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During a recent webinar presented by the American Bar Association, legal experts provided guidance on how doctors can successfully draft pay-for-performance contracts and prevent disputes with payers.
1. Clearly define terms
Contract terms and definitions should be clearly outlined and understood by both parties before value-based agreements are signed, said Melissa J. Hulke, a director in the Berkeley Research Group, LLC health analytics practice.
“Contract terms become central to resolving differences, so it’s important the contract is well defined, especially when moving away from fee for service,” she said. “These are more complex arrangements.”
Another area that needs thorough definition surrounds referral volume. Contracts can include the phrases, “predominately refer” or “primarily refer,” without defining the meaning of “predominately” or “primarily,” Ms. Hulke said.
“If that’s not defined in the contract, it’s hard to establish a benchmark to not only project the provider’s performance under the arrangement and how much revenue they can expect to receive, but it’s hard to know if you’re meeting that benchmark, as well,” she said. “I strongly encourage that if [a term states] “primarily, predominately, [or] mostly refer,” that you have a specific percentage benchmark included. That will help to avoid any disagreement later on.”
2. Review payment calculations
Ensure that payment formulas are examined and agreed upon.
“I think that should be baked into the contracts of today because they are so complex and there is so much money at stake,” she said. “Walk through that compensation exhibit, walk through the examples of what’s supposed to happen.
If not in agreement with calculations, talk to the payer’s financial personnel about how the numbers were reached and try to resolve any differences.
3. Monitor results
Actively monitor projected-to-actual financial performance under the contract. If performance is not being monitored and results are not being tested, it’s impossible to tell whether the contract is succeeding or failing, Ms. Hulke said.
It’s a good idea to monitor projected-to-actual financial performance monthly or at least quarterly, she advised.
“Tracking budget to actual performance and investigating successes and failures are important if the contracts are material to the provider’s business,” Ms. Hulke said.
4. Institute time frames for government methodologies
Be specific about when contracts are linked to Medicare reimbursement methodologies.
If commercial payers are tying payment rates to government programs, which often occurs, contracts should include whether the reimbursement is based on Medicare rates and methodologies as of a particular date and time, according to Ms. Hulke. For instance, the contract could specify that rates are tied to Medicare methodologies at the time the contract was executed. Alternatively, contracts could allow the physician payment rate to fluctuate depending on changes the government makes to Medicare rates and methodologies during the span of the contract.
“If this is not defined, when Medicare makes a change, the parties may have differing opinions on the appropriate rate of reimbursement that’s being paid,” she said.
5. Structure around state and federal laws
Conduct a regulatory analysis before inking any value based payment arrangement/transaction, and structure and document around potential legal constraints, Ms. Hanna said.
Know the laws in your state, she advised. Some states have requirements for provider incentive programs, while others may have rules for provider organizations or intermediaries that assume certain financial risk. When working with federal health care payers, review the Stark Law and Anti-Kickback regulations and ensure that if triggered by the arrangement, the venture falls within an exception of the statutes. Other legal considerations when drafting contracts include:
• HIPAA and state privacy laws.
• Antitrust laws.
• Telemedicine and telehealth laws.
• Medicare Advantage benefit guidelines for programs designed for specific Medicare Advantage populations.
• Scope of practice laws applicable to mid-level medical providers.
6. Design a dispute-resolution strategy
Include a thorough dispute-resolution strategy within the contract. The strategies help facilitate an orderly process for resolving disputes cost effectively, Ms. Hanna said. She suggested that policies start with an informal dispute-resolution process that sends unresolved matters to senior executives at each organization.
“This allows business leaders – and not the lawyers – to find a business solution to a thorny and potentially costly problem before each party gets entrenched in its own position and own sense of having been wronged,” she said in an interview. “The business solution may or may not rely on contract language but may be tailored to keep the relationship moving forward. However, if the informal process proves unsuccessful, then the process gets punted to the legal system – whether in a court proceeding or arbitration.”
7. Have an exit strategy
Include an exit strategy that ensures an end to the arrangement goes as smoothly and fairly as possible. The strategy will depend on the nature and structure of the payer-provider alignment and the value-based payment arrangement, Ms. Hanna said in an interview.
For example, in a true, corporate joint venture, the exit strategy may include buyout rights of the newly formed entity. In this case, it’s important to consider and negotiate the price of the buyout and what circumstances that will trigger the buyout. Termination rights should also be included in an exit strategy, Ms. Hanna said. One option is to allow termination “without case,” by either party.
“Clients often do not like this approach because the intention of the parties going in is to build a strong, long-term relationship where provider and payer benefit,” she said. “A ‘without cause’ termination rights gives the parties a safety valve if circumstances change or the relationship is just not successful.”
An alternative is to allow the relationship time to mature and grow before either party can exercise a without cause termination. A related approach is to develop triggering events that would give one or both parties the right to terminate the agreement, without the other party “having committed a bad act,” Ms. Hanna said in the interview.
“For instance, if the relationship does not meet certain financial or other benchmarks within an agreed-upon time frame, this may be a sufficient reason to terminate the relationship, abandon, or renegotiate the value-based purchasing payment formula or, perhaps, end an exclusive or other preferential relationship,” she said.
[email protected]
On Twitter @legal_med
During a recent webinar presented by the American Bar Association, legal experts provided guidance on how doctors can successfully draft pay-for-performance contracts and prevent disputes with payers.
1. Clearly define terms
Contract terms and definitions should be clearly outlined and understood by both parties before value-based agreements are signed, said Melissa J. Hulke, a director in the Berkeley Research Group, LLC health analytics practice.
“Contract terms become central to resolving differences, so it’s important the contract is well defined, especially when moving away from fee for service,” she said. “These are more complex arrangements.”
Another area that needs thorough definition surrounds referral volume. Contracts can include the phrases, “predominately refer” or “primarily refer,” without defining the meaning of “predominately” or “primarily,” Ms. Hulke said.
“If that’s not defined in the contract, it’s hard to establish a benchmark to not only project the provider’s performance under the arrangement and how much revenue they can expect to receive, but it’s hard to know if you’re meeting that benchmark, as well,” she said. “I strongly encourage that if [a term states] “primarily, predominately, [or] mostly refer,” that you have a specific percentage benchmark included. That will help to avoid any disagreement later on.”
2. Review payment calculations
Ensure that payment formulas are examined and agreed upon.
“I think that should be baked into the contracts of today because they are so complex and there is so much money at stake,” she said. “Walk through that compensation exhibit, walk through the examples of what’s supposed to happen.
If not in agreement with calculations, talk to the payer’s financial personnel about how the numbers were reached and try to resolve any differences.
3. Monitor results
Actively monitor projected-to-actual financial performance under the contract. If performance is not being monitored and results are not being tested, it’s impossible to tell whether the contract is succeeding or failing, Ms. Hulke said.
It’s a good idea to monitor projected-to-actual financial performance monthly or at least quarterly, she advised.
“Tracking budget to actual performance and investigating successes and failures are important if the contracts are material to the provider’s business,” Ms. Hulke said.
4. Institute time frames for government methodologies
Be specific about when contracts are linked to Medicare reimbursement methodologies.
If commercial payers are tying payment rates to government programs, which often occurs, contracts should include whether the reimbursement is based on Medicare rates and methodologies as of a particular date and time, according to Ms. Hulke. For instance, the contract could specify that rates are tied to Medicare methodologies at the time the contract was executed. Alternatively, contracts could allow the physician payment rate to fluctuate depending on changes the government makes to Medicare rates and methodologies during the span of the contract.
“If this is not defined, when Medicare makes a change, the parties may have differing opinions on the appropriate rate of reimbursement that’s being paid,” she said.
5. Structure around state and federal laws
Conduct a regulatory analysis before inking any value based payment arrangement/transaction, and structure and document around potential legal constraints, Ms. Hanna said.
Know the laws in your state, she advised. Some states have requirements for provider incentive programs, while others may have rules for provider organizations or intermediaries that assume certain financial risk. When working with federal health care payers, review the Stark Law and Anti-Kickback regulations and ensure that if triggered by the arrangement, the venture falls within an exception of the statutes. Other legal considerations when drafting contracts include:
• HIPAA and state privacy laws.
• Antitrust laws.
• Telemedicine and telehealth laws.
• Medicare Advantage benefit guidelines for programs designed for specific Medicare Advantage populations.
• Scope of practice laws applicable to mid-level medical providers.
6. Design a dispute-resolution strategy
Include a thorough dispute-resolution strategy within the contract. The strategies help facilitate an orderly process for resolving disputes cost effectively, Ms. Hanna said. She suggested that policies start with an informal dispute-resolution process that sends unresolved matters to senior executives at each organization.
“This allows business leaders – and not the lawyers – to find a business solution to a thorny and potentially costly problem before each party gets entrenched in its own position and own sense of having been wronged,” she said in an interview. “The business solution may or may not rely on contract language but may be tailored to keep the relationship moving forward. However, if the informal process proves unsuccessful, then the process gets punted to the legal system – whether in a court proceeding or arbitration.”
7. Have an exit strategy
Include an exit strategy that ensures an end to the arrangement goes as smoothly and fairly as possible. The strategy will depend on the nature and structure of the payer-provider alignment and the value-based payment arrangement, Ms. Hanna said in an interview.
For example, in a true, corporate joint venture, the exit strategy may include buyout rights of the newly formed entity. In this case, it’s important to consider and negotiate the price of the buyout and what circumstances that will trigger the buyout. Termination rights should also be included in an exit strategy, Ms. Hanna said. One option is to allow termination “without case,” by either party.
“Clients often do not like this approach because the intention of the parties going in is to build a strong, long-term relationship where provider and payer benefit,” she said. “A ‘without cause’ termination rights gives the parties a safety valve if circumstances change or the relationship is just not successful.”
An alternative is to allow the relationship time to mature and grow before either party can exercise a without cause termination. A related approach is to develop triggering events that would give one or both parties the right to terminate the agreement, without the other party “having committed a bad act,” Ms. Hanna said in the interview.
“For instance, if the relationship does not meet certain financial or other benchmarks within an agreed-upon time frame, this may be a sufficient reason to terminate the relationship, abandon, or renegotiate the value-based purchasing payment formula or, perhaps, end an exclusive or other preferential relationship,” she said.
[email protected]
On Twitter @legal_med
During a recent webinar presented by the American Bar Association, legal experts provided guidance on how doctors can successfully draft pay-for-performance contracts and prevent disputes with payers.
1. Clearly define terms
Contract terms and definitions should be clearly outlined and understood by both parties before value-based agreements are signed, said Melissa J. Hulke, a director in the Berkeley Research Group, LLC health analytics practice.
“Contract terms become central to resolving differences, so it’s important the contract is well defined, especially when moving away from fee for service,” she said. “These are more complex arrangements.”
Another area that needs thorough definition surrounds referral volume. Contracts can include the phrases, “predominately refer” or “primarily refer,” without defining the meaning of “predominately” or “primarily,” Ms. Hulke said.
“If that’s not defined in the contract, it’s hard to establish a benchmark to not only project the provider’s performance under the arrangement and how much revenue they can expect to receive, but it’s hard to know if you’re meeting that benchmark, as well,” she said. “I strongly encourage that if [a term states] “primarily, predominately, [or] mostly refer,” that you have a specific percentage benchmark included. That will help to avoid any disagreement later on.”
2. Review payment calculations
Ensure that payment formulas are examined and agreed upon.
“I think that should be baked into the contracts of today because they are so complex and there is so much money at stake,” she said. “Walk through that compensation exhibit, walk through the examples of what’s supposed to happen.
If not in agreement with calculations, talk to the payer’s financial personnel about how the numbers were reached and try to resolve any differences.
3. Monitor results
Actively monitor projected-to-actual financial performance under the contract. If performance is not being monitored and results are not being tested, it’s impossible to tell whether the contract is succeeding or failing, Ms. Hulke said.
It’s a good idea to monitor projected-to-actual financial performance monthly or at least quarterly, she advised.
“Tracking budget to actual performance and investigating successes and failures are important if the contracts are material to the provider’s business,” Ms. Hulke said.
4. Institute time frames for government methodologies
Be specific about when contracts are linked to Medicare reimbursement methodologies.
If commercial payers are tying payment rates to government programs, which often occurs, contracts should include whether the reimbursement is based on Medicare rates and methodologies as of a particular date and time, according to Ms. Hulke. For instance, the contract could specify that rates are tied to Medicare methodologies at the time the contract was executed. Alternatively, contracts could allow the physician payment rate to fluctuate depending on changes the government makes to Medicare rates and methodologies during the span of the contract.
“If this is not defined, when Medicare makes a change, the parties may have differing opinions on the appropriate rate of reimbursement that’s being paid,” she said.
5. Structure around state and federal laws
Conduct a regulatory analysis before inking any value based payment arrangement/transaction, and structure and document around potential legal constraints, Ms. Hanna said.
Know the laws in your state, she advised. Some states have requirements for provider incentive programs, while others may have rules for provider organizations or intermediaries that assume certain financial risk. When working with federal health care payers, review the Stark Law and Anti-Kickback regulations and ensure that if triggered by the arrangement, the venture falls within an exception of the statutes. Other legal considerations when drafting contracts include:
• HIPAA and state privacy laws.
• Antitrust laws.
• Telemedicine and telehealth laws.
• Medicare Advantage benefit guidelines for programs designed for specific Medicare Advantage populations.
• Scope of practice laws applicable to mid-level medical providers.
6. Design a dispute-resolution strategy
Include a thorough dispute-resolution strategy within the contract. The strategies help facilitate an orderly process for resolving disputes cost effectively, Ms. Hanna said. She suggested that policies start with an informal dispute-resolution process that sends unresolved matters to senior executives at each organization.
“This allows business leaders – and not the lawyers – to find a business solution to a thorny and potentially costly problem before each party gets entrenched in its own position and own sense of having been wronged,” she said in an interview. “The business solution may or may not rely on contract language but may be tailored to keep the relationship moving forward. However, if the informal process proves unsuccessful, then the process gets punted to the legal system – whether in a court proceeding or arbitration.”
7. Have an exit strategy
Include an exit strategy that ensures an end to the arrangement goes as smoothly and fairly as possible. The strategy will depend on the nature and structure of the payer-provider alignment and the value-based payment arrangement, Ms. Hanna said in an interview.
For example, in a true, corporate joint venture, the exit strategy may include buyout rights of the newly formed entity. In this case, it’s important to consider and negotiate the price of the buyout and what circumstances that will trigger the buyout. Termination rights should also be included in an exit strategy, Ms. Hanna said. One option is to allow termination “without case,” by either party.
“Clients often do not like this approach because the intention of the parties going in is to build a strong, long-term relationship where provider and payer benefit,” she said. “A ‘without cause’ termination rights gives the parties a safety valve if circumstances change or the relationship is just not successful.”
An alternative is to allow the relationship time to mature and grow before either party can exercise a without cause termination. A related approach is to develop triggering events that would give one or both parties the right to terminate the agreement, without the other party “having committed a bad act,” Ms. Hanna said in the interview.
“For instance, if the relationship does not meet certain financial or other benchmarks within an agreed-upon time frame, this may be a sufficient reason to terminate the relationship, abandon, or renegotiate the value-based purchasing payment formula or, perhaps, end an exclusive or other preferential relationship,” she said.
[email protected]
On Twitter @legal_med