since 2007. Prior to his work at SVMIC, Brian worked in the clinical side of medicine and in broadcast media.