ASC Managed Care Negotiation Best Practices: Tip #4

In our first tip, we discussed the preparation needed for successful contract negotiation. Our second tip explained the contract language that needs to be addressed regarding covered services and reimbursement. The third tip covered other areas of contract language that require close scrutiny. This tip addresses critical information to gather when researching managed care organizations (MCOs).

Tip #4: Critical Areas of Focus When Researching Managed Care Organizations

When contracting with MCOs, remember that they have an entire legal department specializing in obtaining the best financial outcome for their company. That's why it is essential that you have, at a minimum, an experienced managed care negotiator in your corner.

Before moving ahead with managed care contract negotiations, conduct extensive research on the MCO. The following is a list of important areas to focus on:

Company information — Obtain as much of this information as possible prior to negotiation, including:

  • Number and name of states covered
  • Types of contracts offered
  • Litigation history
  • Accreditation status
  • Licensure status
  • Financially stability

Contract information — Examine the following clauses and key terms closely:

  • Termination clause and notice requirements. The termination clause should be mutual, including with or without cause and length of written notice (calendar or business days). If you can’t get termination without cause, then request a short contract term (e.g., one year).
  • Contract renewal terms. The “term of the contract” is the time for which it is to be in effect. Most plans are two- to three-year contracts which are then renegotiated if both parties wish to continue the relationship. Contracts often have provisions for automatic renewals (“evergreen”) if neither party exercises the right to terminate. It is important that the provider understands that the contract cannot be renegotiated until about six months prior to renewal date.
  • Mutual indemnification/hold-harmless agreement. An indemnification provision, also known as a "hold harmless" provision, is a clause used in contracts to shift potential costs from one party to the other. In a mutual indemnification, both parties agree to compensate the other party for losses arising out of the agreement to the extent those losses are caused by the indemnifying party’s breach of the contract.
  • Contract changes. Any changes to the managed care contract should be in writing and only after agreement by both parties.
  • Covered services. The contract should list all the services the provider is to provide. It should also list which services are excluded from coverage.
  • Provider directory. The contract should guarantee that the provider be listed in MCO's print and electronic provider directories as quickly as possible and the provider should have preapproval of the descriptions used in the directories.
  • Arbitration. Request an arbitration provision in the contract, specifically that the arbitration be held in the same geographic area as the provider. This is the best way to sue for monies that have not been paid by MCOs on legitimate claims.
  • Compliance with provider’s state laws. Contract should contain language that states the MCO agrees to comply with all of provider’s applicable federal, state and local laws and regulations.
  • Methodology of payment. Each MCO has its own methodology of determining reimbursement rates. It is important to know what basis the MCO uses. Payer fee schedules are often based on the outdated grouper system which typically produces rates lower than Medicare rates. The preferred methodology is the updated Outpatient Prospective Payment System (OPPS) based on CPT codes. The MCO may also have a pre-determined fee schedule and the provider has the option to accept it or see if there is any room for negotiation.
  • Bundling. ASCs already offer bundled pricing for the pre-operative medical exam and ASC facility fee, which includes supply cost (including anesthesia supplies). However, as fee bundling becomes more prevalent, the ASC may have to negotiate with the surgeon and anesthesiologist to provide pre- and postoperative care.
  • Timely filing limit on claims submission. Request 12 months as the claim submission period (same as Medicare requirements).
  • Time guarantee claims payment. Request 30 days or minimum required by provider’s state prompt-payment laws.
  • Definition of clean claim. A clean claim is defined as a complete and accurate claim form that includes all provider and member information as well as records, additional information or documents needed from the member or provider to enable the MCO to process the claim. Require that the MCO notify the provider of any deficiencies within 15 days of receipt. If no notification is received, the claim is deemed to be a clean claim and must meet the time guarantee. Also, if additional information is requested from provider, MCO must pay claim within 15 days after receipt of information from provider.
  • Adjustments for incorrect payments. Providers should attempt to remove clauses in the contract that allow MCOs to offset prior overpayments against current payments as this method often causes confusion to provider's accounting. If there is a clear obligation to refund, request that the provider remit a separate check to MCO for overpayments. Also, any obligated refund by provider should apply only to "undisputed" duplicate or erroneous claim payment.
  • Requirements for prior authorization and eligibility verification. Providers are responsible for verifying eligibility and health plan enrollment prior to providing non-emergency services. Verification requirements vary between MCOs. These should clearly be outlined in the contract.

These are just a few of the many terms and clauses contained in most MCOs' contracts. Legal language is often difficult to interpret, which is why it is important that you ask for explanations of any areas that you do not understand. It may also be prudent to have your contract reviewed by an experienced managed care attorney.

Although there is currently a growing “take-it-or-leave-it” trend in managed care negotiations, if you have conducted the necessary research, asked the important questions and worked with an experienced negotiator, you will be in a better position to secure a solid contract with the best reimbursement possible for your ASC.

Access Tip #1 on Preparation, Tip #2 on Defining Terms/Terminology (Part I) and Tip #3 on Defining Terms/Terminology (Part II). Stay tuned for the final tip in the series (Tip #5) on Negotiating Strategies. Catch up on previous tips here.

Catch up on previous tips here.

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