Chapter 9.C.3: Membership in Managed Care Networks
For analysis of the full range of issues discussed in this section, see Linda C. Fentiman, Patient Advocacy and Termination from Managed Care Organizations, 82 Neb. L. Rev. 508 (2003); Mark A. Kadzielski, Provider Deselection and Decapitation in a Changing Healthcare Environment, 41 St. Louis U. L. J. 891 (1997); Brian A. Liang, Deselection under Harper v. Healthsource: A Blow for Maintaining Patient-Physician Relationships in the Era of Managed Care?, 72 Notre Dame L. Rev. 799 (1997); William M. Sage, Physicians as Advocates, 35 Hous. L. Rev. 1529 (1999); Note, 48 Wm. & Mary L. Rev. 677 (2006).
Managed Care Contracting:
As the following Managed Care Contracting problem illustrates, insurers sometimes ask physicians to sign contracts that have "blind" payment terms in which physicians agree to fee schedules that not only are subject to change, but also that the company keeps secret, even from the contracting parties. Regarding this practice, one court held that unilateral changes in fee schedules are permissible, but not secret fee schedules, since otherwise physicians have no way to determine if they've been paid the correct amounts. Medical Assoc. of Georgia v. Blue Cross and Blue Shield of Georgia, 536 S.E.2d 184 (Ga. App. 2000).
Exercise: Negotiating a Managed Care Contract*
Florence Nightingale Hospital (FNH) is described at page 1254. One of its competitors established a successful IPA-model HMO two years ago. Fearing loss of patients, FNH is forming the Florence Nightingale Managed Care Network (the Network). The objective is to sign up a number of physicians, mainly in primary care but also in common specialties, and then to market this network to these two sources: (1) large employers who provide health insurance to their workers on a self-insured basis and (2) large regional or national insurance companies (such as Blue Cross) who then offer the Network to their customers.
The Network is approaching each physician group individually and asking them to sign up nonexclusively, leaving them free to sign up with other networks or HMOs. The contract excerpts below contain some common sticking points in these negotiations. Read each pairing of contract options and determine what is at stake. Then, assume the position of lawyer/negotiator for either (a) the Network or (b) a physician group who wants to sign up but is concerned about the details. Meet with a representative from the other side and see if you can hammer out a deal, either adopting one version or the other, or making any changes you want.
Compensation
A. In exchange for providing Covered Services,* Physician shall receive usual, customary, and reasonable rates that similarly situated physicians charge for like services, less a discount of 15 percent; provided, however, that Physician agrees that the Network shall receive his or her “most favored” discount, such that, if Physician gives a greater discount to another network, insurer, employer, or health plan, Physician shall extend the same discount to the Florence Nightingale Network.
B. In exchange for providing Covered Services,* Physician shall receive the same compensation the Network pays other similarly situated physicians for like services, which will be according to a proprietary fee schedule maintained by the Network and which the Network shall be free to modify from time to time as it deems fit, so long as it applies the fee schedule consistently to all physicians in the Network who are similarly situated.
Availability of Physician's Services
A. Physician agrees to provide or arrange all Covered Services* sought by Members in return for the compensation stated above. Physician shall provide such services on a twenty-four per day, seven day per week basis. During the term of this Agreement, Physician must have and maintain full and unrestricted medical staff privileges at a hospital which is under contract with Network.
B. Physician shall provide Covered Services* sought by Members in the same manner provided to persons who are not Members in return for the compensation stated above. During the term of this Agreement, Physician must have and maintain medical staff privileges at a hospital in the geographic area covered by the Network.
Indemnification
A. Physician agrees to indemnify and hold harmless the Network against any negligent act or claim made with respect to items or services provided by Physician under this Agreement. The Network agrees to indemnify and hold harmless Physician against any negligent act or claim made with respect to items or services provided under this Agreement to the extent that the Network is solely responsible for the negligent act or claim.
B. [No indemnification clause at all. Each party is left to bear its own liability.]
Term and Termination
A. This Agreement may not be terminated as to any Physician prior to its expiration unless said Physician loses his or her license to practice medicine. Provided, however, the Physician shall have the option to terminate this Agreement in the event of the failure of the MCO to make payments when due.
B. This Agreement may be terminated by either party at any time without cause by written notice given at least one-hundred-twenty (120) days in advance of the effective date of termination without the need for prior consent of, or notice to any Member, Participating Provider, or other third party.