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Favorable changes in managed care legislation, successful patient initiatives, and strong physician advocacy have led to a promising shift in payer attitudes and new opportunities for doctors to take an active role in contract negotiations.

To find out just how far the tables have turned, Neurology Today asked neurologists who became health maintenance organization (HMO) executives and other experts for their advice on how neurologists can effectively evaluate and successfully negotiate managed care (MC) contracts.


Several factors make it easier to enter into an effective contract negotiation. Most importantly, it pays to know your market. In general, it is easier to negotiate:

  • with a payer that has a smaller percentage of the marketplace;
  • if your practice area has a more diverse market mix and multiple types of plans;
  • if you belong to a group practice with a large number of physicians or you belong to a powerful Integrated Provider Organization (IPO) or Physician Hospital Organization (PHO) with a large market share;
  • if you offer a unique and necessary service;
  • if you are a recognized community leader;
  • if you are willing to “take or leave” the contract.

A good MC contract should be clear, detailed, and consistent with current state and federal laws. Its provisions should be reviewed carefully since they affect reimbursement, administrative workload, physician responsibilities, and patient care.


Daniel Hoodin, a Vice President responsible for managed care for Southern Regional Health System, has worked as executive director for several PHOs. He advised neurologists to read the contract and the medical management plan first before contacting the managed care organizations (MCOs) with questions prior to signing the contract.

“Everything should be open to negotiation,” Mr. Hoodin said. “If you do not want to comply with a particular requirement, you should say so and offer an alternative. If an agreement cannot be reached on the issue, you should walk away from the proposed contract.”

He advised that every physician focus on the basics. Ask:

  • what do I have to do (covered services within the specialty);
  • how do I have to do it (the medical management program);
  • who do I do it for (blind networks);
  • what will I get paid (reimbursement and payment practices);
  • how do I get out, if I don't like it (termination provisions, both with and without cause).

Dr. Orly Avitzur is a neurologist in private practice in Tarrytown, NY. She holds joint academic appointments at Yale University School of Medicine and New York Medical College.


“Before entering a MC agreement, you should first consider whether you even need managed care,” said Ron Koenig, MD, a neurologist who is Medical Director of BlueCross BlueShield of Georgia. “This will depend on the size of your practice, the penetration of MC in your community, whether your referring doctors need someone to see their MC patients, and how busy you are. If your practice has a long backlog in seeing patients, is there a need to fill seats with patients who pay less by virtue of MC contracts?”


Decide first whether the contract is worth your while financially, said Malik Hasan, MD, a neurologist who helped create Qual-Med, an open network HMO, which is now the third largest health plan in the US.

“Calculate your overhead costs and divide by your number of working hours,” he continued. “Deduct this cost from the reimbursement being offered to see if it is reasonable.”

Dr. Koenig added that neurologists should calculate – with the help of an accountant – how much it costs to see their patients. “It is obvious that you would want to see a patient for payment that is higher (contributing more to office overhead and salary) than his cost.”


Dr. Hasan suggested that a plan be considered in view of the reimbursement for those codes that are used most frequently. “Know your practice mix of office visits versus procedures,” he said. “Generally, payment is higher for procedures on an hourly basis. If your practice mainly consists of procedures, this may offset the lower reimbursement for office visits.”

He also recommended that neurologists evaluate their payer mix. “If a health plan is offering to pay at a rate less than Medicare reimbursement and you have a large Medicare population, why sign on? It may, in fact, prevent you from seeing additional Medicare patients.”

Contracts should clearly state how, when, and what a physician will be paid. “A payment, if received two years after the date of service, is not a good payment no matter what the reimbursement is,” Dr. Hasan said.


Reimbursement issues should be reviewed carefully prior to signing a contract. Even when physicians ask for an explanation for how the MCO establishes payment, there are many reimbursement scenarios that are not uncovered until it is too late.

Examples of these issues include what the plan deems as “unbundling” of services, how CPT code modifiers are handled, and restrictions on multiple unit billing (relevant in many neurodiagnostic procedures).

Bundling is the term for a single comprehensive payment for a group of related services; with unbundling, providers break the payment group up into separate services for reimbursement advantage. Services may be bundled erroneously (or almost capriciously) by the payer, resulting in fraud charges for the physician.


Discuss these and other issues in advance and get them covered in writing, particularly as they relate to the most frequently used CPT codes applicable to the services of most value in your practice.

Dr. Koenig suggested asking these questions, as well:

  • How quickly will a clean (error-free) claim be paid? Can the claim be paid electronically and, if so, is there a charge for this?
  • Will you be paid a flat service fee for certain procedures such as electromyography or nerve conduction studies – whether or not you will be paid for neuroimaging procedures?
  • Also, how will appeals be handled when there is a dispute over charges or payments?


Dr. Koenig advised physicians to find out in advance whether tests will require pre-certification (prior authorization) – a query, he acknowledged, that might bother some physicians who want full autonomy and do not like being questioned by an HMO nurse or doctor.

Prior to providing a service, the physician should check with the MCO to confirm that the service is covered and authorized. If it is not covered or authorized, the physician can, under most contracts, make arrangements with the patient for payment.

Generally, if arrangements are made in advance and it is documented that the patient agrees to be responsible for the bill, a physician can charge for non-covered services as they are outside the scope of the patient's contract with the MCO. It may be a little different for services deemed not medically necessary.


Forty-eight states now have “prompt pay” laws (only South Carolina, Idaho, and Washington, DC do not), designed to reduce the time between claim submission and payment. But in many cases, these are not upheld. When delays occur, they cause accounts receivables to increase, creating an economic burden on a practice. Some practices need to take out loans to cover their operating expenses when this occurs. Few doctors pursue legal action, so many MCOs continue to drag out their payments. Even though millions of dollars in fines have been issued, many feel this problem is becoming worse. Before you sign on, ask other doctors if their claims are paid expeditiously.


Few MCOs notify physicians when they implement a change in reimbursement. Contracts should be scrutinized for language that allows the plan to alter the reimbursement methodology or rates without the physician's consent. Also, physicians should look for language that does not allow them to terminate the contract prior to implementing these changes. Institute an office policy requesting periodic fee schedule updates.


Some payers systematically use software programmed to downcode the level of evaluation and management (E&M) service codes by virtue of a diagnosis code rather than by appropriate E&M criteria. Unfortunately, this is not a practice that can be easily uncovered in advance. Ask colleagues about their experiences with payers regarding this practice as well as other payment denial issues.

“Most companies will allow appeals and, if your documentation reflects the appropriate level of service, the downcoding will be reversed,” Mr. Hoodin said. “It helps if you learn how to properly document all of the work that you do – the better the documentation, the better the reimbursement.”


When a payer becomes insolvent, there is usually no recourse for a physician to collect for services that have been rendered. It is therefore important to carefully evaluate a plan's financial standing prior to joining a plan. It is also prudent to evaluate contract termination provisions and include provisions for immediate termination if signs of insolvency are apparent.

Dr. Koenig said, “Unless one knows the full financial structure of an MCO, I would steer clear of arrangements with local or even regional MC companies. Too many MC companies organized by physicians have gone out of business, leaving physicians holding the bag with large unpaid bills for services rendered.”

For information on the financial positions and membership of MCOs, Mr. Hoodin recommended that physicians consults such publications as HealthLeaders Research (formerly the Harkey Report), as well as seek information from such major investment houses as Merrill Lynch, which have detailed information about national MCOs.

Dr. Hasan pointed out that a much more frequent problem is that of an Independent Practice Association (IPA) becoming insolvent. “Contracts state that the IPA contracts with plans and physicians are paid by the IPA, but if the IPA goes bankrupt, the physicians do not have recourse for payment from the plan.” He advises that neurologists ask their IPAs for certified financial statements on a quarterly basis and closely monitor the financial health of these organizations.


Experts offer neurologists this checklist of items for consideration before signing a contract with a managed care organization:

  • ✓ Read the contract and the medical management plan first before contacting the MCOs with questions prior to signing the contract.
  • ✓ To determine if the contract is worthwhile financially, neurologists should evaluate their overhead costs in taking on new managed care patients, as well as their payer mix. For example, if a health plan offers to pay at a rate less than Medicare – and you have a large Medicare population – it may not be worth signing on to that plan.
  • ✓ Neurologists should calculate – with the help of an accountant – how much it costs to see their patients.
  • ✓ Contracts should clearly state how, when, and what a physician will be paid, and physicians should be on alert for any provisions that may cover hidden fees related to reimbursement.
  • ✓ Pre-determine covered tests and services. If the services are not covered, physicians can, under most contracts, make arrangements with their patient for payment.
  • ✓ Before signing a contract, ask other doctors in the plan whether their claims are paid expeditiously.
  • ✓ Look for language in the contract regarding policies on notifying physicians about fee changes.
  • ✓ Carefully evaluate a plan's financial standing prior to signing on.
  • ✓ Evaluate contract termination provisions and include provisions for immediate termination if signs of insolvency are apparent.


Read through your contract carefully. There are several provisions that raise red flags and could be damaging for physicians after the contract is signed:

“Gag” clauses

Contracts should be reviewed for provisions that prohibit the physician from discussing treatment alternatives with the patient. Although most states have banned these clauses – Mississippi, North Carolina, and Puerto Rico have not – check for language that limits reviewing treatment with patients that may or may not be a covered service under the plan. A 1997 federal law now prohibits “gag” clauses on managed Medicare and Medicaid.

Termination without cause

The inclusion of this statement allows the MCO to drop a physician from its panel without apparent reason. Review whether the contract allows the physician due process rights, appeal, or arbitration prior to this action. This clause has become illegal in several states.

Hold harmless

By signing this provision, physicians assume potential liability and costs, which may exceed their liability coverage and even place their personal assets at risk to cover this contractual obligation. Physicians should attempt to sign contracts in the name of their professional corporation and as its agent when at all possible.

In most cases, liability will be limited to the equity in the corporation. These clauses are seen less frequently than in the past and are generally easy for physicians to negotiate out of the provider contract.

Only approximately half the states have legislation prohibiting this clause – California, Connecticut, Georgia, Illinois, Indiana, Louisiana, Maine, Maryland, Massachusetts, Mississippi, Minnesota, New Hampshire, New York, North Dakota, Oklahoma, Oregon, Rhode Island, South Dakota, South Carolina, Tennessee, Texas, Vermont, Virginia, and Washington.


All too often physicians neglect to take into account the operational costs associated with a given plan. A seemingly high rate of reimbursement may be less attractive when administrative expenses are factored in. In some cases, these costs are so burdensome that a practice is actually losing money by signing a contract. Several factors contribute to a workload that can negatively affect the practice's financial bottom line:

  • difficulties in attaining referrals for procedures or consultations for services;
  • delays or difficulties in requesting pre-authorization for a referral (for example, for magnetic resonance imaging);
  • appealing denials;
  • attaching documentation;
  • tracking and checking on delayed unpaid claims;
  • payer processing errors or cost of resubmission;
  • onerous recredentialing requirements.