Yesterday's HD Insights Blog Post identified fourteen common traps for basic hospital and physician contracts, and the negotiating strategies around them. Today's post delivers Part II of this article--with fourteen more tips. Again, some of these tips are obvious, yet one would be surprised how many payers’ “boilerplate” or “standard” contract templates do not address these issues in a manner that provides reasonable protections for providers.
We hope that you find at least one valuable insight from the 28 tips mentioned in these combined articles, and encourage you to comment below on other tips you might wish to share with others. (Ed. note: Nothing in this article or the member comments below should be construed as encouraging a party to deal or not to deal with a payer.)
- Protection from Bad Debt. Bad debt can be worth 3 percentage points or more of the total yield on a managed care contract. As employers push an increasingly large portion of financial responsibility onto employees, providers’ bad debt and the cost to collect patient liabilities will increase. Benefit plans can be designed to reduce the provider’s bad debt exposure (e.g., by deducting a patient’s financial responsibility from his or her pay check and remitting it directly to the provider). Depending on what kind of products and benefit design the payer sells, your exposure as a provider could increase or decrease. Talk with the payer about how you can be protected from bad debt exposure. And make a provision for it in a yield guarantee (see below).
- Get a Yield Guarantee. Simple concept, tough to operationally define, tougher still to negotiate, but the ultimate protection. Concept: At the end of the year, did I get the percent of charges I thought I would when I negotiated this deal, or did the “fine print” cheat me out of it? For some payers, the fine print can be worth 6 – 8 percentage points or more. Plus the administrative hassles. The details can get excruciating, but don’t give up. If necessary, agree to hire a mid-level audit firm familiar with healthcare experience to play referee. Payers are giving this. If they intended to pay you x percent of charges, then they shouldn’t protest. But it has to cut both ways.
- Look backs. Limit look back periods to 12 months after payment is received. Both parties. Don’t allow exceptions in the case of “fraud”, unless fraud is very carefully defined. Otherwise, a vaguely defined fraud exception just becomes a backdoor way to allow look backs forever.
- Recoveries. Do not agree to allow recoveries to be made against future payments. And hire a recovery firm of your own to review otherwise closed accounts. These firms usually work on a percent of recoveries, so there’s no expense to you. Make sure they provide detailed reports of their findings so you can learn from your mistakes (e.g., change the way you do billing and/or change provisions in the contract next time it comes up for renewal).
- Waiver of rights. There are many state laws that were put on the books to protect providers against the bad deeds of insurers. Examples include interest penalties on late payments and the right to balance bill certain patients. Standard language on some contracts would have you waive those rights. Don’t do it. Laws were created for a reason. If the payer doesn’t plan to violate those laws, they shouldn’t mind following them.
- Conflict resolution. Used to be, arbitration was a good thing. Experience has shown it costs as much and takes as long as the courts, but the process requires you to give up certain rules of evidence and the right to appeal an adverse decision. Avoid both binding and non-binding arbitration. If a conflict arises, the parties can always agree to non-binding arbitration later. But to make it a contractual requirement just adds a year or more to the resolution you might otherwise get through the courts. Of course, the jurisdiction should be your home state. Don’t agree to a bench trial, juries love to spank misbehaving managed care companies. And don’t waive your right to join in a class action lawsuit either.
- Evergreen Terms. Anticipate that difficulties may arise during contract renegotiation. Allow for evergreen periods. Make sure they include annual inflators pegged to inflation indices relevant to the healthcare industry. Otherwise, the payer has all the incentive to drag out discussions or even not renew the contract, and you have to “eat” inflationary costs.
- Avoid “Forever” Contracts. Read carefully language about termination, including termination at the end of the contract term. Some “standard” contracts may construe the very right to terminate as being subject to the contract’s dispute resolution provisions. Is the right to terminate the contract itself subject to arbitration?
- Gag Rules. While it is certainly appropriate for certain terms of the contract (e.g., rates) to remain confidential, don’t allow overreaching limitations on your rights to communicate directly with employers, patients, the media, etc.
- Signing bonuses. If there’s a “special project” you’re pursuing and capital funds are tight (e.g., that new electronic medical record system you are eying to improve patient safety), don’t be afraid to ask. But do so after all other key deal points are negotiated. Don’t trade off a one-time signing bonus for other concessions that may have a higher value over the life cycle of the contract.
- Haste Makes Waste. As managed care companies have consolidated, the skill level of their negotiators has increased commensurately. Providers who negotiate only a handful of contracts a year are little match for highly compensated (e.g., often in excess of $1.0 million in total compensation per year) professional negotiators who work argue their boilerplate contracts every day, and have a ready answer for every issue. Resist getting boxed into committing to finish negotiations by a date certain. Once you put your head in that noose, it’s “burn the clock” time for the other side. Rather, commit to a certain number of hours per week. And don’t feel apologetic for having to take a time out to attend to other responsibilities. That’s just another pressure tactic.
- Take a “Time Out”. Prior to signing the final documents, take a few days off to regain perspective. Do a fresh read of the documents, and come back for one last round of discussions if there are issues with which you’re still not comfortable. If it still bugs you now, just think how you’ll feel about it later.
- Don’t Waive Your Rights. After you have a deal, payers are beginning to request/demand a separate agreement be signed that gives up group rights to join any and all class action suits during the life of the contract – and even beyond. Try to avoid entering into these agreements, or at least restrict it to certain categories of class action. After all, if they don’t intend to do anything wrong, why should they need this kind of super-ordinate protection. But they do tend to be tenacious.
- Sunset Clauses on the Back End. Be sure to have “sunset clauses” for protections on the back end, and do a careful editing of definitions and other language to ensure appropriate terms “survive” the termination of the agreement. For instance, you should seek protection that they will keep paying you after termination as claims run out, that the same policies and procedures would be in place post-termination for claims incurred while in network, etc.