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Avoiding the most common pitfalls in insurance contracting

By Robbie Leonard, PT, DPT

If you were to name the top 10 things you love (or hate) about running your business, would reviewing insurance contracts fit in either list?

If you are like most owners, the answer is likely no. Most owners understand the fee schedule aspect and the need to be savvy about being paid our value, but what about the other aspects of contracting? Most owners spend very little time pondering the details of insurance contracts until one lands on their desk. You may be surprised about what you can change in a contract by simply knowing what to look for. In this article we will discuss some of the pitfalls of insurance contracts and how to avoid them.

1. Opt-Out Provisions

Most insurance contracts have an opt out provision with cause and without cause. The with cause provisions are typically not going to change, but the without cause provisions can often be negotiated. You will want to look closely at how you can exit the contract if you determine it is not a good fit for a clinic. Ideally, you will have studied the contract before signing it and don’t experience any surprises, but if the contract doesn’t meet expectations, it is important to have an easy way out. You don’t want to have to wait a full year before being allowed to opt out. A 90- to 180-day written notice is common. Some payers only allow termination for convenience after the first full year. I recommend negotiating for a 90-day or less notice period regardless of how far along you are in the contracting cycle. Plan for the exit before you put your signature on the contract.

2. Non-Covered Service Provisions

When reviewing clinic introductory paperwork, I frequently see language in financial policies that states, “Insurance verification is a courtesy that we provide to our patients.” But is it really a courtesy or is it a contract requirement? Most contracts have provisions about benefit verification, pre-authorization, and notification requirements for non-covered services for in-network beneficiaries. Contracts typically state that if you are going to charge a patient cash for a non-covered service, you are required to notify the patient in writing prior to providing the service. Like the Medicare ABN process, this may be a contractual requirement for your commercial payers. You may or may not want to negotiate these terms, but if you agree to them, you will want to be compliant and remove the courtesy language from your introductory paperwork. This means understanding exactly what is covered and not covered and notifying the patients accordingly.

3. The Reference to Online Provider Manuals and Documents

Most insurance contracts have a requirement to abide by the payer’s online provider manuals and policies. This is a blanket statement, and one that I highly recommend you narrow down with the payer. In evaluating one clinic’s obligations to this statement, I searched for all the provider manuals and information that the clinic was obligated to comply with. It was a weeklong search to find the right documents and read thousands of pages. The result was 11 different manuals that had some reference to outpatient physical therapy business practices and over 4,000 pages to sift through. No one has time for that type of reading. If you want to see the magnitude of this issue, check out the reference on the Marquette Project. When contracting, narrow this section down to the specific manuals that you are agreeing to, and make sure the contract has a provision to notify you in writing of any substantial changes to the contract or fee schedules or online manuals that materially affect your business.

4. Extra Paperwork

No one needs extra paperwork or additional administrative burden, but you may be agreeing to do so if you do not read carefully. This is a notoriously big issue with Worker’s Compensation contracts. Many of these contracts require completion of specific paperwork to be return to the company or providing documentation to an adjuster or case manager at specific time frames. Review these sections carefully. In most cases, you can push back and get them to agree that you will not complete special forms, but instead provide the documentation that is already present in your EMR upon request. Also be aware of exceptionally burdensome pre-authorization requirements.

5. Prompt Payment

Most states have some type of prompt payment legislation on the books for third-party payment of healthcare services. Make sure that you know what those laws are in your state. Check the contract that you are signing to make sure that you are not agreeing to terms that are longer than the state law. The state law may reference the fact that you can sign a contract outside of the legal requirement which would mean that the terms of the contract are followed versus the quicker reimbursement required by law. When you are asking for this to be changed, prior to signing a contract it is prudent to reference what the state law requirements are for your specific state. There are many additional items to be aware of when negotiating an insurance contract. PPS has an excellent reference for members to utilize when reviewing a contract. I recommend that you have that document open when you are reviewing any new or revised contract. If you already have contracts in place with language that is not favorable to you, it’s never too late to ask for a change.

Use an Excel document similar to the example below to keep track of your insurance contracts and key provisions. Owners should keep all original contracts and any additions or changes to those contracts in his/her own files. Do not delegate this to a non-owner since these are critical to your business operations and need to be easily accessible. If you do not have copies of your contracts, you can request them from the payer, but you will typically need to do so in writing.

Table 1: Sample Contracting Grid
Insurance #1
Effective Date1/18/2016
Provider ID
Timely Filing of Claims90 days from DOS
Timely Payment of ClaimsWithin the timeframes required by state law
Time frame for appeals180 days
Terms of agreementOne year and continues year to year unless terminated
Terms for termination90 days written notice (without cause)
Fee schedule for therapyFee schedule based on CPT codes following MidPoint Rule
Fee schedule for DMEDME requires a separate contract
Liability Requirements1 Million Occurrence/3 Million Aggregate, must notify if insurer changes or policy is updated
MD Referral RequirementNot referenced
Follows Medicare RulesMedicare not referenced in contract
CredentialingNot referenced in contract
Non-Covered ServicesMust notify patient in writing before providing and charging for non-covered services
Online Provider Manual or Medical Policies ReferencedYes – See Medical Policy Grid
Prohibits Balance Billing & Waiving of Co-pays, Co-insurance, DeductiblesYes
Required by Contract to check benefits and obtain pre-auth if requiredYes
Specific Plans ListedList covered products (i.e., HMO, Medicare Advantage, etc.)
Other NotesProvider shall not directly or indirectly establish, arrange, encourage, participate in, or offer any patient an incentive
Table 2: Sample Medical Policy and Provider Manual Grid
Insurance #1
Medical Policy URLURL where rehab/therapy policies are located
Provider ManualURL where provider manual is located
Policy NameOutpatient Physical Therapy Policy
Effective Date01/01/2017
Key Points
Medical NecessityServices must be: Medically necessary, require the skill of a therapist, expected restoration is significant, and documentation supports functional improvement
Not Medically NecessaryMaintenance; services for educational, training, conditioning, or fitness; patient does not make progress in a reasonable amount of time
Evaluation and POC RequirementsEval: Must be completed before treatment begins; treatment plan; functional short- and long-term goals required
Treatment Sessions RequirementsTreatment sessions: Date, specific treatments that match procedure codes billed, total treatment time, response to TX, skilled assessment, progress, changes to POC, name and credentials of treating clinician
Progress Report RequirementsProgress reports: Must be done intermittently
Re-EvaluationRe-evaluation: When there are new clinical findings, significant change in the patient’s medical status (not for routine assessment or progress reports)
Qualifications of StaffMust be delivered by a qualified provider of PT services acting within the scope of their license (PT or PTA). Aides, ATC, Ex Phys, and techs do not meet the definition of a qualified provider and cannot provide billable services
Considered Experimental or Non-CoveredDry needling
Habilitative ServicesUse SZ Modifier for Habilitative Services (see definition in policy)
OT and Speech PoliciesOT and speech have separate policies
OtherPlans may have a maximum allowable PT benefit. When reached, coverage is no longer provided even if medically necessary

1Payment Resources: Checklist of Key Issues for Managed Care Provider Agreements. APTA Private Practice Section website. https://ppsapta.org/userfiles/File/CHECKLIST%20OF%20KEY%20ISSUES%20FOR%20MANAGED%20CARE%20PROVIDER%20AGREEMENTS.pdf. Accessed December 4, 2019.

2Marquette Project White Paper. APTA Private Practice Section website. https://ppsapta.org/userfiles/File/Marquette%20Project%20White%20Paper.pdf. Accessed December 4, 2019.

Robbie Leonard

Robbie Leonard, PT, DPT, CHC, is a physical therapist and PPS member who has worked in private practice and as a consultant helping practice owners with revenue cycle management and administrative processes for the past 25 years. She can be reached at robbie@8150advisors.com.

*The author has a professional affiliation with this subject.

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