AMARILLO, TX – Approximately 50% of Medicare beneficiaries are covered by Medicare Advantage Plans (“MAPs”) and approximately 70% of Medicaid patients are covered by Medicaid Managed Care Plans (“MMCPs”). These percentages are increasing. This means that in order for DME suppliers to have access to a large portion of their customers, the suppliers need to sign managed care contracts with MAPs and MMCPs.

A common opinion is that managed care contracts (“Contracts”) are a “take it or leave it” proposition. That is, from the standpoint of the MAP and MMCP, there is no room for negotiation. Some MAPs and MMCPs (collectively referred to as “Plans”) may take this position. However, others do not.

Before a DME supplier signs a Contract, it needs to determine what provisions it can live with…and what provisions it needs to push back on. The ability of the supplier to “push back” is influenced by how badly the Plan needs the supplier on the Plan’s panel. For example:

• Does the supplier serve a geographical area that most suppliers do not serve?
• Does the supplier serve a particular patient population that most suppliers do not serve?
• Does the supplier provide products and services that most suppliers do not offer?
• Does the supplier collect data showing how the supplier’s products and services reduce the incidents of patients having to return to the hospital (“frequent flyers”)?
• Does the supplier have the support of a hospital and/or physician group that has influence with the Plan?

In reviewing a Contract, the following provisions are the ones that the DME supplier should focus on:

• Identification of the Parties – Most Plans identify DME suppliers by their Tax ID Numbers. Subsidiaries and affiliated companies need to be listed as parties to the Contract, or enter into separate Contracts with the Plan, if they are to be included on the Plan’s panel.

• Covered Services – “Covered Services” should be defined specifically and any products/services that the supplier will not be providing eliminated from the Contract.

• Medical Necessity – “Medical Necessity” needs to be defined in the Contract, with specific procedures for determining medical necessity and for bearing the risk of error if the products/services are provided and later determined not to have been medically necessary.

• Hold Harmless – This concept is seen most often in its benign form, that is, where the supplier agrees to hold a covered life harmless and not seek reimbursement directly from him/her for covered services rendered. DME suppliers should watch for provisions that require them to hold the Plan harmless from findings of supplier negligence arising from the supplier’s compliance with the Plan’s policies.

• No Disparagement – These are basically “no slander” clauses under which the DME supplier agrees not to disparage the Plan.

• Passive Amendment – The DME supplier should be aware of a passive amendment provision that states that amendments to the Contract offered in writing to the supplier, that are not expressly rejected in writing by the supplier within a certain time frame, are automatically deemed accepted by the supplier. For example, a BCBS contract states: “The Agreement may be modified and/or amended at any time by Blue Cross upon at least forty five (45) days’ prior written notice to the Provider; provided, however, that forty five (45) days’ advance written notice shall not be required in those circumstances when Blue Cross modifies the fee schedule to correct errors or omissions or to reflect state or federal regulatory requirements, in which case Blue Cross shall provide as much advance notice as is reasonably practical. In the event of any amendment by Blue Cross, Provider shall have forty-five (45) days to reject the amendment and terminate the agreement in writing; otherwise, the parties will assume that the amendment has been accepted by the Provider.”

• Waiver of Legal Rights and Remedies – Many Contracts specify that in the event of a dispute between the parties, the matter will be resolved through mandatory arbitration in lieu of litigation. DME suppliers should be sure that in relinquishing their legal rights to enforce the Contract through certain mechanisms, those rights are waived only for defined actions under the Contract, such as failure to pay, and not for all disputes that could arise.

• Incorporation of Collateral Documents – Many important terms are incorporated by reference. These terms can be contained in manuals, policies, procedures, handbooks, exhibits and schedules. Typically, utilization review, quality assurance, payment terms and provider/supplier due process rights are contained in collateral documents. The Plan may argue that the terms of the Contract do not articulate the mutual promises of the parties, but that the Contract instead includes what is written in the Contract as modified by the more specific terms in the Plan’s manuals and other collateral documents. The Plan may claim that because it has the right to modify its collateral documents during the term of the Contract, it also has the right to modify the Contract itself. An example can be found in an MVP Health Plan contract: “Ancillary Provider agrees to…be bound and abide by all of MVP’s programs, protocols, rules and regulations including, without limitation, MVP’s quality improvement program, credentialing process, peer review systems, member grievance system and utilization management program.”

• Set-Off Provisions – A set-off provision allows the Plan to control the money during a dispute. It allows the Plan to withhold disputed amounts from future payments to the supplier. Because these provisions allow the Plan to make a unilateral decision, they are susceptible to abuse. The DME supplier should attempt to have set-off provisions removed from the Contract.

• Remedy for Unexcused Delay in Payment – It is reasonable to negotiate a contractual provision obligating the Plan to pay interest if payment is not made within a specified period after the receipt of a “clean claim.” The DME supplier should work with the Plan to define a “clean claim” in the context of what the Plan expects, consistent with the applicable state’s prompt-pay regulations.

• Payment Forfeiture for Late Claims – Plans want claims to be submitted in a timely fashion. However, Plans should not be allowed to require DME suppliers to forfeit all payments on claims that miss the deadline. Suppliers should attempt to negotiate a more reasonable incentive for the prompt submission of claims.

• Insurance and Indemnification – Each party should carry its own professional and general liability insurance for its own acts and omissions. The supplier should only be required to insure against its own liability and not the liability of the Plan. The Contract should avoid insurance/indemnification provisions that shift the risk of loss for the Plan’s acts to the DME supplier.

• Claims Processing – Claims processing is one of the most routinely disputed provisions of Contracts between Plans and DME suppliers. At the source of many of these conflicts are state laws requiring prompt payment of “clean claims” submitted to Plans. There are two key time limits that are of specific concern to suppliers in claims processing. First, the Contract will contain a clause requiring the supplier to submit a claim within a certain time period after provision of services or products in order to be paid. Second, the Contract should contain a clause requiring the Plan to pay a “clean claim” within a certain amount of time. The DME supplier should request that the Contract discuss what constitutes a “clean claim” by describing the information required and discussing a method for resolving disagreements between the parties. The Contract should also include specific penalties such as late payment penalties, interest payments and, in some cases, termination of the contract in the event of continued delay or non-payment.

• Marketing – The DME supplier should request the right to review all marketing materials referring to the supplier before they are used by the Plan. Conversely, the Contract may impose restrictions on how the supplier can market to, or otherwise communicate with, the Plan’s covered lives.

• Reimbursement – An important provision is the one pertaining to reimbursement. The Contract should include a provision to renegotiate the reimbursement based on defined events.

• Term – DME suppliers may wish to enter into a Contract for an initial term of one year with a longer renewal term so that they can have flexibility in addressing any shortfalls to the fee schedule that occur during the initial year. Suppliers should closely track Contract renewal dates, as well as deadlines for modification.

• Termination – Specifying the factors that may lead to termination, such as the failure of the Plan to make payment, is vital. Post-termination obligations are also important. Regardless of the reason for the termination, the obligation to continue treating the Plan’s members post-termination should be clear, defined and time limited. For example, a BCBS Contract states: “This Agreement may be terminated without cause by a Party upon written notice to the other Party with termination to become effective 130 days after receipt of written notice. If the Agreement is so terminated, Blue Cross, at its discretion, may extend the terms of the current Agreement for a period of up to an additional 180 days, to allow Blue Cross proper notification of Subscribers and continuity of care practices.”

• Subcontracting – A DME supplier, that is a party to a Contract, may desire to subcontract out certain responsibilities to another supplier. Before doing so, the supplier (contracted with the Plan) should determine if the Contract addresses subcontracting. For example, a BCBS Contract states: “All subcontracts of Provider under this Agreement must be in writing. All subcontracts of Provider are subject to Blue Cross review and approval…All subcontractors of Provider shall meet all applicable terms and conditions of this Agreement. Subcontracts shall not abrogate or alter Provider’s responsibilities under this Agreement.”

• Appeals – Before the DME supplier signs a Contract, the supplier should determine what the Contract says about the supplier’s appeal rights. For example, a BCBS Contract states: “The Provider and Subscriber shall have the right to appeal Utilization Review decisions through Blue Cross’ Utilization Review Process as set forth in the Provider Policy & Procedure Manual.”

• Home Set-Ups – The DME supplier needs to determine if the Contract requires the supplier to conduct home set-ups and training. For example, a BCBS Contract states: “When appropriate or requested by the Subscriber, Provider will set up the DME at the Subscriber’s home and provide training to the Subscriber and his or her family.”

• Voluntary Repayments – Some Contracts will impose on the DME supplier the affirmative obligation to voluntarily repay claims that should never have been paid to the supplier in the first place. For example, a BCBS Contract states: “Provider shall promptly report and return overpayment of any kind to Blue Cross.”

• Collection of Copayments – Many Contracts expressly require the supplier to make a “good faith” effort to collect copayments and deductibles. For example, a BCBS Contract states: “Provider agrees to make a good faith effort to collect any deductible, coinsurance, and/or copayment amounts due from Subscribers. This provision shall not prohibit Provider from collecting a lesser amount on individual hardship cases as determined by Provider.”

Jeffrey S. Baird, JD, is chairman of the Health Care Group at Brown & Fortunato, a law firm with a national health care practice based in Texas. He represents pharmacies, infusion companies, HME companies, manufacturers, and other health care providers throughout the United States. Baird is Board Certified in Health Law by the Texas Board of Legal Specialization and can be reached at (806) 345-6320 or [email protected].