Practice Management
Contract Goals
What does the MCO need to do to accomplish its goals?
- Attract a wide range of providers within its target geographic
location, so it can provide all the services necessary.
- Keep plan enrollees satisfied, so they will remain with the plan.
- Generate competition among health care providers to reduce costs.
- Shift as much risk as possible to plan providers to reduce costs.
- Limit the expenditure of health care resources to reduce costs.
- Maintain a favorable reputation among providers. To attract providers
the plan needs to offer the continuum of care and ensure that quality
of care remains high. Therefore, the MCO may reduce the costs associated
with providing more care than otherwise would be absolutely necessary.
What do MCOs look for in a provider?
- Attitude—MCOS need to know that you understand, accept, and
embrace the tenets of managed care.
- Cooperation—MCOs want providers who will cooperate with the
gatekeepers and who understand the necessity for procedures that managed
care providers must follow, including referral processes, pre-certification,
retrospective utilization review, and prospective admission planning.
- Collaboration—MCOS seek physicians who understand that patient-physician
satisfaction is closely linked to patient-plan satisfaction and who
therefore are interested in feedback and evaluation provided by the
payor. Those physicians who analyze the information provided and use
that information to improve their practices are often more favorably
financially rewarded.
- Reputation—MCOs look for providers with strong reputations:
those who are well regarded by other physicians and have large patient
bases. In many cases, MCOs prefer high-recognition providers with large
patient bases and large market shares over high-quality niche practices
with small patient bases and minor market shares. Larger practices
usually translate into a larger market share.
- Geographic coverage—Practices that are located within a strategic
market offer a key component to the managed care profile.
- Accessibility—Patient convenience is very important to the success
of an HMO. Therefore, the services offered by participating providers
must be accessible to the plan's beneficiaries.
- Service Coverage—Managed care organizations want providers who
can provide a full spectrum of services for their patients. The fewer
providers they need to contract with (or at least the fewer number
of referrals they have to manage), the less costly the plan is to administer.
In addition, the more that can be done in the physician's office and
the less that needs to be done in the hospital or other facility, the
lower the cost to provide the ancillary service.
- Favorable Outcomes—Physicians with unfavorable outcomes often
have unhappy patients who may disenroll from the managed care plan
or gripe publicly about the plan. This negative image costs money to
counter. MCOs also value patients recognizing the quality of care,
a related service that comes from good patient relations.
- Lower Costs—The mantra of managed care has traditionally been
providing services at lower costs.
- Ability to Assume and Manage Risk—This may be the most important
issue to the health care provider. The management service organization
(MSO) wants its providers to make the fixed arrangements work so that
over the long term they will be able to continue to provide care for
patients and avoid patient/doctor turnover.
What are the objectives a typical MCO has when negotiating with providers?
- An acceptable provider panel
- Reasonable reimbursement rates
- Favorable provider and facility contract terms
- A planned framework for future relationships and growth.
What objectives should the physician have for forming managed care
plans?
- Market share—Physicians sometimes fear that if they fail
to participate with certain plans, they will lose part of their current
patient base. Others view managed care plans as a way to attract
new patients and expand their market share.
- Diversity—Some providers try to participate in as many plans
as possible in order to prevent any single plan from becoming the dominant
player influencing their practice income. This is sometimes called
the "thirty percent rule".
- Satisfaction of other provider needs—Physicians participate
with managed care plans because their affiliated hospital has joined
the plan and they perceive a need to help the hospital by admitting
patients there. This objective is common in PHO and IPA arrangements
that partner physicians with hospitals.
- Favorable reimbursement—Predictability often implies a fee-for-service
based reimbursement approach, with prompt payment. However, it is the
MCO's perspective that capitation payments mean regular planned expenses,
with significant risk for care passed to the provider.
- Predictable incomes—Capitation payments can provide the favorable
outcome of smoothing out cash flow, if all risks and hidden costs are
understood and addressed.
- A framework for a future relationship—You should view your relationships
with managed care plans on a long-term basis, even if you are offered
short-term contracts.
How to Negotiate
1. Prepare to Negotiate
2. Conduct the Negotiations
3. Develop a Checklist
1. Prepare to Negotiate
Preparing to negotiate should begin with an understanding of the goals,
objectives, strengths, and weaknesses of your practice and of the other
negotiating party. Without adequate preparation, many physicians feel
taken advantage of by the MCO during negotiations. Preparation is one
key success factor that generally is within control of each negotiator.
It is important to develop a strong understanding of the financial
and administrative ramifications of the contract, the amount and type
of risk you are asked to assume under the contract, and your position
on every important matter. Be realistic about the weight of each contract
item, and understand that both parties may have to concede issues.
The physician-shareholders should determine their objectives by reaching
consensus on several issues.
- Why does your practice want to join this MCO? The issues you wish
to pursue and the relative importance of each should be prepared.
- What are your practice's strengths and weaknesses? How will they
affect negotiations? Does your practice provide the full range of services
pertinent to cardiology?
- What are your perceptions of the organization's "bottom line"
for negotiations and how much it is willing to concede to obtain an
agreement with you?
From this point, you are ready to review the proposal and begin the
actual negotiating process.
2. Conduct the Negotiations
One of the first decisions you need to make in the negotiating process
is the location. Some physicians believe that location is one of the
most important factors; however, it is rarely a decisive factor in
success or failure of the contract. If you feel more comfortable in
your own office, hold the negotiations there.
The review of the contract will reference essential
documents. Therefore, ensure that every physician in the group
has a copy of each of these documents.
Even if you are a good negotiator, you should consider hiring professionals,
such as accountants, practice management consultants, and attorneys,
to advise or even represent you at the negotiating table. Be certain
these professionals are experienced in health care law and consulting.
If you do decide to stay on the sidelines and have someone represent
you, you still should be aware of what is and is not in the contract,
what adjustments you want to achieve, and what tradeoffs you are willing
to make. You must advise your representative of your goals and monitor
his or her performance. Then, sign the contract only if you are satisfied
with its contents.
Even if the first one or two negotiating sessions are not very productive,
this is a good opportunity to evaluate the personnel with whom you and/or
your advisors will be negotiating. Learn all you can about the contract
and the contractual relationships you are considering entering into.
This is the time to ask questions and prepare for the "real" negotiations.
Regardless of what is said at a session, only what is written in the
contract will matter. If it is not written in the contract, no matter
how large or small the term or condition, it never legally happened.
Make sure your contract reads exactly how you want it to before you sign
it.
When you receive an offer from a managed care organization, make sure
you ask the necessary questions. Develop a thorough list with the input
of your advisors to make sure the questions you ask are appropriate and
have meaning for your specific practice.
3. Develop a Checklist
Assess the MCOs standard contract
Focus on the MCOs policies and practice
protocols
Addressing medical records
Payment issues
Assess the contract's terms and
termination items
Addressing dispute resolution
List of Essential Documents
- Description of covered benefits
- Non-covered services
- Withhold percentage and distribution of these amounts
- Capitated rates and payment dates
- Risk pool amounts and distribution
- Policy and procedure manuals
- Utilization and authorization procedures guidelines and utilization
targets
- Quality assurance policies and procedures
Assess the MCOs standard contract
- Will you be limited in terms of referrals you can accept?
- Will enrollees be able to refer themselves to your practice?
- Are you being asked to provide a package of services that the MCO
considers on its "product lines"?
- What is the capitation rate?
- What degree of risk will you bear?
- What services will you provide/not provide?
- How does the MCO handle subcapitation for service? If your patient
needs a service your practice does not provide, is it your responsibility
to subcontract for the needed services?
- What about carve-outs?
Focus on the MCOs policies and practice protocols
- Ask for a provider manual or written set of policies on which you
can agree or at least live with. Determine who establishes these
policies.
- Obtain current copies of all incorporation, bylaws, or similar MCO
documents, and review them. Make arrangements to be notified in writing
of any modifications.
- Does the MCO have a peer review or utilization review program? Can
the MCO make changes in these programs without your input or without
notifying you?
- Who defines "quality of care"?
- Define the services available to your patients (physician, hospital,
pharmacy, ancillary care).
- Are you required to be available on a 24-hour basis? What about call
coverage and emergency appointments?
- Who arranges for physician coverage when you are absent or on vacation?
Does the replacement physician need to be under contract to the same
MCO?
- What are your obligations when your patients are seen by covering
physicians?
Addressing Medical Records
- Are the contract's record terms and conditions in compliance with
state law? Consider matters of patient confidentiality.
- Are you required to cover the costs of any records you must provide
to the MCO?
Payment Issues
- Will you be paid by fee schedule, at a reduced rate, or by capitation?
- What are your financial incentives?
- How can you optimize your financial rewards?
- Does the MCO require the patient to make co-payments? Is these a
deductible? What about coinsurance?
- Can the MCO change any or all of these rates? Eliminate them? Can
it do so without your consent or without notifying you?
- Does the contract specify a time limit for the submission and payment
of claims? Is there a penalty?
- Are you protected against the retroactive denial of payments?
Addressing the contract's terms and termination
items
- Can either party terminate the contract without cause? With
cause?
- Causes that constitute a breach of contract must be clearly spelled
out. Understand them and agree with them before signing the contract.
- Make sure the contract clearly defines the termination process.
Obtain in writing the number of days before the contract is terminated,
as well as your appeal rights.
- Are you contractually obligated to continue to provide services
after the contract has been terminated?
- What happens if the MCO becomes insolvent or bankrupt? What are your
legal obligations?
- Under what circumstances can you terminate the contract?
Addressing Dispute Resolution
- Does the contract provide for arbitration of disputes?
- Where will disputes be resolved? (your office, MCO headquarters,
elsewhere?)
- Make sure you have the right to participate meaningfully in the process.
Contact membership@acc.org;
800-253-4636, ext. 5603; 202-375-6000, ext. 5603
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