If It Ain't Broke, Don't Fix It… Or Maybe You Should

The importance of a healthy bottom line is fundamental to the survival of any health care provider, whether it is a 300-bed hospital, a specialized surgical center, or an emergency department of a community based urgent care center.  The continuing existence of any health care provider is becoming more and more dependent on the success (or lack of success) of the relationships these entities have with a Managed Care Organizations (MCO), and the managed care agreements that connect a health care provider and the MCO.  These relationships will often start off with enthusiasm and a drive for a mutual successful relationship.  As these relationships mature, it can be beneficial to review the agreement and determine if it is still mutually beneficial, or alternatively, if it has become stale and needs updating.

It is not uncommon for a health care business to have an agreement in place with a MCO that has been in place for over a decade.  It doesn’t take a lot of thought to understand that things can, and do, change in that period.  The question then becomes, “Does the contract need to be ‘fixed,’ or brought up to date?”

1. How old is the agreement?

It is normal for a health care provider to have no idea, or a very feeble idea, when they signed an agreement with a MCO.  If this is the case, it may be a good time to find a good dust cloth and do some clean up.  It may be startling what you discover.  It is suggested to start a review for agreements older than 5 years to determine how it may be affecting your bottom line.

2. What am I being paid?

One of the most surprising issues health care providers may discover is how much they are being reimbursed for their services— and not in a good way!  MCO are adept at including language in agreements that provide no means for increasing fees based on growing business and/or cost of living expenses.  It is possible that some health care services are being performed at a loss!

3. What are the actual contractual provisions?

Frequently, MCO agreements will include terms that permit the conditions and provisions of the agreement to be modified, and controlled, by a provider manual.  This is accomplished through particular terms of the contract that permit changes to the agreement to be made with notice and adherence to the conditions of this provider manual. When modifications are made, the provider manual will often require the health care provider to access the modified conditions through the MCO website.  The terms of the agreement may further stipulate that when changes are a “material modification”, to the agreement, it will require prior written notice to the health care provider with a defined number of days in which to respond if the modifications are unacceptable.  If the health care provider does not respond to the MCO rejecting the proposed modified terms, they will thereafter become part of the agreement. If such terminology exists in your older managed care agreement, it may be possible that the agreement that you have on file, as the fully executed agreement, does not include all the updated terms and conditions in which you are delivering health care services.

4. With whom am I actually contracted?

In today’s health insurance market place, it is becoming more and more common for insurance companies to merge or become acquired.  When this occurs, it can be extremely difficult to know who holds the agreement.  What can make matters worse is if the MCO that you have an agreement with is no longer in existence, or has been purchased by another organization. The conditions of this agreement can still be amended by terms on the provider manual.

5. It looks like the agreement needs to be fixed. What now?

Now that you have taken the time to review the agreement and found that it is in the best interest of your business to update, how do you go about accomplishing this?

Often, there will be contact information in the body of the agreement that can provide a direction to begin renegotiations.  If this information does not exist in the agreement, it may be necessary to review documentation related to the initial contract negotiation, or in some instances, performing a web search to begin the process of locating the correct telephone number, email address and/or names.

When the appropriate contact is made, it may take some time and persistence to get the contractual ball rolling, but if it in the best interest of your business, then it is worth some patience and persistence.

Once the ball gets rolling, it is recommended that you have an idea of where you want the relationship to go. For example:

  1. The agreement is working for your business, except for certain provisions. You should be able to specifically identify what terms need to be changed or updated.
  2. Does the entire agreement need to be updated? If so, make sure that it is clearly understood with what company, or companies, you will be entering a business relationship.
  3. What are you going to be paid for your services?  Is it better than what you were previously being paid? Does it include language for increases in cost of living? Annual increases for market growth?
  4. If it is discovered that the terms of the current agreement are no longer acceptable, and the terms of the proposed agreement are not in the best interest of your business, know how to get out of the current arrangement. It may be possible that termination can take from 90 days, or up to a full year depending on the specific terms of the contract.

It is understood that contractual review and negotiation can be a confusing and overwhelming process, but it is a vital part of the success of a health care business. 

The items discussed here are just a few points to an overall contractual review, negotiation, and implementation.  Medical Practice Success is available to help you obtain successful arrangements for your business now and in the future! 

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