Contracts between health plans and healthcare providers set forth the terms and conditions under which the parties will interact.  Generally, the contracts are drafted by the health plan and contain clauses that favor the health plan.  As a result, it is important for the healthcare providers to understand the contractual terms presented by the health plan contract.  Regardless of whether you, as the healthcare provider, attempt to negotiate the terms of the contract with the health plan, it is helpful to keep the following contractual categories in mind:

1.) Read the Contract – While this sounds simple, many providers do not read their health plan contract.  The contracts are drafted by the health plans and therefore, are drafted to benefit the health plan.  It is important for the provider to read the entire contract so the provider knows and understands its contractual obligations.  Often, health plan contracts incorporate other documents, clinical coverage policies, or federal or state regulations into the health plan contract.  When the health plan contract does this, the provider is then bound by all those incorporated references.  It is important for the provider to read the incorporated references before signing the health plan contract.  If the provider does not read the health plan contract and the incorporated references, the provider may not fully understand its obligations under the health plan contract and incorporated references.

2.) Utilization Management – A hallmark of managed care contracts is approval of provider services through a utilization management process prior to administration of the services.  The health plan contract may subject the provider to a multitude of requirements and obligations the provider must meet before the health plan will approve the services.  Again, these utilization management requirements may be embedded in policies and procedures incorporated by reference into the health plan contract.  The providers should carefully review and understand the utilization management requirements.  For example, health plans will often only reimburse providers for “medically necessary” services.  The definition of “medically necessary” services may vary depending on the health plan contract.

3.) Quality Assurance Provisions – Health plan contract generally grants the health plan broad quality assurance rights over the network of providers.  The health plans use these provisions to oversee, audit, review, and inspect the quality of services provided by providers.  Providers should pay close attention to the circumstances under which the audits can occur and whether notice of the audit to the provider is required.  Similarly, the health plan may allow broad authority for the health plan to review all documents retained by the provider.  At times, the health plan my subject the provider to audit by federal and state entities such as the Centers for Medicare and Medicaid Services or state Departments of Health and Human Services.

4.) Reimbursement and Billing – These are important issues that providers can overlook.  At times, providers view entering the health plan network as an entree to consumers, but do not consider reimbursement requirements.  The contractual terms applicable to this element, however, should not be ignored because they outline the how, when, and what the provider is paid for services.   The provider should analyze whether the reimbursement rates and reimbursement process are sustainable under the provider’s business model.  For various reasons, health plans often reduced reimbursement rate.  In that light, some health plan contracts permit the health plan to unilaterally reduce reimbursement rates with minimal or no notice to the provider.  Similarly, providers should pay close attention to claims submission requirements.   The health plan contract may require the provider to follow multiple steps when submitting claims.  The health plan contract may also set forth time periods for payment of claims which may not be sustainable under the provider’s financial structure.  As a provider, you need to consider these issues up front.

5.) Termination Provisions – The provider should know  the circumstances under which the health plan contract can be terminated.  For example, some health plan contracts only permit termination by the health plan, but not the provider.  As a provider, you may not want to be stuck in a health plan contract from which you cannot escape.  Similarly, the provider should consider whether the health plan contract permits both for cause and not-for-cause termination.  The provider should be aware of the conditions under which they can be terminated from the health plan network.  In that light, an attorney can help you understand how the termination provisions are interpreted by courts and enforced.  Termination of a health plan contract by either party can become a trigger point for litigation, which can lead to increased expenses.  It is important for a provider to understand the termination provisions before entering the health plan contract.

The contract between a health plan and a provider is the cornerstone of the relationship between the parties.  As a provider, it is imperative that you read, review, and understand the health plan contract before signing the contract.  Taking the time to understand the contract at the outset of the relationship can save you time and money in the long-term.  In that light,  it is beneficial to consult with an attorney who can review the contract before it is assigned to help address the areas of concern identified above.

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