A matter of law: Managing your managed care contracts

by Legal and Regulatory Affairs Staff and Communications Staff

Whenever a psychologist signs a provider contract to deliver services to managed health plan subscribers, it creates obligations that have the force of law. Contract provisions sometimes prove problematic for practicing psychologists.

Beginning with some general advice on managing contracts, this article highlights several contract terms of particular interest to practitioners and offers tips for handling provisions that may pose difficulties or challenges.

The following pointers offer some general guidance for managing your contracts with managed care organizations (MCOs):

Review a contract thoroughly before you sign it. Do not assume that all MCO contracts governing health professionals’ services are alike. Contracts tend to differ from one to another regarding at least a few of the terms. Read every provider contract carefully and make sure you know what the terms mean—and that you are willing and able to meet them—before you sign a contract.

Psychologists sometimes wonder if there is any leeway when they sign a contract to modify a provision that they find objectionable, for example, by striking through it and signing their initials. Companies typically expect health professionals to agree to a provider contract in its entirety without changing any of the terms. However, if you don’t like a particular term, you can ask the MCO whether it is possible to modify or delete it.

Always have a copy of your contract with an MCO readily accessible. Psychologists sometimes do not keep track of their provider contracts and therefore cannot readily refer to the document when a conflict with the MCO arises. Yet simply reviewing the contract may reveal that the disagreement should be resolved in the psychologist’s favor.

For example, practitioners facing fee increases may think they have not been given adequate notice of the increase. A review of the contract will show whether the MCO honored the psychologist’s contractual rights to notice.

It is also important to keep track of and maintain any amendments to the contract that you may receive from insurers.

Keep a copy of all materials that are incorporated by reference into the contract. Provider contracts frequently incorporate by reference policy manuals or other documents. For example, your contract may refer to a separate document identifying procedures that are considered “medically necessary.” It is important that you receive and maintain a copy of these documents along with the contract and that you are aware of the terms and provisions in these supplemental documents, as they are considered part of your contract.

Be aware of state governmental entities to which you can report an MCO’s unfair practices. Your state insurance commission, or similar state agency responsible for overseeing contracts issued by MCOs, routinely addresses health professionals’ complaints about their contracts with MCOs and may be willing to help you resolve conflicts. Whenever you send a complaint letter to the MCO, send a copy to the state insurance agency as well.

In considering whether to enter into a provider contract, psychologists need to be aware of the fundamental distinction between “for cause” and “no cause” terminations. There are certain items listed in the contract that are identified as constituting grounds for terminating the provider “for cause” if he or she does—or fails to do—these items. It is crucial for psychologists to be fully aware of terms related to “for cause termination” before signing a contract and be prepared to abide by them.

Some contracts have what are called “no cause termination clauses.” These clauses allow an MCO to terminate a contract without giving you any reason for doing so, usually with a certain number of days notice.

“No cause” terminations typically are used when a company determines that it is no longer in its business interest to continue contracting with a particular party. Organized psychology has long challenged no cause terminations as inappropriate for contracts where the delivery of health care services is involved, given the relationship between the health professional and his or her patient and the quality of care issues at stake when continuity of care is disrupted.

It is difficult to fight a no cause termination because you are left without any “due process” from the insurance company: it is able to terminate you without any reason. As a result, you can’t argue with the company about whether a particular ground for termination was legitimate.

Some states have found no cause termination provisions to be contrary to public policy and have passed legislation prohibiting such provisions in provider contracts. You should check to see if such a law exists in your state.

There is another important matter for psychologists to be aware of related to terminating their relationship with an MCO. Practitioners should know in advance whether they are contractually obligated to continue providing services to patients covered by the MCO for a specified period of time (for example, 90 days) after their relationship with the company has terminated, or at least until the patient is transitioned safely to another health professional’s care.

Your contract may specify the length of time for which you need to keep patient records. It is important to keep in mind that, regardless of whether or not contractual requirements apply, you may be obligated by state law and/or ethical and professional guidelines to keep these records for a certain period of time.

The APA Practice Organization asserts that professional standards should guide individual psychologists in determining what patient records to keep. Nonetheless, some provider contracts entail additional patient record keeping requirements. In situations where a contract includes requirements that are more onerous than professional standards would suggest, keep in mind that if you sign the contract, you are bound by these record keeping requirements.

If any of the record keeping requirements are unclear, you may want to ask for clarification or check to see if the MCO’s provider manual or website provides adequate guidance.

Remember that if you keep psychotherapy notes as defined by the Health Insurance Portability and Accountability Act (HIPAA), a health insurer cannot demand to review these notes.

Many provider contracts give the MCO the right to audit a psychologist’s established patient records for quality control purposes or fraud and abuse detection. There have been instances where companies go beyond what their contract or state law allows when conducting retrospective audits.

The APA Practice Organization was involved in a prime example of this activity when the organization, along with the New York State Psychological Association, intervened in a retrospective audit conducted by Oxford Health Plans in 2003. Psychologists in the New York area were required to turn over to Oxford’s auditors a sample of patient records dating back as far as seven years. These audits resulted in practitioners being directed to refund monies to Oxford due to alleged deficiencies in recordkeeping. Following organized psychology’s advocacy on behalf of practitioners, Oxford ultimately backed off from its repayment demands, and the company returned refunds that health professionals already had paid.

If you face a retrospective audit that you consider excessive, you should check your contract and provider manual, as well as relevant state laws, to determine whether the company is going beyond what the contract or law allows.

Many states have statutes or regulations specifically requiring MCOs to pay within a designated amount of time after receiving “clean claims” that contain all the information needed to process that claim. For example, an Ohio statute requires that an insurer pay health professionals for their clean claims within 30 days of receipt.

Check your state laws regarding prompt payment and make sure that your contract's payment provisions match state law requirements.

Payment rate changes and other modifications to contract terms bring into play provisions in the contract itself that govern how the MCO can change terms of the provider contract.

In general, contracts may either indicate that the company may make changes to the contract unilaterally—that is, on its own without the provider’s agreement—or that changes must be agreed to by the MCO and the health professional. You should know before signing a contract what provisions of the contract an MCO may change on its own versus any changes in which you would have a say as a party to the contract.

Unilateral changes usually require some degree of notice, and psychologists should be mindful of the notice an MCO is required to give. For example, a contract may obligate the company to give written notice 60 days before a contract change takes effect.

Another important issue is what the psychologist can do in response to a proposed change. Provider contracts sometimes allow the psychologist to formally object to a proposed change, but by taking this action the psychologist may be considered by the contract terms automatically to have resigned from the provider panel.

Other provider contracts allow the health professional to object to and block any changes to the contract. In response to a psychologist’s doing so, however, the company may elect to remove an objecting psychologist from the panel after the designated notice period by using the contract’s termination provision.

If an MCO proposes a change in your provider contract that you consider unsatisfactory, check your contract to determine whether you received proper notice and what will happen if you object to the change.

Please contact the Practice Directorate’s Office of Legal and Regulatory Affairs at 202-336-5886 if you have any questions or concerns about your provider contracts with managed care companies. While we cannot provide legal advice to individual psychologists, we can tell you about legislation or legal actions related to your contract issue.

This article is the first in a series, “A matter of law,” about the practical effect of various laws and regulations on practicing psychologists. Later articles in this series will further address topics such as patient record keeping discussed in this article.

Please note: Legal issues are complex and highly fact-specific and require legal expertise that cannot be provided by any single article. In addition, laws change over time and vary by jurisdiction. The information in this article should not be used as a substitute for obtaining personal legal advice and consultation prior to making decisions regarding individual circumstances.