Common pitfalls for managed care contracts

Although contract negotiations differ from agency to agency and from one managed care organization to another, there are some very common "gotchas" for which agency managers need to look, warns Sherl Brand, RN, BSN, CCM, president and CEO of the Home Care Association of New Jersey.

"It's important to have an attorney review the contract carefully to make sure that the contract language doesn't give the managed care organization rights to do something that might affect the contract without your knowledge," says Brand. A typical clause in a contract might give the managed care organization the ability to make decisions on the home health agency's behalf, such as when the managed care organization negotiates rates with an employer and offers an additional discount to the amount already identified in your contract, she explains. "It's important that a home health agency add language to the contract that requires the managed care organization to notify the agency of any potential changes in terms of the contract."

Reading the fine print

Carefully read the section that describes the malpractice and liability insurance that your agency must carry, suggests Brand. Although agencies carry the insurance amounts mandated by regulatory or accreditation organizations, some managed care organizations may require much higher limits, she explains.

Another section you should read carefully describes billing requirements, points out Brand. Some managed care organizations will require that you bill them in less than six months or the claim won't be paid, but if you are billing Medicare or another primary insurance and waiting on their payment before you bill the managed care organization as a secondary insurance carrier, you might not be able to meet their time frame, she says. Be sure you are clear on deadlines and your ability to meet them, she adds.

Hospital-based or -owned agencies have a special challenge, Brand says. "Usually the hospital negotiates the entire contract with home health included as a part of the overall contract," she says. "This means that the hospital will focus on the big-dollar items and may not pay close attention to what the home health rates will do to the agency." For this reason, a home health agency manager should be involved in the contract review process to make sure that the home health agency's interests are looked after, she suggests.

Be sure that the contract contains clearly defined termination language that allows both parties to terminate the contract, recommends Brand. You also should make sure that there is an indemnification clause that protects the agency from errors made by the managed care organization, she adds.

When negotiating rates for a multiyear contract, make sure you have cost-of-living adjustments or other annual incremental increases to cover rising costs without having to re-negotiate the entire contract, suggests Brand. If the managed care organization won't agree to annual increase, ask for an annual review of the contract during which you can present data that demonstrate any increase in costs, she says.

Almost all managed care contracts will include language that refers to the fact that the home health agency must follow all policies and procedures of the managed care organization, but they don't give you those policies and procedures at the start of negotiations, points out Brand. "Ask for the policies and procedures as you begin reviewing the contract so that you can make sure you are able to follow them," she suggests. "Otherwise, you are agreeing to something you've never reviewed."