Turn standard MCO contracts into hospice-specific agreements

Fight for per diem rate that includes all COP-required services

Managed care contracting can be an intimidating experience, pitting a David-like hospice against a Goliath-like health plan. Plans often require a platoon of representatives, lawyers, medical directors, and case managers. Paired against these formidable foes, a small hospice must negotiate a deal that will not only provide patients, but also pay enough to cover costs and perhaps make a small profit.

To do so, however, hospice leaders must have a basic understanding of managed care contracts and a keen eye for elements that could put their organizations in fiscal peril. According Lisa Spoden, chairwoman of the Arlington, VA-based National Hospice Organization’s managed care task force, many hospices make the mistake of assuming managed care requirements are the same as those for Medicare. Even in Medicare-sponsored managed care plans, also called Medicare-risk, that type of assumption could cost hospices dearly.

"When hospices started getting exposure to managed care, it was totally foreign to them," says Spoden, a partner with the Columbus, OH-based consulting firm Strategic Health Care. "For example, they didn’t understand that they had to verify authorizations."

Just as managed care is foreign to many hospices, hospice care is unknown to managed care companies. Health plans often assume incorrectly that hospice care is akin to home health and perceive integral hospice services, such as bereavement care, as unessential.

"End-of-life care just isn’t on the radar of most managed care companies," says Peter Benjamin, partner with the Coconut Grove, FL-based Huntington Consulting Group. "Ideas like professional management of the patient remaining with hospice is an anathema to them; bereavement care and chaplain [counseling], it makes them crazy.

"We recently met with a managed care company and spent a majority of the time going over basic definitions and levels of care," he adds. "When they think of routine hospice care, they think of a home visit where a nurse comes to the home for one home visit, not the hospice interdisciplinary approach where there could be several people waiting in the wings."

Hospice leaders should review a proposed contract by dividing it into these categories:

    • preliminary review;
    • defining key terms;
    • provider and health plan obligations;
    • compensation;
    • termination.

When considering any prospective contractual relationship with a managed care organization (MCO), a hospice provider should review all available information from the MCO and other independent sources. In most cases, the MCO will provide a standard contract, one it uses for all its providers — physicians, hospitals, and post-acute settings. It’s likely the document will have little to do with hospice care and will require a lengthy addendum to make it hospice-specific.

Hospices should use this opportunity to read over the language of the standard contract and have language removed that doesn’t pertain to hospice care or is contradictory to its philosophy, says Peter Moberg-Sarver, MSW, president and chief executive officer of Upstate New York Hospice Alliance Inc. in Syracuse.

"Each entity appears to have their own boilerplate contract," he says. "Look for a lot of language written for physicians, like minimum office hours and maintaining credentials."

In addition to reviewing the proposed contract, it is important to determine how long the MCO has been in operation and whether it is a financially stable and solvent legal entity. It also may be wise for a hospice provider to talk with other hospices or providers in other segments of health care that have had relationships with the MCO to learn more about the organization’s strengths and weaknesses.

Also, the provider should examine the MCO’s member and provider disenrollment rates. If one or more of those rates are high, it may be a signal that those involved with the MCO, patients and providers alike, are dissatisfied.

One of the most important sections of the managed care contract is the definition section. Because standard MCO contracts may have been written originally for physician groups or hospitals, language specific to hospice will need to be added. Because MCOs are usually reluctant to make wholesale changes in the language of their contract, hospice specific language should be added in the form of an addendum. In this addendum, hospices must define key terms so both parties are clear on the scope of services and responsibilities.

For example, a hospice that makes the incorrect assumption that the MCO will interpret the term "routine hospice care" in the same manner that Medicare does could find itself providing services not covered by its per diem payment.

Such terms as "covered services," "covered persons," "emergency," and "medically necessary" should be adopted by the parties as part of the negotiating process and used consistently throughout the final contract and any related MCO policies and procedures. Key hospice terms, such as "routine hospice care," "palliative care," or "levels of care" should be defined clearly in the addendum. (See story on basic hospice definitions and levels of service definitions, p. 68.)

Provider and MCO obligations

At the very least, the contract should state that the provider is not obligated to provide any services under the contract that it does not customarily provide to its patients who are not members of the contracting MCO and its affiliate plans. In addition, the parties may want to consider adding an addendum to the contract that specifically lists all services, or types of services, that are covered by the MCO and the plans. Finally, the provider may want to add a paragraph providing that if the provider elects to limit or discontinue certain services in the future, the provider may do so without penalty, as long as appropriate notice is given to the MCO according to the contract’s terms.

Because hospices routinely are paid on a per diem basis, it would be wise to have a provision in the contract that states all services provided by the hospice will be related to the terminal condition and necessary to implement patients’ care plans.

With regard to regulatory compliance, it is not uncommon for managed care contracts to include a provision requiring the contracting health care provider to maintain all licenses, registrations, permits, and certifications required by law to perform the services set forth in the contract. One of those may be Medicare certification or compliance with federal conditions of participation (COPs). Hospices can use this to their advantage. Federal law requires Medicare patients to receive the same care as non-Medicare patients. During negotiations, MCOs may try to carve out services in an attempt to bring down a hospice’s per diem rate or insist on a per visit rate. Hospices should balk at an MCO’s attempt to carve out any service required under Medicare’s COPs or unbundle services provided by the interdisciplinary team into per-visit rates.

"I advise my clients that it is all or nothing," says Benjamin. "COPs are not optional. If they are not willing to give up professional management of the patient or pay for bereavement care, you have to be willing to walk away."

Just as the provider has obligations to the MCO, the MCO also has obligations to the provider that should be stated clearly. To properly anticipate future changes, language should be included in the contract that requires the MCO to inform the provider at least 30 to 60 days in advance of any proposed amendments to MCO bylaws, rules, regulations, or policies and procedures. The time should give a hospice provider an opportunity to review, comment, and adapt to the proposed changes. Hospices also should strive to have a "termination without cause" arrangement in the event proposed amendments are unacceptable.

Non-negotiable points

As Benjamin mentions, hospices should not provide hospice care that deviates from the Medicare standard. In addition, Spoden recommends hospices use the following points to ensure MCOs understand the importance of maintaining the Medicare standard for non-Medicare patients.

• COPs require hospices to be responsible for professionally managing the care and services of their patients for palliation and management of the terminal disease. Limiting care to a commercial plan enrollee could be construed as a violation of federal COPs and result in the hospice’s loss of Medicare certification.

• Federal law requires hospices to make available the full continuum of prescribed services and to deliver the same level of services to all patients regardless of payment source.

• A nursing visit alone cannot be labeled hospice care. An insurer cannot label a benefit hospice unless the it meets the criteria defined by law.

• State and federal regulation require that the plan of care, interdisciplinary care team, case management, and use of ancillary services be under the direction of hospices.

• Hospice and home care services are separate licensed entities, and their services, functions, and contract language must be kept separate.

Compensation issues

A key element of any managed care contract is the provider’s compensation for services. But before hospices can discuss how and when they should be paid, they first must get a handle on their own costs. Knowing the cost of average home hospice visit, for example, will help hospices determine whether a proposed per diem is enough to cover daily services.

After hospices have done their cost-accounting legwork, they should begin examining an MCO’s compensation proposal. First, they should identify how and when they will be paid. They also should clearly understand the administrative requirements of submitting claims and the timing of receiving payment; for example, the time period within which a provider must submit claims must be clearly stated. Second, the particular forms used to submit claims must be identified by name. Third, all arrangements with regard to the coordination of benefits and late payments must be carefully spelled out in the contract.

Finally, because providers don’t contract directly with the various payers and plans administered by the MCO, language must be added to the contract that requires the MCO to use its "best efforts" to ensure timely payments by these third-party payers and plans.

A managed care contract may offer different types of payment. Common types of payments include discounted fee-for-service, per diem, per visit, percentage of premiums, and capitated arrangements. Few hospices are paid in forms other than per diem. However, Spoden warns that some health plans are seeking per visit contracts, which should be refused, she says.

"The hospice benefit was designed to be reimbursed on a per diem basis," Spoden says. "If you break apart the hospice benefit into a nursing or social worker visit instead of a 24-hour, on-call service where members of an interdisciplinary team are waiting in the wings, you’re losing the depth and breadth of the interdisciplinary team."

Compensation must include all services required under federal regulations. Hospices must not allow MCOs to unbundle hospice services that would jeopardize the interdisciplinary team approach or weaken the team’s ability to follow and manage the patient’s plan of care.

That’s why hospices must understand their costs. If they complete the cost-accounting exercise mentioned earlier, they will have a clear picture of per diem costs for their levels of care. Compared to the per diem proposed by an MCO, hospices will be able to discern readily between a fair offer and one that will lose them money. In addition, they can provide cost-report data to the MCO to help make a case for a higher per diem rate.

Terminating contracts

There are three primary ways to terminate a contract prior to its natural expiration at the end of its term. First, the contract may be terminated by a mutual agreement of the parties to the contract. Secondly, the contract may be terminated "without cause," which allows either party to walk away from the deal after the necessary notice required by the contract has been given to the other party. Although each of these methods allows the parties flexibility in terminating the contract before its completion, one or both of the parties may be reluctant to include such provisions, depending on how much the parties may depend on one another for patients or services.

The contract also should allow either party to terminate "with cause," in the event the other party fails to comply with its many promises and obligations as set forth in the contract. A 30-day "cure" period often is included to encourage the parties to resolve a breach or default before a termination with cause. An automatic termination provision also may be included in the event a party becomes insolvent, convicted of a health care crime, or loses insurance coverage or a regulatory license as required by law.

While termination language may seem innocuous, it is perhaps the most pragmatic portion of the contract. It stipulates a way out if a hospice is not satisfied with the business arrangement or prompts the MCO to adopt changes that would remedy a bad situation. "I take a pragmatic approach to contracts," says Moberg-Sarver. "My concern is the backup provisions and the escape clause. You can scrutinize a contract based on the amount of risk it presents. If they are only going to provide a few patients, just sign it and file it, but know if you can get out if it’s not working."