PCP Contracts – Class 7

Physician entering into HMO Managed Care Contract should:

Carefully review the contract and remember that the HMO might try to make the terms broadly worded and one-sided in their favor.

Physician entering into HMO Managed Care Contract should have their own health care attorney review their contract. Physician should review the contract and remember that the HMO might try to make the terms broadly worded and one-sided in their favor.

Typically, a provider relations department of an established MCO such as a HMO will offer a form provider agreement, personalized for the financial terms negotiated by the provider and the MCO. MCO’s tend to want this agreement accepted in nearly its original form, in order to maintain consistent terms among their various contracts with network providers. This helps reduce administrative burdens of maintaining multiple contracts. MCO’s might claim that the contract is not negotiable for reasons such as the contract has been approved by the applicable Department of Insurance or that the MCO is required by law to have certain terms.

“Hold Harmless” Provisions:

  • Hold harmless provisions in HMO contracts with hospitals prevents hospitals from seeking payment from HMO members for “Covered Services” rendered by the hospital, even if HMO does not pay for these services, or if HMO goes bankrupt.
  • This clause does not prevent hospital from looking to the HMO for payment, but this clause prevents the hospital from looking to the HMO’s members for payment for covered services.
  • If hospital is looking for payment for services not covered by the HMO that were rendered to HMO Member, then hospital can seek payment directly from the member for those type of services (“Self-Pay Situation where services provided are not covered by HMO contract).

This clause does not prevent the hospital from looking to the HMO for payment, but this clause prevents the hospital from looking to the HMO’s members for payment for covered services. If the hospital is looking for payment for services not covered by the HMO that were rendered to an HMO Member, then the hospital can seek payment directly from the member for those type of services (“Self-Pay Situation where services provided are not covered by the HMO contract).

“Hold Harmless” Provisions:
Hold harmless type of provisions in HMO contracts with hospitals prevents hospitals from seeking payment from HMO members for “Covered Services” rendered by the hospital, even if the HMO does not pay for these services, or if the HMO goes bankrupt

This clause does not prevent the hospital from looking to the HMO for payment, but this clause prevents the hospital from looking to the HMO’s members for payment for covered services

If the hospital is looking for payment for services not covered by the HMO that were rendered to an HMO Member, then the hospital can seek payment directly from the member for those type of services (“Self-Pay Situation where services provided are not covered by the HMO contract)

HMO’s in some states may be required to get approval of form provider agreements prior to use by the applicable state’s Department of Insurance. Often, established HMO’s also tend to submit amendment type forms for approval as well.

One way physicians can determine what is negotiable in the contract and not, is to find out what terms are actually required by that states governing bodies that regulate MCO’s such as the Department of Insurance. In Illinois, there are certain Preferred Provider Organization (“PPO”) laws, Third Party Administrator (“TPA”) laws and Health Maintenance Organization (“HMO”) laws.

Many states require specific terms to be in HMO’s medical service agreements with physicians. Such terms might deal with:

(1) providers being required to participate in quality assurance programs of the HMO,

(2) certain notice of termination type provisions such as requiring at least 30 days notice by the Provider for termination with cause, as defined by such Provider agreement and at least 90 days notice by the Provider for termination without cause, and

(3) certain requirements dealing with professional liability insurance such as requiring providers to have professional liability insuranceeffective as of the effective date of the contract and that the Provider will give at least 15 days advance notice of cancellation of such insurance.

In Illinois, there is a “hold harmless” provision that is required to be in HMO’s agreements with hospitals. HMO’s tend to put this type of provision in all or most of their various provider agreements. This provision is basically the essence of what HMO’s are about in terms of arranging for healthcare for their members and the members not being required to pay the actual providers for the services rendered, except for applicable copayments and deductibles. This goes with the concept of “per capita prepaid basis”because the providers are paid in advance for covered services to be rendered to members.

Basically, HMO members get an HMO identification card indicating that they are a particular HMO member and that you the providers are not to collect any money from this member, except for applicable copayments and deductibles. That is suppose to be one of the benefits of being an HMO member, the reduced paperwork for the Members.

This hold harmless provision prevents hospitals from seeking payment from HMO members for covered services rendered by the hospital, even ifthe HMO does not pay for these services, or if the HMO goes bankrupt. This clause does not prevent the hospital from looking to the HMO for payment, but this clause prevents the hospital from looking to the HMO’s members for payment for covered services. If the hospital is looking for payment for services not covered by the HMO that were rendered to an HMO Member, then the hospital can seek payment directly from the member for those type of services (“Self-Pay Situation where services provided are not covered by the HMO contract). This “hold harmless” provision is a strong clause because it survives the termination of the HMO’s contract with the hospital. Members of the HMO and those persons acting on such member’s behalf are third party beneficiaries of this clause, meaning they have rights under this contract.

Persons responsible for developing and negotiating managed care contracts typically have a high level of understanding of the following operational functions: services required by the contract and related costs; billing process; information systems and support; admitting, medical records, utilization review; and collections.

Terese Hudson’s article, “Providers Beware: Managed Care Contracts Can Be Tricky,” advises hospitals (providers) to: not just “sign and file” their managed care contracts, especially when these contracts might make up 20 to 40 percent of a hospitals business; only use capitation if the hospital is organized to handle the risk such as by having a PHO, not just a PPO in disguise; for hospitals to check out MCO’s – that a good litmus test is for the HMO to have at least 10% market share in its existing markets; find out if any corrective action plans have been issued to the HMO from state or federal regulators. As far as contract points this article suggests: hospitals should look at the termination provision because a 60 or 90 day notice of termination clause changes a five year contract to a 60 or 90 day contract; avoid payments that are a percentage of premiums unless the provider has some input into that percentage; avoid “most favored nation” clauses that the hospital will giver the HMO the best prices it gives to other plans because it is difficult to compare per diems to capitated rates.

“Providers Beware: Managed Care Contracts Can Be Tricky”

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