The Bigger Picture: Contract Change? What Contract Change?

April 1, 2007

What happens when payers alter their rules mid-contract? You get shafted, that’s what.


When payers alter the rules mid-contract, physicians are typically stuck. Oxford Health Plans and its new owner, UnitedHealthcare, recently sent physicians in the Northeast the cheeriest letter.

They announced the addition of two new fee schedules in March, one for United PPO products and the other for non-PPO products from both Oxford and United. That’s in addition to the existing fee schedule for Oxford Liberty members. Oh, and they’ll also continue paying physicians differently based on place of service.

In other words: “Dear Physician, we are about to turn your accounting into mud.” It’s a letter that exemplifies the absurdities of healthcare and the dysfunction of payer-provider relationships.

When the fee schedules for United and Oxford combine, some physicians will take a pay cut. In cases in which Oxford paid more than United, physicians with more Oxford patients will take a hit. If United paid more, it’ll be the physicians with more United patients whose payments will decline. “Physicians may see a 10 to 20 percent decrease in payments, depending on mix,” says Susanne Madden of The Verden Group, a firm that helps physicians contract with payers.

Although combining fee schedules affects how much physicians will be paid, it’s technically a mere policy change, so the companies don’t need to get physicians to agree to these contract alterations. Practices are still bound to the contracts they originally signed, even though the plans may change the terms of those contracts unilaterally.

In this case, these companies are making things not only more complex, but also less lucrative for physicians. Multiplying fee schedules makes it harder to keep track of what payers owe.

“It can really affect your reimbursement if a majority of patients end up on the Liberty schedule and the non-PPO schedule, but you don’t have any way to plan for that or to get out of it” until your contract expires, Madden explains.

All this has physician Jill Stoller worried about what will happen to her practice when her nonstandard, three-year contract with Oxford Health Plan is up. “I’m sure at the next renegotiation they’ll be looking to do the same thing to me,” she says, but United and Oxford together represent 30 percent of her patient base, so it’s hard to walk away.

Stoller is offended that the insurance commissioner for New Jersey even allowed the merger between the two companies to go forward, given its anticompetitive nature, and she worries about how efficient a massive company can really be. She has already raised such a fuss over Oxford’s inability to pay her correctly on her current contract that her provider rep won’t come to her office anymore. “All the research shows that when you bring two big companies together, the craziness only gets worse,” she says.

Madden expects to see more providers in Stoller’s shoes as payers multiply products and fee schedules. More fee schedules make employers happy and allow payers to reimburse physicians less for some patients. But what really gets Madden’s goat is the tone of the letter.

It reassures physicians that the plans are still fee-for-service (as if that’s really an issue), and it promises that existing policies will continue to apply and that claim processes will stay the same. Then it breezily presents images of sample membership cards for front-desk staff to study, offers a toll-free number for assistance, and advises physicians to “request” fee schedules online.

“The aim of a letter like this is, if you set the tone right, doctors won’t suspect that there is something about to go wrong. It reads like there is really no change. What it doesn’t say is your fee schedule may change radically,” says Madden. She worries about the physicians locked into three-year contracts who may start losing money. “If you are taking a really big hit on reimbursement but you can’t get out of your contract for a year, what do you do? I mean, do you take out a second mortgage to pay your staff? Physicians are saying, ‘You don’t understand. I can’t pay my bills. You have to let me out of the contract.’ They end up in bankruptcy.”

Beware out there, folks.

Pamela L. Moore, PhD, is senior editor, practice management, for Physicians Practice. She can be reached at pmoore@physicianspractice.com.
This article originally appeared in the April 2007 issue of
Physicians Practice.