Understanding the Negotiation of Managed Health Care Contracts

By: Mathew J. Levy, Esq.
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To the dismay of the majority of physicians today, both the practice of medicine and the  “Business” of medicine have become so intertwined that it has become impossible to differentiate the two.  Unfortunately, those physicians who either choose to resist this trend, or worse, ignore it altogether, all too often find themselves mired in unfavorable contractual relationships which, in turn can lead to lower revenue to the practice.  While physicians understandably wish to focus on the treatment of their patients, it is now essential that they understand the importance of properly handling the business of medicine as well.

One such aspect of the business of medicine that physicians often ignore is the negotiation of managed health care contracts.  Unfortunately, most physicians do not know that these contracts are negotiable.  Accordingly, these physicians enter into such agreements without even reading its terms and, satisfied with just the mere prospect of treating the respective health plan’s insured’s, store the agreement away never to be seen or found again.  The provisions of a managed health care contract are just as important as the respective insurance carrier’s fee schedule, and again, are negotiable.  The purpose of this article is to quickly highlight a few concepts to consider in negotiating a managed health care contract.

Indemnification or “Hold Harmless” Provision

When a health plan offers a contract to a physician, its terms will be unfairly and predictably favorable to the carrier.  One such example of a “one-sided” term is the indemnification or “hold harmless” provision of the contract.  An indemnification provision essentially protects one party to a contract from any liability arising from the actions or omissions of the other party to the contract in performing its obligations therein.  Often, a proposed contract will provide this protection only for the health plan.  Therefore, it is important that the indemnification provision be modified so as to provide mutual protection against the respective liabilities arising out of actions or omissions of both parties – essentially forcing both parties to handle their own liabilities.

Termination Without Cause

As in any agreement that a physician may enter into, it is essential that there exist an “exit strategy” whereby the contract can be terminated for any reason.  As the contract will likely contain terms that may change according to factors outside the physicians’ control, it is necessary that the physician be able to terminate the contract if those changes cause its terms to become onerous or result in the practice losing money.  This is of particular importance if the health plan, pursuant to the provisions of the contract, chooses to reduce the amount of reimbursement for a particular service under its fee schedule.  Thus, if this reduction in fee reimbursement causes the contractual relationship to become untenable, it is essential for the physician to have the ability to terminate it.

Evergreen Provision

Similarly, it is important for the physician to be able to re-negotiate the terms of a contract over time, while at the same ensuring it remains in effect without interruption.  This can be established by insisting that an “evergreen provision” be added to the contract.  An evergreen provision provides that the contract (and its present terms) will automatically renew at a set time interval – usually every year.  While this provides the physician with the peace of mind that the contractual relationship will carry on without interruption, it also provides a mechanism whereby the physician can force re-negotiation of certain provisions of the contract in anticipation of the renewal.  This ability to re-negotiate is essential as it allows the physician to avoid “being stuck” with unfavorable terms for an untenable period of time.

Claims-Based Provisions

At the heart of a managed health care contract are the provisions setting forth the obligations of both parties when it comes to the actual submission of claims and the subsequent payment thereof.  It is in the best interests of the physician that the contract provide for both a clear and efficient methodology for the submission of claims and the prompt payment of those claims by the health plan.  Therefore, it is essential that the physician take great care to review these “claims-based” provisions to ensure the cost-effectiveness of the contract to the practice.  To that end, the physician is encouraged to pay particular attention to the following:

  • the amount of days a physician has to submit a claim after performing a particular service;
  • the documentation a physician must submit with a claim;
  • the amount of days a health plan has to remit payment upon receipt of a claim;
  • the amount of interest, if any, the health plan will pay if remittance of payments are late; and
  • the amount of time the health plan has to institute overpayment procedures.

Conclusion

Even in this brief discussion, it should be apparent to the physician that, when it comes to the business of medicine, complacency will only serve to the detriment of the practice.  In entering into agreements with managed health care plans, physicians are well-advised to carefully review its terms and provisions, negotiate with the health plan.

Mathew J. Levy is a Partner of the firm and co-chairs the Firms corporate transaction and healthcare regulatory practice. Mr. Levy has particular experience in advising health care clients with respect to contract issues, business transactions, practice formation, regulatory compliance, mergers & acquisitions, professional discipline, healthcare fraud & billing fraud, insurance carrier audits including prepay and post payment review, litigation & arbitration, and asset protection-estate planning. You can reach Mathew Levy at 516-926-3320 or email: mlevy@weisszarett.com.

New York State Physician Profile: A Practitioner’s Guide

By David A. Zarett, Esq.

After some highly publicized cases involving “bad outcomes” by physicians with prior disciplinary histories which were otherwise unknown to the public, in particular the Lisa Smart matter of 1997, the New York State Legislature passed and Governor George Pataki signed into law, the New York Patient Health Information and Quality Improvement Act of 2000 (the “Act”), creating what we now know as the New York State Physician Profile (“the Profile”).1

The Act can be found at New York Public Health Law § 2995 et seq. (“the Profile Statute”) and its regulations can be found at Title 10 N.Y.C.R.R. 1000 et seq. (hereinafter, the “Profile Regula-tions”). In general the Profile is a publically available online database which contains a wealth of information about every physician licensed in New York State, including background on a physician’s medical education and training, board certification, medical staff privileging, and legal actions taken against the physician such as medical malpractice awards or settlements.2 In February 2002, some two years after the Act was signed, the Profile went live.3 The stated purpose of the Profile is to provide patients with information about health care providers and thereby improve the quality of health care in New York State.4

Data Collected-Initial

Data and Updating Requirements The data collected in the Profile spans from “required data,” such as education and board certification, to “optional data” such as publications and a statement by the physician. Significantly, New York Public Health Law § 2995-a (7) states that a physician who provides materially inaccurate information to the Profile is guilty of professional misconduct. One explanation for this particular provision is that the information maintained by the Profile is based on the information reported by the physicians in their initial profile submission upon licensure (10 N.Y.C.R.R. 1000.4) and pursuant to the physician’s self-updating requirements (10 N.Y.C.R.R. 1000.5).

Physicians can update their Profile information by contacting the Profile customer service center and obtaining a Physician Survey Form. The Physician Survey Form is a ten-page form which lists all the information a physician will find in their Profile and allows for modifications which are then submitted to the Profile for updating.7 There is also an online updating option which requires that the physician obtain a username and password from New York State.8

How is the Profile Utilized?

The Profile is utilized by patients, insurance payors, hospitals and physician rating/review websites (such as healthygrades.com and vitals.com), amongst others. The Profile has vastly increased the amount of data available to the public regarding physicians licensed in the State of New York. While many utilize the Profile, the information on the Profile is primarily based on self-reported data.9 Failure of physicians to timely self-report to the Profile has an obvious negative effect on the ability of patients to make informed decisions regarding their choice in practitioner and puts into question the accuracy of the information presented by physician ratings websites. It also puts physicians at risk for not following the Profile updating requirements. Attorneys representing physicians would be wise to remind their physician clients to confirm the accuracy of their profiles and to timely update their profiles. But that is easier said than done due to the lack of regulatory guidance about Profile updating.

Practical Guidance

There is confusion about what information needs to be updated to the Profile and when such updating responsibilities are triggered. One such area of confusion which we have encountered in our practice relates to New York Public Health Law § 2995-a(1)(d), the reporting of hospital privileges restrictions. Any restriction or loss of a physician’s hospital privileges constitutes non-optional information which requires updating to the Profile within 30 days.10 Recognizing physicians’ due process rights to challenge a disciplinary action taken against their privileges by a hospital, New York Public Health Law § 2995-a(1)(d) states that a physician must submit to the Profile “a statement of any loss or involuntary restriction of hospital privileges or a failure to renew professional privileges at hospitals within the last ten years, for reasons related to the quality of patient care delivered or to be delivered by the physician where procedural due process has been afforded, exhausted, or waived, or the resignation from or removal of medical staff membership or restriction of privileges at a hospital taken in lieu of a pending disciplinary case related to the quality of patient care delivered or to be delivered by the physician …” (emphasis).

In our practice we have faced this issue when representing physicians who have their hospital privileges summarily suspended, sought appeal of the suspension via the hospital due process hearing rights, and were successful in reversing the suspension through the intra-hospital hearing process. Upon review of the Profile Statute and Regulations, along with consultation with representatives at the Profile, we advised our clients that an update was not necessary even though they had been suspended from clinical practice at their respective hospitals for an extended period of time during the pendency of the internal due process hearing process. From a tactical standpoint, the ability to delay the updating or potentially avoid the updating of a hospital privileging adverse action can be very beneficial when representing a physician who is facing such a predicament. As a result of the paucity of regulatory guidance on the specifics of Profile updating in nuanced situations such as these, we have found it necessary to request two opinions from the Profile to determine whether a physician-client’s Profile updating obligations had been triggered. Requesting an opinion from the Profile on reporting obligations for your physician clients is a worthwhile avenue for attorneys to evaluate a physician’s updating obligations especially when an update would have the potential to damage a practitioner’s reputation. We have also found it helpful at times to call the Profile and speak to one of their knowledgeable staff members on specific client related issues.

Finally, on multiple occasions we have assisted physicians who received notice from the Profile of a posting of a malpractice award, with an appeal pursuant to 10 N.Y.C.R.R. 1000.3, requesting reversal of the decision to publish the award.11 This written appeals process permits the physician to submit factual clinical information to the Department of Health, which reviews the submission under the standard of whether the settlement/award is “relevant to patient decisionmaking.”12 In our practice, we represented a physician who had a substantial money damages verdict against him. Though it was his first settlement/award the Profile sought to post the award pursuant to 10 N.Y.C.R.R. 1000.3(b)(2)(i) as the plaintiff had suffered a permanent injury. We successfully appealed the decision to post the award to the Profile. While the jury found our client liable, the Profile (through the panel set up to review Profile appeals pursuant to 10 N.Y.C.R.R. 1000.3(b)(2)(ii)(a)) agreed that, “…despite the awarding of payment to a complaining party, appropriate provision of patient care was provided.”13 It is important to note the 30-day time limit by which the appeal must be submitted is based on the date of the Profile notice, not the date of receipt of the notice.14

Conclusion

If you are an attorney who represents physicians it is important for you to consider Profile related issues when representing your client in a wide array of matters. From the benign situation of a physician resigning privileges at one hospital in order to take a new position at another institution, to the more serious and career-threatening situation of a physician facing criminal charges, each may trigger a Profile update obligation. For those attorneys who represent physicians before the Office of Professional Medical Conduct (“OPMC”), one of the first things mentioned at the physician’s Interview by the OPMC investigator is the physician’s need to update their Profile. Ideally as a result of your counsel, your client will be able to inform OPMC that they are in full compliance with their Profile updating obligations. Furthermore, as explained, it is also critical that the physician’s Profile information be accurate as misleading information to the Profile constitutes professional misconduct.15 A relatively simple way to verify your client’s accurate reporting to the Profile is to assist them with the completion of their Physician Survey Form. Finally, if your client is faced with the obligation to update a negative change to their Profile (such as a criminal conviction) you may want to consider submitting an optional statement in which the physician can explain the conviction and potentially limit the reputational damage that can understandably result from such an update.

David A. Zarett, Esq. and Joshua A. Boxer, Esq., Weiss & Zarett, P.C. New Hyde Park, New York, representing physicians in “Profile” issues and related proceedings.

1. See Buettner and Sherman, New York Daily News, March 8, 2000, “Fight For Law To Open Malpractice Records.”

2. See Public Health Law § 2995-a, which lists the information collected by the New York State Physician Profile.

3. The New York State Profile is located at www.nydoctorprofile.com.

4. New York Public Health Law § 2995(1).

5. The non-optional information that a physician must update to the Profile within thirty days of any such change includes education and certification, board certification, teaching appointments, hospital privileges, participation in state or federal health insurance programs, translation services offered at their office, malpractice award payments, license actions, hospital privileging limitations, and criminal convictions. The optional information that a physician must update within 365-days of any such change includes practice office location, publications, professional community service activities, health plan contracts or other affiliations, and the physician concise statement which is an optional statement a physician can include on their Profile.

6. New York Public Health Law § 2995-a (4).

7. The Profile Customer Service Center can be reached at (888) 338-6999.

8. To obtain e-access for Profile updating online contact the New York State Health Provider Network at (866) 529-1890 to apply for an HPN account.

9. Physicians are required to report malpractice judgments and/or settlements pursuant to 10 NYCRR 1000.3, and those judgments or settlements are also separately reported by professional liability carriers pursuant to N.Y. Ins. Law § 315.

10. N.Y.C.R.R. 1000.5(a).

11. A physician is able to appeal a malpractice settlement/award posting to the Profile if they have two or fewer awards/settlements within the most recent 10 years. 10 N.Y.C.R.R. 1000.3(b)(1).

12. 10 N.Y.C.R.R. 1000.3(b)(2)(ii)(a).

13. 10 N.Y.C.R.R. 1000.3(b)(2)(ii)(a).

14. 10 N.Y.C.R.R. 1000.3(b)(2)(ii)(b).

15. See New York Public Health Law § 2995-a (7).