Remember the phrase “No good deed goes unpunished”? 

Take heed and avoid this nasty situation by being meticulous with your managed care negotiation communications.

When I assist in the negotiation of a contract together with a client,  clients at first describe me as “obsessive” about avoiding oral negotiation communications on clarifications, changes, and acting “as if” there is a contract with the other party.   I coach the client to do likewise and encourage their best efforts to take every precaution to ensure that communication is unambiguous.  While the inexperienced and naive negotiator may think I go overboard here, it’s not overboard at all.  I am not trained as a lawyer.  Therefore, I did not go to law school and learn this in a contracting class.  Instead, on this matter, I am unashamed to say that I earned a certificate from the Been There, Done That Academy.  (While there is no such academy for managed care contracting, I have attempted to start one with the The Managed Care Institute.)

In my career as a contractor for various hospitals, IPAs, PHOs, MSOs and the medical groups for which I served as Administrator, many contracts passed my desk.  As a beginner, I thought that if we didn’t sign the contract, we weren’t bound by its terms. In one case, more than 15 years ago, a physician with whom I worked decided that he would refuse to sign the contract draft agreement.  I remember this incident as if it was yesterday.

Here’s how to avoid a dangerous consequence of being “nice” to patients who have insurance cover through companies with which you choose not to contract.

What he did instead was to act “as if” we had a contract with the payer. We accepted their rates, wrote off balances in excess of the allowable and charged co-payments to the patients. When records requests were received to substantiate and defend the treatment rendered, we complied without requesting payment for medical records copies. When the plan failed to pay secondary using the excuse that the primary paid what they would have paid, so that no additional payment would be tendered, we wrote off the balance.  When a remittance summary contained a denial due to lack of pre-authorization, or pre-certification, and a there was failure to obtain a non-covered waiver, we wrote off the balance owed.  We did everything to be a good citizen but he didn’t want to sign the contract.

One day, a very large bill was reduced to a ridiculous amount and he decided he had had enough. He decided to balance bill the patient.  To our surprise, we received a letter from the payer stating that to do so was not permitted in accordance with the terms of our agreement and to stop billing the patient. What agreement? “We signed nothing”, we asserted.  We then asked them to pay up to at least the usual and customary amount we received from all other payers. (Oops!)  When they didn’t, he took matters into his own hands and self-filed a lawsuit in small claims court. After all, the contract required participating providers to enter binding arbitration, he didn’t sign that.  The payer then challenged us with an interrogatory with one question (of 20 they are allowed) that stood out to me as odd at the time. It requested us to provide the ledger of every patient for which we had been paid and denied by the payer, demonstrating contractual adjustments we had allowed, and the accompanying EOB.  “Why do they need that”, I wondered.  “They know what they paid us.”

Still, the physician did not want to spend a dime on legal counsel. So, we complied with the interrogatory like a good citizen…and played right into their hand.  They then used our response against us to enter a motion to dismiss for lack of standing, asserting that we indeed had a contract, and had repeatedly demonstrated the existence of a meeting of the minds. Further, they asserted that the contract had a requirement of binding arbitration and therefore it was inappropriate for use to use the courts as the forum to resolve our dispute. (It was an ERISA case, and we didn’t know better, so we actually sued the wrong entity, but that’s another article for another time.)

Lessons Learned

Ultimately we lost and here is why: I learned that a contract that is never signed can still become binding on the parties if they can prove that what actually happens in the relationship demonstrates a meeting of the minds. I found out that this can also come about if you repeatedly allow them to pay you late, allow them to deny certain claims or accept behaviors that differ from the terms of the signed agreement enough that the reasonable person would assume that after so many repeated incidences of the behavior that you are okay with it.  Take heed, as this can also happen in the case of “Silent PPO” type arrangements.

When I negotiate a managed care contract now, or assist in negotiations with a client, I make sure that a few things happen:

First, any changes in the contract language are marked.  For additions, a double underline and red text are used.  For deletions, a strikethrough is used.  This way, I can show my refusal to demonstrate that there is not a meeting of the minds on paper.

Second, all conversations are documented with a memorandum to follow that confirms the discussion. Each is numbered, date sequenced and filed. This includes emails, faxes, and calls, and now -even Skye and text messages.

Third, I caution the client not to extend the courtesies of the contractual relationship beyond the end of the in ital term of the contract.  You have to be careful here, because sometimes, the contract stipulates that if you miss a window of opportunity or a date range by which your contract negotiations must be finalized and signed, and you continue on with the same behavior, you are obligated for the renewal term. If you do sign the contract renewal with the new terms, the other side may be able to act on the old terms and ignore the new requirements, and then assert that they were unclear as to which version is in effect.

You Have a Few Options

If you want to continue to act as a participating provider and do a good deed for the patients beyond this deadline for execution, you may wish to discuss with your legal counsel the drafting and execution of a Memorandum of Understanding with a specific deadline after which you will consider the deal and the understanding “dead”.

If you intend to sign, execute a Letter of Intent stating the deal breakers that need to be finalized in order to move forward and follow through on the intention – basically that you don’t “intend” to follow though if you cannot resolve those differences.  The documents can be binding or non-binding.  Your attorney can guide you as to which is more appropriate given your particular situation.

Finally, if there is no contract, no understanding…don’t act as if there is one.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column width=”1/1″][vc_call_to_action button_title=”Book a 15 minute courtesy consult – we’re here to assist you” button_link=”” title=”Need help with a bad situation?”][/vc_column][/vc_row]

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