The sign of a good business deal is when both sides walk away happy……
By Bill Rusteberg
For mostly unreasonable reasons everyone wants access to provider agreements when seeking medical care. The term “In-Network” is forever imbedded in the American vernacular.
Any plan can get a direct agreement, anywhere, anytime. Just like PPO intermediaries some plans enter into direct agreements no matter what the reimbursement rates are just so they can say they have one and don’t have to face employee pushback over balance billing issues.
We don’t believe direct hospital contracts are necessary based on our experience in managing Reference Based Pricing plans. Well managed health insurance plans can do just fine without them. And save a ton of money.
Plan sponsors have often asked us to get direct contracts for them. “Sure, no problem, what do you want to pay them?” we ask. It takes one phone call to the right person in order to determine if a contract makes sense for both parties, not days and weeks with endless back and forth dealing with all the wrong people lacking authority.
We have found “reasonable” direct agreements can best be attained when Reference Based Pricing market penetration achieves scale in a given geographic area. Decision makers take notice. Such is the case in the Lower Rio Grande Valley and San Antonio, Texas where Reference Based Pricing first originated and has been growing ever since over the past 20 years.
Our direct hospital agreements range from 100% to 130% of Medicare in both areas. Conversely, based solely on our own experience, direct agreements in West Texas, Dallas – Ft. Worth, and Austin are worth a +20% rate load based on average reimbursement rates of +180% of Medicare (why bother, stay with your PPO).
Below are two sample Hospital Agreements we have used for more than two decades with good success. These agreements are short and simple vs traditional provider agreements with page after page of legalese no plan sponsor understands nor reads because they are not allowed to.
HOSPITAL AGREEMENTS
These hospital agreements do not include stop loss provisions or other egregious one-sided outliers common to managed care contracts. There are no value draining third party intermediaries involved. These are direct agreements between plan sponsors and providers.
Letter of Agreement #1
This Letter of Agreement is entered into as of _______________ (the “Effective Date”) between NAME OF GROUP (“Payor”) and NAME OF PROVIDER (“Provider”), Tax ID #: ______________________, NPI #: ____________________________.
The Payor sponsors, administers, and funds an employee health and welfare benefit plan (the “Plan”). The Plan is a self-funded group health plan formed and administered under the purview of applicable law. The Payor has a fiduciary duty to manage the plan in a prudent manner, pay only reasonable expenses, and administer benefits in strict accordance with the governing Plan Document. The Plan Document sets forth explicit parameters limiting the maximum payable amount for a claim. A copy of the Plan Document is available upon request.
The Plan’s maximum payable amount is typically based on _____% of the Medicare allowable fee schedule amount. For services that the Plan covers but Medicare does not, the Plan allows the Plan Administrator to consider factors such as Medicare equivalency codes derived from Resource-Based Relative Value Scale Relative Value Unit tables, amounts Medicare pays to other providers in the same geographic locale, and other factors. The Plan Administrator also has discretionary authority to consider additional factors when determining the maximum payable amount, but the Plan Administrator is strictly prohibited from releasing benefits that are in excess of the Plan’s maximum payable amount.
An assignment of benefits is an arrangement wherein a Plan Participant assigns to the Provider its right to seek and receive payment of eligible Plan benefits, less deductibles, copayments, and coinsurance. Once the Provider accepts an assignment of benefits, the Provider’s rights to receive Plan benefits are equal to those of the Plan Participant and, accordingly, are limited by the terms of the Plan Document. If the Provider accepts an assignment of benefits from the Plan Participant, then the Provider accepts the assignment of benefits, deductible, copayment, and coinsurance as payment in full for the services rendered to the Plan Participant. If the Provider refuses to treat an Assignment of Benefits, deductible, copayment, and coinsurance as payment in full, the Provider may seek payment from the Plan Participant. In that case, the Plan may make payment only to the Plan Participant for the maximum payable amount under the Plan Document’s terms.
Under this LOA, the Provider will accept Assignment of Benefits as consideration in full for services it renders to a given Plan Participant. Further, the Provider will not bill the Plan Participants for any amounts that exceed the maximum payable amount, deductibles, copayments, and coinsurance under the Plan Document. The Plan’s third party claims administrator (“TPA”) will issue payment on behalf of its client benefit plans within 30 days from the date it receives a Clean Claim for expenses the Plan covers. A “Clean Claim” is a claim that the TPA can process under the Plan Document’s terms without obtaining additional information from the Provider or a third party. The TPA will issue payments on behalf of the Payor according to the terms of the Plan Document. Any TPA that assists the Plan is not an insurer, guarantor, payor, or Plan fiduciary.
Either Party may terminate this LOA upon 90 days’ prior written notice for any or no reason. Both Parties will comply with all applicable state and federal laws and regulations.
NAME OF PLAN SPONSOR NAME OF PROVIDER
Signature: ___________________________ Signature:___________________
Name: _____________________________ Name: _____________________
Title: _______________________________ Title:_______________________
Date: _______________________________ Date: ________________________
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Letter of Agreement #2
(A Medicare based fee schedule with Carve-outs Where Needed)
Inpatient
100% of Medicare[1] using MS-DRG Reimbursement Methodology. Patient is responsible for 5% coinsurance, up to $250.
Outpatient
100% of Medicare using APC Grouper Reimbursement Methodology. Patient is responsible for 5% coinsurance, up to $150 for any Ambulatory Surgical Procedure as defined by Medicare. All other Outpatient encounters will not require a Patient Payment.
For services not reimbursable through Medicare: 110% of CMS Cost-To-Charge
Exclusions (Applicable to Inpatient and Outpatient Services):
Excluded items will be recognized from the following revenue codes and reimbursed per the following:
Surgical implants, prosthetics and orthotics properly billed in accordance with nationally recognized billing standards under revenue code:
- 274 (prosthetic/orthotic devisees)
- 275 (pacemakers)
- 276 (intraocular lens)
- 278 (other implants)
- 279 (Other supplies/devices)
(Collectively “Implant”) shall be reimbursed as follows:
Within each revenue code identified above, Hospital shall be reimbursed for the implants billed under that revenue code at 110% of cost (Manufacturer invoice based)
Drugs properly billed in accordance with nationally recognized billing standards under revenue code:
- 634 (Erythropoietin (EPO) <10,000 units)
- 635 (Erythropoietin (EPO) >10,000 or more units) or
- 636 (drugs requiring detailed coding) when billed with revenue code 331, 332, or 335
Applicable J Codes are: J9000-J9999; J7190-J7195 and J2505
Collectively “High Cost Drugs”) shall be reimbursed as follows:
Within each revenue code identified above, Hospital shall be reimbursed for the High Cost Drugs billed under that revenue code at 110% of cost (Manufacturer invoice based)
Payments:
Payer shall pay Hospital for Covered Services rendered to Members less any applicable Member Copayments, Coinsurance or Deductible amounts as described above. Hospital shall accept such compensation, and any applicable Member Copayment, Coinsurance or Deductible as Hospital’s only compensation for Covered Services. Payer shall make such payment for services with thirty (30) days of receipt of Clean Claims.
Recovery of Underpayments and Overpayments:
Payer and/or Hospital must provide an explanation as to why it is believed a refund is legitimate including details of their bundling edits, fee schedules, criteria or provider bulletins.
- Underpayments: Hospital has 1 year from payment to request adjustments to incorrect payments.
- Overpayments: Payer has 1 year from payment to request overpayments returned for incorrect payments.
- Barring any systematic practice to underpay Hospital by Payer, Payer and Hospital agree that underpayments and/or overpayments amounting to less than $25.00 on an individual entire claim shall be considered to have been paid in accordance with the terms of this Agreement and shall not be appealed by Hospital or Payer. Rather, Hospital or Payer shall write-off the under- and/or over-payment difference.
Retrospective Audits
Payer has 1 year from payment date to conduct a retrospective audit.
Term and Termination:
This Agreement shall be effective as of the Effective Date and shall continue until otherwise terminated in accordance with this Agreement. The initial term is the first year this Agreement is in effect (the “Initial Term”) and will Auto renew on an annual basis at the end of each term unless noticed received 90 days prior to renewal date.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to become effective July 1, 2015:
By QBC Fence Company
__________________________________________________ Date _________________
By Hospital
__________________________________________________ Date __________________
[1]MS-DRG Reimbursement Methodology: These payments are intended to mirror the payment mechanism that Medicare would pay to the hospital. The Medicare payment includes without limitation, DRG, outlier payments, GME, IME, Disproportionate Share Hospital, Capital Pass Through and any other compensation made by Medicare.
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
PROFESSIONAL DIRECT AGREEMENT
RiskManagers.us clients have used the following agreement for over 20 years with no changes since. In the Rio Grande Valley plan sponsors have directly contracted +1,500 physicians including free standing surgical and MRI centers. In San Antonio our clients have secured more than 2,000 of these agreements. All agreements are between plan sponsors and each provider, there is no third-party intermediary involved. Average PCP reimbursement is 110% of Medicare. Specialists average is 135%, free standing MRI – Surgical Center is 105%.
Letter of Agreement
This Letter of Agreement is entered into this ______day of______________, 2014 between XXXXX, MD and the self-funded welfare benefit plan covering eligible employees and dependents of ABC Fence Company (“AFc”).
XXXXX, MD will bill the Plan for services provided to employees and dependents of (AFC) covered by the Plan. The Plan will be permitted to discount the billed charges as follows: The lessor of billed charges or ___% Medicare (RBRVS). Codes not established by Medicare will be reimbursed at __% off of billed charges.
The Plan will pay XXXXX, MD according to the above arrangement, less any deductible or coinsurance payable by the patient. XXXXX, MD will bill the patient for only the amount of deductible and coinsurance not paid for by the Plan. A claim that requires no additional investigation will be paid within thirty (30) days from the receipt of the claim.
ABC Fence Company member and dependent claims for service should be submitted to the Plan Administrator (Name of TPA) at:
Electronic (EDI) Mail
This Agreement may be terminated by either party with at least sixty (60) days notice of intention to terminate this agreement. Any charges incurred prior to the termination date of this Agreement will be paid in accordance with the terms of this Agreement.
Provider Name: XXXXX, MD Employer: ABC Fence Company
By: _____________________________ By: _____________________________
Title: ____________________________ Title: ____________________________
Date: ____________________________ Date: ____________________________
Tax ID #:_________________________
NPI #:___________________________
Address: _________________________
City, State: _______________________
Phone #:_________________________
How do you recognize a good agreement from a bad one? If you don’t know what the current agreement offers how do you know if your offer is better or worse for you? If a hospital currently gets 350% of Medicare through the PPO network you’re using, what makes you think they will accept the 120% of Medicare you’re offering? How do you convince them to accept your “low ball” offer? Who needs the other more than the other? How do you gauge your chances of success before you make your pitch?
There’s a science to this……………
Plan sponsor’s ode to a hospital administrator………….
