Contracting is the starting point for every neurosurgeon in the managed care process. It is not an automatic procedure; neurosurgeons must apply for and be accepted into the plan’s contract. As many have observed, the initial stages of contracting can be surprising and, in some cases, an unpleasant experience for neurosurgeons not accustomed to the process.
The Power of Negotiation
The most difficult obstacle for a neurosurgeon entering into a managed care agreement is that he or she will lose a degree of freedom of independent action, as will his or her patients. Everything that is good or bad in a managed care contract depends on how well physicians negotiate agreements. Consequently, neurosurgeons must learn to deal with new issues involving contract analysis and negotiation.
With fixed prepayments and risk sharing, neurosurgeons must conduct a careful review of each page, each paragraph and every term of a managed care agreement. And, before signing on the dotted line, they must seek expert legal assistance from attorneys familiar with health care law and contracting.
Understanding the Contract
Managed care contracts are always state and health care plan specific, and are typically designed for a modified fee-for-service deal or an arrangement covering capitation. In contract negotiation, it is important to know which conditions or terms are negotiable.
For example, certain federal or state language cannot be modified. Sections you must attempt to modify or delete include terminology indicating that the physician holds the health plan “harmless.” Such a provision may negate all or part of the physician’s malpractice coverage. Consultation with the plan and the insurance carrier should be completed before such an item is included in the contract.
When negotiating with health plan providers, neurosurgeons will want to bring to the table a list of their top 10 or 20 procedures and their usual fee schedule. Because these procedures will account for most of a practice’s cash flow and encounters, neurosurgeons must ensure the health plan’s proposed payments for these services are adequate. They should be enough to offset any other reductions on the infrequent, but expensive procedure.
Recognize the Red Flags
Of the many issues that surface in a contract, some bear particular attention. One of these is the impact of withholds. Withholds are a common component of contracts, and result when a portion of the physician’s reimbursement is held back by the payer as a reserve to cover unexpected costs.
When reviewing a managed care contract, the agreement must specify how, when and under what conditions any such reserves are to be distributed. Neurosurgeons should note whether the agreement specifies if the withholds are the limit of each physician’s risk, or if the physician can be held financially responsible for losses in excess of the withhold. Neurosurgeons should be cautious about some managed care plans’ promises of withhold returns or proof of such payments going back several years. The medical environment is too unstable to sign a contract based on the outlook that the record of past payments will continue in the future.
Indications that the plan might be encountering financial difficulties, suggest that a neurosurgeon should not sign an agreement with that organization. Recall that if the plan files for bankruptcy, physicians might be obligated to continue providing services. Physician claims generated before the filing will not be paid until the bankruptcy is resolved.
Neurosurgeons should always obtain information on a plan’s financial status, including the amount of reserves, underwriting gain and level of administrative costs. Plans in potentially precarious financial condition will be identified by such data andd suggest that the plan may not be capable of paying its claims in a timely manner.
Another issue that affects negotiations is the anticipated volume of new patients. Any promises by the plan of minimum numbers of new patients should probably not be taken as anything more than overoptimistic estimates.
Also, neurosurgeons should be concerned what “new patients” means. If “new” means patients previously unavailable to the practice, then that is positive. However, if the new patients were previously the practice’s private patients that have since been enrolled in the local health plan, all the neurosurgeon will be getting are his or her old patients back at a discounted reimbursement level.
Finally, neurosurgeons should negotiate contracts based on the relative size of the patient pool. If the plan is a start-up, or one that does not have significant market penetration, neurosurgeons should take a more aggressive negotiating stance.
Know When to Say No
If at any point in the negotiation process things are not progressing, and the costs and risks are not balanced by real dollars, neurosurgeons must recall and use the overriding principle in all negotiations – know when to say thank you, smile, get up from the table and walk away.
John A. Kusske, MD, is the Chair of the AANS Managed Care Advisory Committee.