Billing agreements: Practices must take steps to avoid painful, expensive mistakes

A practice’s entire business depends on a billing company that can properly bill and collect for the practice’s services.

Many physician groups use an outside billing service to assist in collecting fees for professional services. However, it is not unusual for physicians to become unhappy with their billing company for a variety of reasons. Unfortunately, the billing service agreement that physicians enter into often are poorly drafted, vague or overly favorable to the billing company. Physician practices should make sure to seek legal help when negotiating a billing agreement in order to be sure the terms are as fair as possible. Some possible issues to consider are the following:

  1. The agreement should spell out the exact services to be provided by the billing company, the timeframe in which the services are to be provided and any items or services which are not included. For example, what reports will be provided each month by the billing company? How quickly will a clean claim be filed? What collection efforts will be made?
  2. Many practices like working with aspecific team assigned to their account and become unhappy if personnel are reassigned to workers less attentive or familiar with the practice. Sometimes the account is even moved to offshore personnel or other material changes are made that were not contemplated when the billing agreement was signed. The practice should try to spell out its expectations clearly in the written agreement.
  3. It is important to understand the termination and/or remedy process in the agreement if the practice believes that the billing company is not performing as expected. Most billing agreements can be difficult to terminate because they provide limited breach terms or allow the billing company to “cure” breaches repeatedly so the contract can never be easily terminated. A billing agreement should provide a specific list of reasons a practice can terminate the contract and should limit the opportunities provided by the billing company to cure an alleged breach. Additionally, both parties should have a right to terminate the agreement without cause, as long as there is sufficient notice and a clear transition process included in the agreement.
  4. I also like to focus my clients on the compliance aspect of the billing agreement. What ongoing education will the billing/coding team receive? What internal education and audit processes do they have in place? Will the billing team update the practice should applicable rules regarding documentation and coding change? How often will an audit of the client’s billing and documentation be performed to help assure accuracy and compliance?Who is responsible should there be an audit or recoupment related to the practice’s billing and is this liability clearly and fairly spelled out? These are important issue to outline in any billing agreement.
  5. A particular issue of contention in billing agreement are the fees to be charged.The agreement should spell out precisely what is included in the fee and when the practice will be charged extra. How long is the fee in place before it can be changed and how can it be changed? How much can the fee be increased annually or upon contract renewal? There should be a clear understanding and negotiation of fee rates before a contract is executed. Also, some states regulate how a billing company can be paid for its services. Any compensation terms in the agreement must comply with relevant law.
  6. Once the billing agreement comes to an end or is terminated, a major issue of concern is transition to a new billing company. It is essential that the contract spell out a smooth process to transition documents, data and responsibility so the practice is not caught in the middle, which can impact timely billing and cashflow. This is an issue on which I like to focus as a client’s records and data are sometimes held hostage by the terminated billing company. This is especially true if the practice also relies on the billing company’s software for its billing and collection activities. For this reason, a review of the software and any related hardware provisions that can impact transitioning to a new billing company is key. It also is advisable to include a provision obligating the billing company to pay the practice’s legal fees should they be uncooperative in the transition effort.

A practice’s entire business depends on a billing company that can properly bill and collect for the practice’s services. For this reason, it always is worth the time and effort to review a billing agreement carefully, negotiate for favorable termsand have it reviewed by knowledgeable counsel.

Ericka L. Adler, JD, LLM has practiced in the area of regulatory and transactional healthcare law for more than 20 years. She represents physicians and other healthcare providers across the country in their day-to-day legal needs, including contract negotiations, sale transactions, and complex joint ventures. She also works with providers on a wide variety of compliance issues such as Stark Law, Anti-Kickback Statute, and HIPAA. Ericka has been writing for Physicians Practice since 2011.