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Understanding the Negotiation of Managed Health Care Contracts

On Behalf of | Aug 15, 2019 | Articles, Blog, Business Law, Healthcare Law, Publications

By Mathew J. Levy, Esq.Email the Author

To the dismay of most self-employed physicians today, both the practice of medicine and the “business” of medicine have become so intertwined that it has become impossible to differentiate between the two. Unfortunately, physicians who choose to resist this trend, or worse ignore it, too often find themselves mired in unfavorable contractual relationships that can lead to lower revenue for the practice. While physicians understandably wish to focus on the treatment of their patients, it is now essential that they understand the importance of properly handling the business of medicine.

One very important aspect of the business of medicine physicians often ignore is negotiation of managed health care contracts. Unfortunately, most physicians do not know that these contracts are negotiable. Accordingly, physicians enter into such agreements without even reading them, and are satisfied merely with the prospect of treating the respective health plans insureds. They file the agreement away never to be seen or found again. The terms of a managed health care contract are just as important as the respective insurance carrier’s fee schedule, and again, are negotiable. The purpose of this article is to quickly highlight a few concepts to consider when negotiating a managed health care contract.

Indemnification or “Hold Harmless” Provision

When a health plan offers a contract to a physician, its terms will be unfairly, but predictably favorable to the carrier. One such example of a “one-sided” term is the indemnification or “hold harmless” provision. An indemnification provision essentially protects one contracting party from any liability arising from actions or omissions of the other party to the contract. Often, a proposed contract will provide this protection only for the health plan. Therefore, it is important that the indemnification provision be modified so as to provide mutual protection against the respective liabilities arising out of actions or omissions of both parties – essentially forcing both parties to be responsible for their own liabilities.

Termination Without Cause

As in any agreement a physician may enter into, it is essential that there exist an “exit strategy” whereby the contract can be terminated for any reason. As the contract will likely contain terms that may change according to factors outside the physicians’ control, it is necessary that the physician be able to terminate the contract if those changes cause the contract to become onerous or result in the practice losing money. This is of particularly important if the health plan, in accordance with the contract, chooses to reduce reimbursement for a particular service under its fee schedule. If reduction in fee reimbursement causes the contractual relationship to become untenable, it is essential that the physician to have the ability to terminate it.

Evergreen Provision

Similarly, it is important for the physician to be able to re-negotiate the contract over time, while at the same ensuring it remains in effect without interruption. This can be acomplished by insisting that an “evergreen provision” be added to the contract. An evergreen provision provides that the contract (and its present terms) will automatically renew at a set time interval – usually every year. While this provides the physician with peace of mind that the contractual relationship will carry on without interruption, it also provides a mechanism whereby the physician can force re-negotiation of certain provisions of the contract in anticipation of renewal. This ability to re-negotiate is essential as it allows the physician to avoid “being stuck” with unfavorable terms for an untenable period.

Claims-Based Provisions

At the heart of a managed health care contract are provisions setting forth obligations of both parties regarding submission of claims and subsequent payment thereof. It is in the best interests of the physician that the contract provide a clear and efficient methodology for submission of claims and prompt payment of those claims by the health plan. Therefore, it is essential that the physician take great care to review these “claims-based” provisions to ensure cost-effectiveness of the contract to the practice. To that end, the physician is encouraged to pay particular attention to the following:

The time a physician has to submit a claim after performing a particular service.
Documentation a physician must submit with a claim;.
The time a health plan has to remit payment upon receipt of a claim.
The interest, if any, the health plan will pay if remittance is late.
The time the health plan has to institute overpayment procedures.


Even by this brief discussion, it should be apparent to the physician that when it comes to the business of medicine, complacency will only be detrimental to the practice. When entering into agreements with managed health care plans, physicians are well-advised to carefully review terms and provisions, and wherever possible, negotiate with the health plan.

Mathew J. Levy, Esq. is a Principal of Weiss Zarett Brofman Sonnenklar & Levy, PC. Mr. Levy is nationally recognized as having extensive experience representing healthcare clients in transactional and regulatory matters. Mr. Levy has particular expertise in advising health care clients with respect to contract issues, business transactions, practice formation, regulatory compliance, mergers & acquisitions, professional discipline, criminal law, healthcare fraud & billing fraud, insurance carrier audits, litigation & arbitration, and asset protection-estate planning. You can reach Mathew Levy at 516-627-7000 or [email protected].

Weiss Zarett Brofman Sonnenklar & Levy, P.C. is a Long Island law firm providing a wide array of legal services to the members of the health care industry, including corporate and transactional matters, civil and administrative litigation, healthcare regulatory issues, bankruptcy and creditors’ rights, and commercial real estate transactions.