Chart Your Course


Practices are becoming increasingly empowered to negotiate their health plan contracts

The luster has faded from managed-care health plans in many markets, where increasing premiums and decreasing patient satisfaction mean employers and legislators have become sounding boards for complaints. And a class-action lawsuit was filed this year in Florida - an amended version of an earlier lawsuit in California - in which physicians have accused certain managed-care plans of conspiracy to deny them payments. But as the environment becomes increasingly rancorous, physicians can take some consolation from their decade-old relationship with managed care. Many, by virtue of real-life experience, are becoming increasingly empowered to negotiate their health plan contracts.

In the past few years, physician advocacy groups such as the American Medical Association (AMA) and the American Academy of Family Physicians (AAFP) have supported physicians in this arena, producing guides to assist contract negotiations. These guides, along with the advice of specialized healthcare attorneys and experienced physicians, provide great resources for those new to contract negotiations.

Before signing anything, physicians should plan a negotiating strategy. For starters, negotiations should not threaten the security of the practice. “If you have no negotiating experience at all, start with a relatively small patient group,” advises AAFP board member Bruce Bagley, MD. In other words, “don’t bet the whole farm” on a single contract.

Something else to keep in mind, according to John F. Mahoney, a healthcare attorney with Chuhak & Tecson PC, in Chicago, is that companies are willing to negotiate many contract provisions. The trick is to choose your battles wisely.

“Some provisions are so onerous on the doctor - and as simple as an MCO saying physicians will be paid based on a fee schedule, but not providing the fee schedule,” says Mahoney. “It’s all negotiable - especially the fees - and physicians have a right to know the fees.”

Beware the unfair

Once the paperwork is in hand, physicians should read it carefully, noting any terms or clauses that might cause concern. The AMA and other physician advocates recommend that physicians beware of certain conditions that can cause trouble down the road. One example is the Silent PPO, a clause requiring physicians to provide services to “any entity” which contracts with a managed-care organization (MCO). This definition could be broad enough to force physicians into contracts with any group to which the MCO sells its provider list. Similarly, an All Products segment may include physicians in “any specific plan” or “any members of the plan” - a condition that could force physicians to participate in all plans offered by the MCO, or to accept a capitated contract without specifically choosing to do so.

“Gag” clauses, which prohibit physicians from discussing certain topics with patients, and provisions limiting physicians’ ability to negotiate with other parties, are other areas to watch for - and avoid.

In addition, consider the possibility that your long-term relationship with the MCO can change, and prepare accordingly. Today’s volatile economy often means mergers and acquisitions as large organizations struggle to maintain market position. Does your payer have the right to assign your contract to a third party? Does the MCO stipulate it must consent to your contracting with another party, even in the case of a corporate merger? Be sure these items are spelled out clearly and to your best advantage.

Negotiating strength depends on marketplace position. A large practice or highly specialized group with a significant patient load will have leverage with MCOs that don’t want to risk losing patients. A solo practitioner or specialist with plenty of competition will have less influence. Physician practices should assess their situation - then negotiate strategically.

Expert advice

AAFP has compiled “Principles of Interaction Between Family Physicians and Health Plans,” a guide suggesting several areas that should be fairly determined in physician/MCO contracts. It includes disclosure, infrastructure, discrimination, patient rights, and contracting. AAFP also recommends that physicians seek legal counsel when considering contracts.

“Legal review of a contract probably isn’t as expensive as you might think,” says Mahoney. “If the lawyer is experienced in healthcare contracting, he can look through a contract in an hour or two. If the contract covers a major source of revenue, it’s worth it to have [an attorney take] a look.”

Bagley agrees. “We work with legal counsel to review the contract after we’ve done the groundwork, to make sure a contract protects us and is defensible.”

He also offers a suggestion for physicians who cannot find a healthcare attorney in their area: “It’s absolutely necessary for the physician leaders of a group to read every word of the contract so you don’t have to teach a lawyer your business. You’re taking a chance if you just hand the contract over.”

Negotiating, not battling

Although negotiations can turn ugly, Bagley notes that his practice’s discussions have mostly been friendly. In fact, his Albany, N.Y., practice has helped design capitation contracts with area MCOs that had not previously implemented them.

When it comes to capitation, it is crucial to check for risk limitations, particularly when the practice is new to that payment system. For example, an introductory capitation contract might state that if, at the end of the year, the total from a capitated contract is less than income was under fee-for-service reimbursement, the MCO will make up the difference.

“You should have an insurance company that doesn’t want you to fail,” Bagley says. Some small practices also prefer contracts with an arbitration clause. This provision states that any conflicts will be solved in binding arbitration, rather than in court - where a large company with deep pockets might be able to wait out a conflict until a practice can no longer fight. Some attorneys, however, advise against this clause. As with all contracting matters, practices should decide what works best for their needs.

The AMA and local medical societies sometimes offer seminars on contracting. Healthcare attorneys, too, can advise on contracting matters. Other physicians and area bar associations can be good sources for referrals to a skilled attorney.

Most important, an informed negotiator is more likely to succeed at getting the best deal. By knowing their positions and their requirements, physician practices can take MCOs to the negotiating table - and walk away satisfied.

Susanna Donato can be reached at

This article originally appeared in the July/August 2001 issue of Physicians Practice.

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