Health Plans Contracting Handbook: a Guide for Payers and Providers Eighth Edition

Health Plans Contracting Handbook: A Guide for Payers and Providers Eighth Edition

BY ROBIN FISK, EDITOR IN CHIEF CHRISTINA DEGRAFF-MURPHY, EDITOR GREGORY R. MITCHELL, EDITOR

GERALD “JERRY” L. ABEN MATTHEW AMODEO ADAM C. ASERON BROOKE BENNETT AZIERE JOHN C.J. BARNES JAMES W. BOSWELL AIMEE DEFILIPPO LISA G. HAN ANDREW C. HELMAN JOHN M. KIRSNER DAVID E. KOPANS MARK S. KOPSON KATHRIN E. KUDNER JACQUELINE B. PENROD CHRISTIAN PUFF MICHAEL F. SCHAFF DEBRA SILVERMAN ANDREW STEIN LEAH B. STEWART ADAM C. VARLEY AMANDA M. WILWERT Copyright 2021 by AMERICAN HEALTH LAW ASSOCIATION 1099 14th Street, NW, Suite 925, Washington, DC 20005 Web site: www.americanhealthlaw.org E-Mail: [email protected]

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form, or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the express, written permission of the publisher. Printed in the United States of America ISBN: 978-1-6633-1388-1 ISBN: 978-1-6633-1386-7 (Members) ISBN: 978-1-6633-1389-8 (eBook) ISBN: 978-1-6633-1387-4 (eBook, Members) “This publication is designed to provide accurate and authoritative information with respect to the subject matter covered. It is provided with the understanding that the publisher is not engaged in rendering legal or other professional services. If legal advice or other expert assistance is required, the services of a competent professional person should be sought.”

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iii

Preface

The Health Plans Contracting Handbook: A Guide for Payers and Providers, published by the American Health Law Association, is the 8th edition of a work that has served as a resource for practitioners for two decades. It has become a classic and one of the essential tools of the health law practitioner’s library. The intent behind the Health Plans Contracting Handbook is to provide advice on addressing the issues that arise in managed care network relationships. These contracts often endure for years at a time and must document increasingly dynamic relationships between the parties, including changes in products, governing laws, and medical and administrative best practices for both payers and providers alike. As with prior editions, this book attempts a balanced approach and practical focus, rather than exhaustive reporting on the state of the law. We aim to provide sample clauses to assist you in thinking about and drafting appropriate language; many of which are based on real examples. Throughout the book, the authors have provided cites to cases or state statutes to help you begin research as needed, but an exhaustive description of the state of the law, including the variations among jurisdictions, is beyond the scope of this publication. As previous editions have done, the 8th edition examines emerging themes and issues in the managed care contracting space. We continue to see large health systems launching as independent payers or through integrated delivery models and have incorporated issues arising with this additional layer of contracting throughout the book. The chapters reflect the increasing focus on value-based payments and the financial and operational considerations for arrangements that incorporate them. This edition includes three new chapters reflecting additional changes in the field: the uses and ownership of data, direct-to-employer contracting, and considerations when the provider is out-of-network. Finally, the chapters, particularly the chapters dealing with Medicare and Medicaid, consider the effects of increased managed care penetration into populations that have traditionally been carved out of managed care, such as individuals with chronic conditions and more complex populations, including individuals with intellectual and developmental disabilities and foster children. This volume was started before the COVID pandemic and before we had any understanding of the monumental changes that were about to affect how we conduct meetings, operate, and even greet each other. The first drafts were due at the end of March 2020, just as stay-at-home orders were going into effect. It is a tribute to the authors that none abandoned the project, even as their workloads increased during this unprecedented time. Every chapter was informed by and improved as a result of the pandemic. We are grateful to the authors and their incredible commitment to this edition. This edition would not have been possible, and certainly would not have been timely, without the assistance of Kara Kinney Cartwright, whose continuing and expert guidance kept us all on track. We mourn the loss of Kathrin (Kathy) Kudner, our well-respected colleague and a long-standing author of the chapter on Medicaid. We extend our sincere thanks for her firm, Dykema Gossett, and specifically her colleague, Gerald (Jerry) Aben, for stepping in and completing her excellent work.

v Preface

Since we began updating this 8th edition, we have seen the onset of the COVID pandemic, the rise of telehealth, the increased use of online scheduling, remote monitoring, and many other changes that will be interpreted through the lens of thousands of managed care contracts. We hope that this volume will provide reliable guidance to health care practitioners as they navigate the changes ahead.

Robin Fisk, Ashland, New Hampshire, Editor in Chief

Gregory Mitchell, New York, New York Christina DeGraff-Murphy, Burlington, Vermont Editor Editor

November 2020

vi About the Editors

Robin Fisk, Editor in Chief and co-author of Chapter 17, Considerations in the Absence of a Contract Between Provider and Payer, is a health lawyer focusing on managed care and business transactions. She has represented providers, practitioners, and managed care organizations. Robin has functioned as in-house counsel for managed care companies in metro New York, Texas, and Massachusetts, served as lead counsel for four insurer start-ups, several service line and service area expansions, and as contract counsel to national providers. Pursuing a longstanding interest in improv- ing the way services are delivered, she recently completed her Master’s of Health Care Delivery Science, a program jointly sponsored by the Tuck School and the Dartmouth Institute. Robin has also taught health law at the Master’s level. She graduated from Boston University School of Law and the University of Pittsburgh a very long time ago.

Christina DeGraff-Murphy, Editor, is the Assistant General Counsel of Contracting for The University of Vermont Health Network consisting of six Affiliate hospitals in New York and Vermont, including an academic medical center, several skilled nursing facilities and other health care entities. She represents the organization on a wide range of matters with an emphasis on managed care, ASO and ACO contracting. Christina balances strategic and business initiatives with contractual and legal requirements in managed care negotiations, contracting, and dispute resolution, alternative payment methodology arrangements, and general contracting to support network initiatives. This is Christina’s first time serving as an Editor for the AHLA’s Health Plans Contracting Handbook. Christina is an alum of Western New England School of Law (2001) and Western New England University (1998). Christina resides in Vermont with her husband and three children.

Gregory R. Mitchell, Editor, is an associate in the law firm of Epstein Becker & Green PC and is based in the firm’s New York office. He focuses his practice on advising health systems, medical groups, independent practice associations, accountable care organizations, and other providers, provider groups, and intermediary entities on a range of managed care-related matters. He negotiates and drafts managed care agreements by and among managed care companies, insurers, hospitals, health systems, independent practice associations (IPAs) and similar provider organizations, behavioral health and substance use disorder treatment providers, physicians, and ancillary providers relating to Medicare Advantage, Medicaid managed care, as well as fully-insured and self-insured lines of business. He negotiates and drafts agreements relating to innovative payment models; including full- risk/capitation, bundled payment, and shared savings/losses models; prepares agreements relating to the delegation of management functions by managed care entities to third parties; and negotiates and prepares managed care agreements between health care providers and managed care entities and insurers for reimbursement in traditional reimbursement models. In addition, he has spoken and coauthored articles on various health care topics including social determinants of health, encounter data, and the Affordable Care Act’s impact on health insurance and provider. Gregory is an alumnus of Emory University School of Law and Union College.

vii

About the Authors

Gerald “Jerry” L. Aben (Chapter 15, Medicaid Managed Care) is a member of Dykema Gossett PLLC’s Health Care Practice Group, located in the firm’s Ann Arbor, Michigan office. Jerry specializes in the representation of health care providers and payers with respect to corporate and regulatory issues, including hospitals, long-term care and assisted living facilities, behavioral health providers and payers, and continuing care retirement communities (CCRCs). His emphasis on managed care includes assisting clients with managed care contracting, provider networks, regulatory compliance, and Medicare and Medicaid plans. Prior to his law career, Jerry received an appointment to the Centers for Disease Control and Prevention as a Presidential Management Fellow, where he primarily focused on budget and policy issues affecting the nation’s public health preparedness and emergency response. Jerry has been recognized by Michigan Super Lawyers as a “Rising Star” in health law and was named to the “2021 One to Watch” by Best Lawyers.

Matthew Amodeo (Chapter 16, Direct-to-Employer Contracting) is a Partner in the Albany, NY office of Faegre Drinker. Matthew guides health care providers and other industry players through complex state and federal regulations as they make the transformation from fee-based to value-based reimbursement. He is a leading adviser on Medicare and commercial value-based payment models, accountable care organizations (ACOs), clinically integrated networks, and hospital-physician affiliation transactions. He counsels hospitals, provider-sponsored plans, population health companies, and other industry stakeholders on regulatory matters associated with Medicare Advantage plans, the Medicare Shared Savings Program (MSSP), the BPCI-Advanced Model, and other CMS and CMMI payment models and demonstrations. He advises clients on the intricacies of participating in multiple Alternate Payment Models (APMs) and MIPS under the Quality Payment Program. Matthew also assists health systems in developing integrated delivery systems, payer contracting strategies, and shared-risk arrangements with vendors.

Adam C. Aseron (Chapter 4, Key Contract Definitions) is a founding member of Giles Aseron PLLC. Adam has over a decade of experience advising providers on managed care matters. A substantial portion of Adam’s practice is dedicated to representation of health care systems with respect to managed care arrangements with private and governmental payers. Adam regularly negotiates participation agreements for his clients covering a wide spectrum of plan and product types, including commercial, exchange-based, Medicare Advantage, Medicaid managed care, ACO, and workers’ compensation products. Before co-founding Giles Aseron PLLC, Adam worked for several years as a health care attorney with a focus on managed care in the Austin office of Vinson & Elkins LLP. Previously, Adam served as a judicial clerk for The Honorable Thomas B. Bennett, U.S. Bankruptcy Court for the Northern District of Alabama. Adam obtained his law degree from the University of Texas School of Law in 2006, where he graduated with high honors, was a member of the Order of the Coif, and served as an associate editor of the Texas Law Review.

Brooke Bennett Aziere (Chapter 6, Payer Programs and Policies: Utilization Management and Quality Assurance) is a partner in the Wichita, Kansas office of Foulston Siefkin LLP. Brooke is a member of the firm’s health care practice group and current practice group leader. Her major practice

ix About the Authors areas include health care regulatory matters, HIPAA, compliance, long-term care, risk management, Medicare and Medicaid reimbursement, and government investigations relating to fraud and abuse. She has experience assisting clients with negotiation of managed care and other payer contracts and pursuing provider appeals related to utilization review, quality assurance, and statistical sampling and extrapolation, among others. She has frequently represented clients in matters before state licensing boards, and other clients in state and federal lawsuits involving a variety of cases, including medical malpractice defense, intellectual property disputes, contract disputes, and torts. She is a 2003 graduate of the University of Kansas School of Law, where she was a member of the Order of the Coif and an articles editor for the Kansas Law Review. Brooke also received the Faculty Award for Outstanding Scholastic Achievement. She is a member of the Kansas, Missouri, and Texas Bar Associations, the American Health Law Association, The Greater Kansas City Society of Health Attorneys, the Kansas Association of Hospital Attorneys, the Missouri Society of Health Care Attorneys, and the Health Law Section of the State Bar of Texas. In 2019, she co-authored Chapter 14, Medical Necessity, Claims, and Payment Processes of AHLA’s Health Care Compliance Legal Issues Manual, 5th ed. (2019). Brooke is included in the most recent edition of The Best Lawyers In America and is admitted to practice in Kansas, Missouri, and Texas.

John C.J. Barnes (Chapter 1, Introduction: Basics of Contracting and Negotiating) is a partner in King & Spalding’s national health care practice. John specializes in managed care arrangements and represents provider clients in managed care contract negotiations and in litigation. In his transactions practice, John advises clients on the structuring of risk-based managed care contracts (including capitation and shared savings arrangements), as well as traditional fee-for-service arrangements. In his litigation practice, John represents providers in disputes arising out of managed care agreements, including payment disputes, medical necessity disputes, and disputes over mid-contract changes to the parties’ agreement. John also advises clients on licensing requirements, contract terminations, network access disputes, revenue cycle practices, and provider obligations to provide charity and indigent care. John received his BA from the University of California, San Diego, and his JD from the University of the Pacific, McGeorge School of Law, from which he graduated with distinction and was inducted into the Order of the Barristers.

James W. Boswell (Chapter 12, Dispute Resolution) is the Team Leader of King & Spalding’s national Healthcare Team. His practice is devoted to handling litigation and investigations on behalf of health care industry clients. Jim has particular expertise in handling managed care litigation on behalf of health care provider clients. He has also served as counsel in False Claims Act lawsuits in Georgia, Mississippi, Nevada, New York, and Texas. An experienced health care litigator, Jim regularly handles jury trials, administrative hearings, arbitrations, and appellate arguments regarding specialized health care issues. He joined King & Spalding in 1992 after clerking on the United States Court of Appeals for the Fifth Circuit and became a partner of the firm in 1999. Jim has been listed in Chambers USA, Super Lawyers, Best Lawyers in America, and Georgia Trend’s Legal Elite. A member of the American Health Law Association’s Board of Directors, he chaired their Health Care Liability and Litigation Practice Group from 2009-2012. In 2008, Jim was recognized as one of 12 “Outstanding Healthcare Litigators” nationwide by Nightingale’s Healthcare News. He is a past Chair of the Health Law Section of the State Bar of Georgia. Jim is also a frequent speaker and presenter.

x About the Authors

Aimee DeFilippo (Chapter 3, Antitrust Issues in Payer-Provider Contracting) is a partner at Jones Day. Her practice is devoted to antitrust law, where she represents clients in a variety of industries, with a particular focus on health care and pharmaceuticals. She focuses on merger defense and clear- ance, representing clients in investigations brought by the FTC, DOJ and state attorneys general, and counseling on competitor collaborations and antitrust compliance issues. Aimee also spent over a year on secondment with General Electric’s corporate competition law group, where she worked on a variety of transactional, counseling, and compliance matters across the globe. Aimee serves as Chair of the Antitrust Practice Group of the American Health Law Association, and speaks and writes for organizations such as the AHLA, the American Bar Association, Competition Policy International, Bloomberg BNA, and others. Global Competition Review has recognized her in its Who’s Who Legal “Future Leaders in Competition Law” publications, and she is also recommended in the Legal 500 US. In 2019, Aimee was included as one of the top “40 in their 40s” women competition professionals across North and South America.

Lisa G. Han (Chapter 14, Medicare Managed Care Contracting) is a partner at Jones Day. Lisa represents health plans and a wide variety of health care organizations and provides strategic, transactional, and regulatory counseling with respect to their managed care operations and value-based arrangements. Lisa focuses her practice on advising health insurance and health care clients on the following: mergers, acquisitions, and restructurings of insurance companies and managed care plans; insurance holding company transactions and related regulatory filings; formation of insurance companies, HMOs, risk-bearing provider networks, and other regulated entities, such as third-party administrators and pharmacy benefit managers; compliance with Medicare Advantage and Medicaid managed care plan and state insurance laws; complex managed care contracting; formation of ACOs, clinically integrated networks, direct contracting entities and other types of provider networks; negotiation and development of value-based arrangements, such as shared savings arrangements, bundled payment, consumer directed health plans, and other risk-based programs.

Andrew C. Helman (Chapter 13, Protecting Against Insolvency) is a Partner in the Restructuring, Insolvency & Bankruptcy and Distressed Health Care Groups at Dentons Bingham Greenebaum LLP. Andrew focuses his practice on bankruptcy and insolvency matters and works with all types of businesses, including those in the health care sector, to help them restructure and protect their assets. Andrew has served as lead counsel to debtors, trustees, secured parties and others in Chapter 11 cases, including having served as independent counsel to a state attorney general in several Chapter 11 cases in New England and Delaware. He has particular experience as lead counsel representing rural hospitals in Chapter 11 cases and has successfully confirmed Chapter 11 plans that have allowed several hospitals to continue operating with restructured balance sheets. Andrew frequently writes articles for national insolvency publications and teaches seminars on bankruptcy. In addition, he is Co-Chair of the American Bankruptcy Institute’s Health Care Committee and was a recipient of the American Bankruptcy Institute’s 40 Under 40 Award in 2019. He was also selected as one of 40 attorneys nationally to participate in the National Conference of Bankruptcy Judges’ 2016 NextGen Program. He is ranked by Chambers for bankruptcy and restructuring and has been selected by his peers for inclusion in the 2015-2020 issues of Super Lawyers & Rising Stars.

xi About the Authors

John M. Kirsner (Chapter 3, Antitrust Issues in Payer-Provider Contracting) is a partner in the Health Care and Life Sciences practice group at Jones Day, resident in Columbus, Ohio. John’s practice focuses on provider integration strategies, including development and on-going legal and regulatory advice for accountable care organizations (ACOs), including waiver strategies, clinically integrated networks and other provider-network strategies. He also has led several engagements forming sophisticated integrated provider organizations, including establishing foundation models, professional service agreement models, and loose affiliation models involving large multispecialty group practices and hospital systems. He has extensive experience with commercial ACO shared savings arrangements, assisting in the negotiation of such models with payers, as well as establishing internal distribution mechanisms. John has over 25 years of experience with payer-provider contracting issues as well. He has written book chapters for other AHLA publications, is a co-author of a book on payer-provider contracting issues, and is a frequent national speaker and author on health care issues. He is a past chair of the Ohio State Bar Association Health Care Law Committee, and has been named to the Best Lawyers in America for both health care and insurance law since 2007, and an Ohio Super Lawyer since 2006. He is a 1992 graduate of The Ohio State University Moritz College of Law, and has two wonderful children, Eleanor (13) and Ariel (11), with his wife Lisa.

David E. Kopans (Chapter 2, Accountability and Collaboration in Payer-Provider Relationships) is Of Counsel at Jones Day and represents health care providers (HCPs), insurers, and other third parties with managed care contracting and transactional and regulatory matters. He also represents accountable care organizations (ACOs), clinically integrated networks (CINs), and similar provider networks with participation in value-based payment arrangements and government programs such as the Medicare Shared Savings Program. David’s experience specifically includes managed care contracting for both traditional brick-and-mortar practices as well as telehealth practices; the formation and acquisitions of insurers and provider-based plans; insurer, TPA (third-party administrator), PBM (pharmacy benefit manager), and provider network licensure and registration; preparation of evidence of coverage and other insurance form filings; insurance regulatory filings; negotiation and preparation of services agreements with and on behalf of insurers, TPAs, PBMs, and other vendors; and the development of, and contracting for, CINs, ACOs, and various Medicare initiatives and programs. David also advises clients in the health care and life sciences industries on transactional and regulatory matters related to health information privacy and security compliance under the Health Insurance Portability and Accountability Act (HIPAA) and other state and federal laws. David’s clients include HCPs, insurers, and other payers, life sciences companies, and digital health and telehealth companies offering mobile applications, online solutions, and data analytics.

Mark S. Kopson (Chapter 10, Other Material Contract Provisions) is a shareholder in Plunkett Cooney’s Bloomfield Hills, Michigan office and chairs the firm’s Health Care Industry Group. His practice emphasizes managed care contracting, including value-based reimbursement, revenue cycle management, and dispute resolution, as well as multi-party integration strategy and implementation. Mr. Kopson advises individual and institutional physical and behavioral health providers, integrated networks, and managed care plans. He serves on the Board of Directors of the American Health Law Association, having previously chaired its Payers, Plans, and Managed Care Practice Group, and is a Fellow and former Chair of the State Bar of Michigan’s Health Care Law Section. He was a chapter author of the Health Plans Contracting Handbook: A Guide for Payers and Providers,

xii About the Authors seventh edition (2015, AHLA), a co-author of the Managed Care Contracting chapter of the Health Law Practice Guide (2007, Thomson West), and a chapter co-author of the Representing Physicians Handbook, fourth edition (2016, AHLA). Since 2014, Mr. Kopson has been selected for inclusion in Best Lawyers in America, Michigan Super Lawyers, and Top Lawyers, for health care law. He is a frequent speaker on health law topics and also serves as an arbitrator and mediator.

Kathrin E. Kudner (1950-2020) (Chapter 15, Medicaid Managed Care) was a member of the Health Care Practice Group of Dykema Gossett in the Ann Arbor, Michigan, office. Kathrin specialized in the representation of health care providers, health plans, and biotechnology and life sciences companies in connection with corporate transactions, HIPAA compliance, contract review and drafting, tax exempt issues, impact of the Affordable Care Act, and FDA- and clinical research-related regulatory matters. Her emphasis in managed care included managed care contracting, provider networks including accountable care organizations, regulatory compliance, and Medicare and Medicaid plans. Prior to her law career, Kathrin was a Peace Corps volunteer in the Philippines and an administrator for a rural nonprofit medical and dental health care system. Michigan Super Lawyers had ranked Kathrin as one of the top health care attorneys in Michigan since 2006, and The Best Lawyers in America had listed Kathrin for health care law since 1999.

Jacqueline B. Penrod (Chapter 11, Provisions Related to Data Sharing) is an Associate Professor in the Health Programs department at Peirce College in Philadelphia, Pennsylvania and an Adjunct Professor at Drexel University’s Klein School of Law. She is the owner and sole member of J. B. Penrod Law LLC, focusing her practice on health information privacy. A graduate of the James E. Beasley School of Law at Temple University, she served as the Editor in Chief of the Temple Law Review during the 2001-2002 academic year. She later served as a law clerk for the Honorable Gene E. K. Pratter in the United States Court for the Eastern District of Pennsylvania. Jacqueline also has a master’s degree in Business Administration with a concentration in Finance and has worked as a business manager and consultant in the health care industry, specializing in the area of managed care. Her professional experiences include working as a consultant at a large national accounting firm, a financial analyst for a small Medicaid health maintenance organization, director of Managed Care for a 500-bed hospital, and Senior Counsel for AmeriHealth Caritas.

Christian Puff (Chapter 17, Considerations in the Absence of a Contract Between Provider and Payer), Associate General Counsel/Assistant Corporate Secretary, Parkland Community Health Plan, is an attorney who has worked for sixteen years with managed care plans, as well as provider-owned plans. Prior to joining Parkland, Christian served as Counsel at the Dallas office of Hall Render Killian Heath & Lyman, and directly before that, as the Chief Operating Officer for CHRISTUS Health Plan, a Catholic. not-for-profit, provider-owned organization with Medicare, Medicaid, Marketplace, and USFHP plans. Christian brings a unique perspective, having worked for both Fortune 50 health plans and pharmacy benefit managers (PBMs). In her work with these companies. she performed due diligence for merger and acquisition work; advised on regulatory matters for Medicare, Medicaid, self-funded and fully insured commercial health plans in a variety of states. She also advised on Medicare Advantage Plan issues and First-Tier, Downstream, and Related Party compliance matters; and acted as counsel for MAPD plans and freestanding Part D plans, performing as both transactional

xiii About the Authors and regulatory counsel. Christian has partnered with plans as third-party administrators and PBMs in her role as Chief Operating Officer for CHRISTUS Health Plan.

Michael F. Schaff (Chapter 8, Term and Termination Provisions) chairs the Corporate and Healthcare Departments, co-chairs the Cannabis Practice Group, and is a shareholder of Wilentz, Goldman & Spitzer P.A. Michael was the sole 2018 Recipient of the AHLA’s prestigious David J. Greenburg Service Award. Michael had the honor of being elected as a Fellow of the American Health Law Association in June 2016, and is currently a member of the AHLA Fellow Coordination Counsel. Michael is currently on the AHLA Journal of Health and Life Science’s Law Editorial Board and was a member of the AHLA Board of Directors from 2006 to 2012, and served in many capacities. Michael was the co-chair of the program planning committee for AHLA’s Physicians and Hospital Law Institute held in Austin, Texas (February 2016), Las Vegas (February 2015) and New Orleans (February 2014) (member of the committee 2005-2010, co-chair 2014-2016, and speaker 2003- 2019). Michael also was the chair of the planning committee of AHLA’s Fundamental Health Law program held in Chicago (chair, 2010-2012 and speaker 2004-2018). Active in the New Jersey State Bar Association (NJSBA), he is a Trustee (2017- ), past Chair (2016-2017, 1999-2000), Director (1996-2018) and Emeritus Director (2018- ) of the Health Law Section, and co-chair of the NJSBA Cannabis Law Committee (2018- ). In December 2016, Michael received the New Jersey Institute of Continuing Legal Education’s 2016 Distinguished Service Award. In March 2008, Michael received the Middlesex County Bar Association’s Transactional Attorney of the Year Award. Michael received the NJSBA Health Law Section’s first Distinguished Service Award. Michael is the past Chair (2014- 2017), former Vice Chair (2009-2014), and member (2005- ) of the Editorial Board for the New Jersey Lawyer Magazine. Michael was awarded the AHLA Pro Bono Champion Award (2012), is an active volunteer in the American Cancer Society (2000- ) and was the 2011 recipient of the American Cancer Society Shining Star Award for Volunteering and the 2016 recipient of the Susan G. Komen Pink Tie Award for volunteering. Michael was on the Board of Directors for the Susan G. Komen South and Central New Jersey Affiliate (2009-2016) and a former Board member for Circle of Life Children’s Center (2008-2011). Michael is on the Editorial Advisory Board of Bloomberg Law Health Law and Business (2018- ), the Board of Advisors (2008- ) of the Radiology Administrator’s Compliance and Reimbursement Insider; Ophthalmology Compliance & Reimbursement Insider, Managed Care, and Ambulatory Surgery Compliance & Reimbursement Insider newsletters (HcPro, Inc.). Michael is on the Editorial Board of The Coding Institute’s Part B Insider (2009- ), the Board of Advisors of Imaging Economics (2009- ), and was on the Advisory Board of Bloomberg BNA’s Health Law Reporter (2011-2018). Michael has been selected for inclusion in New Jersey Best Lawyers list 2003-2021 (2012, 2016 & 2018 Healthcare Lawyer of the Year) and New Jersey Super Lawyers list 2005-2021 (Top 100 attorneys; 2007-2015, 2017-2021), Chambers USA 2007-2020 (Band 1, Healthcare 2011-2019, Star Recipient 2020) and Who’s Who in American Law, Who’s Who in the World, and Who’s Who in the East.

Debra Silverman (Chapter 5, Policy and Procedure Amendments) is a Partner/Director of Garfunkel Wild PC and chair of its health law practice group. Debra represents hospital systems, teaching and community hospitals, faculty practice plans and physician group practices, with an emphasis on

xiv About the Authors managed care contracting. She handles direct negotiations with major managed care organizations (including Empire BlueCross BlueShield, Aetna, CIGNA, United Healthcare as well as Medicare Advantage and Medicaid managed care plans) for fee-for-service, accountable care, and full-risk arrangements. Debra also advises clients with respect to health care delivery networks, accountable care organizations, clinical integration, physician arrangements, antitrust, and regulatory matters. A frequent lecturer for the Healthcare Financial Management Association, Debra was also a contribut- ing author of the New York Health Law Update. Debra has been selected for inclusion in The Best Lawyers in America every year since 2016, and has been named a “Super Lawyer” each year since 2014. She graduated cum laude from Princeton University and received her JD degree from the University of California, Hastings College of Law.

Andrew Stein (Chapter 7, Payment Methodologies) is an attorney in the King of Prussia office of Stevens & Lee PC. He concentrates his practice in health law with an emphasis on federal and state regulatory compliance, complex transactions involving hospitals, health systems, and physician practices, and third-party reimbursement including appeals. He received an MBA from the University of Oxford, a JD from Villanova University Law School, and a BS from Boston University.

Leah B. Stewart (Appendix C, Physician Group Practice Provider Agreement with Commentary) is Associate Vice President for Legal Affairs at The University of Texas at Austin Dell Medical School. She has more than 15 years’ experience in health care and regulatory law, with an emphasis on managed care and government programs. Previously, as a shareholder with Beatty Bangle Strama PC and an associate with Vinson and Elkins LLP, she represented industry stakeholders on managed care contracting and disputes; regulation of health care providers and health plans; insurance and risk issues; managed Medicaid, Medicare Advantage, and Medicaid reimbursement, including supplemental payments; the Health Insurance Portability and Accountability Act (HIPAA) and state privacy issues; Texas legislative and rule-making initiatives; federal and state fraud and abuse laws; and various other health care transactions. Leah has formerly served as both Chair and Vice Chair in the AHLA Payers, Plans, and Managed Care Practice Group. Leah is an alum of the University of Virginia School of Law and Texas A&M University.

Adam C. Varley (Chapter 9, Insurance Requirements and Indemnification) is a shareholder of Rath, Young and Pignatelli PC and a member of the Business and Finance, Energy and Utilities, Financial Institutions, Technology and Emerging Growth Companies, and Health Care Practice Groups and serves on the firm’s Management Committee. He focuses his practice on insurance, banking, health care, and corporate and business law. Adam assists insurance companies, trust companies, banking institutions, health care providers, and a wide range of other businesses with regulatory, licensing, transactional, and compliance issues. He regularly represents clients before the New Hampshire Insurance and Banking Departments on a variety of matters. Adam also advises clients on a range of issues with respect to health insurance and other employee benefits plans, including extensive work with clients on issues related to the Affordable Care Act. On corporate matters, Adam represents companies in connection with formations, private securities offerings, transactions, employment issues, and contracting matters. He also assists the Energy Practice Group on the corporate and transactional aspects of project financings and acquisitions in the alternative energy sector. Prior to joining the firm in 2007, Adam practiced law in the Health Care Group at the Albany office of Greenberg

xv About the Authors

Traurig LLP, where he represented managed care companies and other insurers on a wide range of regulatory issues.

Amanda M. Wilwert (Chapter 6, Payer Programs and Policies: Utilization Management and Quality Assurance) is an attorney in the Overland Park, Kansas office of Foulston Siefkin LLP. She is a member of the firm’s health care practice group. She works with all types of health care clients, including acute and post-acute institutional providers, pharmacies, independent physicians groups, and hos- pice programs. Her major practice areas include health care regulatory matters, HIPAA, EMTALA, compliance, patient care issues, consent issues, risk management, and Medicare and Medicaid reimbursement. She has experience assisting clients with negotiation of managed care and other payer contracts. She frequently represents clients in matters before state licensing boards. She frequently practices in litigation in the areas of reimbursement and professional malpractice. She also serves as a patient care ombudsman in health care bankruptcy cases. She is a 2011 graduate of the Washburn University School of Law, where she was an articles editor for the Washburn Law Journal. She is a member of the Kansas and Johnson County Bar Associations, the American Health Law Association, the Kansas Association of Hospital Attorneys, the Missouri Society of Health Care Attorneys, The Greater Kansas City Society of Health Attorneys, and the Kansas Women Attorneys Association. In 2019, she co-authored Chapter 14, Medical Necessity, Claims, and Payment Processes of AHLA’s Health Care Compliance Legal Issues Manual, 5th ed. (2019). Amanda was selected for inclusion in 2021 Best Lawyers Ones to Watch in the practice area of Health Care Law and is admitted to practice in Kansas, Missouri, and the District of Columbia.

xvi About the American Health Law Association

Excellence in health care starts with excellence in health law. The American Health Law Association (AHLA) is the nation’s largest, nonpartisan, 501(c)(3) educational organization devoted to legal issues in the health care field. AHLA maintains excellence in health law by educating and connecting the health law community. With a diverse membership of over 13,000 health law professionals, representing the entire spectrum of the health care industry, AHLA is able to leverage the deep expertise of practitioners to produce high-quality, just-in-time educational resources that help members of the health law community provide analysis, assess risk, ensure compliance, and make informed recommendations to their organizations and clients. AHLA’s trusted resources benefit anyone who advises physicians, hospitals, health systems, specialty providers, payers, life sciences companies, vendors, investors, and many other health care stakeholders. If you have an interest in health law, you have a home in AHLA. For more information about our educational, professional development, and networking opportunities, please visit us at americanhealthlaw.org.

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Table of Contents

Recent Titles from the American Health Law Association Preface About the Editors About the Authors About the American Health Law Association 1 Introduction: Basics of Contracting and Negotiating John C.J. Barnes 1.1 Preparation 1.1.1 Self-Knowledge 1.1.1.1 The Provider 1.1.1.2 The Payer 1.1.2 Knowledge of the Other Party 1.1.2.1 Strategies 1.1.2.2 Financial Strength 1.1.2.3 Method of Operation 1.1.3 Knowledge of the Marketplace 1.1.4 Identifying the Value of Contracting 1.1.4.1 The Value of Steerage and Network Participation 1.2 Formulation of Key Objectives and Deal Points 1.3 The Negotiating Team 1.4 Review of the Proposed Contract Terms 1.5 Agreement on Final Contract Language 1.5.1 Give and Take 1.5.2 Final Review and Drafting 2 Accountability and Collaboration in Payer-Provider Relationships David E. Kopans 2.1 Accountability in Value-Based Payment Arrangements 2.1.1 Value-Based Care and the Triple Aim 2.1.2 The Triple Aim and Accountability 2.2 Overview of Value-Based Payment Arrangements 2.2.1 Vehicles for Value-Based Payment Arrangements 2.2.1.1 Accountable Care Organizations 2.2.1.2 Clinically Integrated Networks 2.2.1.3 Direct Contracting Entity 2.2.1.4 Other Provider Organizations 2.2.2 Common Value-Based Payment Arrangements 2.2.2.1 Pay for Performance 2.2.2.2 Bundled Payments 2.2.2.3 Patient-Centered Medical Homes 2.2.2.4 Shared Savings Arrangements

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2.3 Regulation of Value-Based Payment Arrangements 2.3.1 Overview of Value-Based Payment Regulation 2.3.2 Licensure, Certification, and Registration 2.3.3 Medical Loss Ratio and Other Payer Considerations 2.3.4 Employer Self-Insured Plans and Provider Collaborations 2.3.5 Fraud and Abuse Laws 2.3.5.1 The Anti-Kickback Statute 2.3.5.2 The Stark Law 2.3.5.3 The Civil Monetary Penalties Law 2.3.5.4 Final VBP Arrangement Protections 2.3.6 HIPAA and Other Privacy Laws 2.4 Achieving Accountability Through Collaboration 2.4.1 Data Sharing 2.4.2 Setting Common Goals 2.4.3 Cooperation in Patient Engagement 2.4.4 Accountability for Quality and Costs 2.4.5 Transparency and Performance Measures 2.5 Conclusion 3 Antitrust Issues in Payer-Provider Contracting John M. Kirsner and Aimee DeFilippo 3.1 Overview of Antitrust Principles 3.1.1 Introduction 3.1.2 Federal Antitrust Laws and Enforcement 3.1.3 The Federal Health Care Statements 3.1.3.1 Financial Integration 3.1.3.2 Clinical Integration 3.1.3.3 Rule of Reason 3.1.3.4 Messenger Model 3.1.3.5 Safety Zones 3.1.4 State Antitrust Laws and Enforcement 3.2 Market Power Issues and Payer-Provider Contracting 3.2.1 Market Power Issues Defined 3.2.2 Provider Mergers and Acquisitions 3.2.3 Exclusivity Provisions 3.2.4 Most Favored Nations Provisions 3.2.5 Anti-Tiering and Anti-Steering Provisions 3.2.6 Tying/Bundling of Services Provisions 3.3 Clinical Integration Issues for Provider Networks 3.3.1 Clinical Integration Defined 3.3.2 Antitrust Regulatory Underpinnings of a Clinically Integrated Provider Network 3.3.2.1 Health Care Statements and Guidance Pre-MedSouth 3.3.2.2 MedSouth, Suburban, Greater Rochester, TriState, and Norman: Clinical Integration Analysis from Five FTC Advisory Opinions

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3.3.2.2.1 MedSouth Advisory Opinion 3.3.2.2.2 Suburban Health Organization Advisory Opinion 3.3.2.2.3 Greater Rochester Independent Practice Association Advisory Opinion 3.3.2.2.4 TriState Health Partners Advisory Opinion 3.3.2.2.5 The Norman Physician Hospital Advisory Opinion 3.3.3 Lessons Learned: Characteristics and Parameters of a Clinically Integrated Provider Network 3.3.4 What a Clinically Integrated Provider Network Can Accomplish 3.3.4.1 For the Providers 3.3.4.2 For the Payer 3.3.5 Contractual Provisions to Implement Clinical Integration 3.3.6 Strategic Alignment Structures Involving Clinically Integrated Networks 3.3.6.1 Network-to-Network Model 3.3.6.2 “Super” Clinically Integrated Networks 3.3.7 Evolution of Single-Specialty Clinically Integrated Networks 3.4 Antitrust Issues and Accountable Care Organizations 3.4.1 FTC/DOJ Guidance—Statement of Antitrust Enforcement Policy Regarding ACOs Participating in the Medicare Shared Savings Program 3.4.1.1 The 30 Percent Safety Zone 3.4.1.2 ACOs Outside the Safety Zone—Conduct to Avoid 3.4.1.3 ACOs Outside the Safety Zone—Availability of Expedited Voluntary Antitrust Review 3.4.2 ACO Structure Within Current Antitrust Guidelines 3.5 Messenger Model Contracting Concepts: Contractual Terms and Compliance Considerations 3.5.1 Establishing an Effective Messenger Model 3.5.2 Practical Problems Encountered 4 Key Contract Definitions Adam C. Aseron 4.1 Importance 4.2 Common Drafting Issues and Best Practices 4.2.1 When and Why to Formally Define a Term 4.2.2 Where to Define Terms 4.2.3 What to Look For 4.3 Key Health Plan Contract Definitions 4.3.1 Provider 4.3.2 Affiliates 4.3.2.1 Affiliates from the Payer’s Perspective 4.3.2.2 Affiliates from the Provider’s Perspective 4.3.2.3 Affiliates and Contract Assignment 4.3.3 Change of Ownership/Control Implications 4.3.4 Clean Claim 4.3.4.1 Statutory Definitions 4.3.4.2 Clean Claim from the Payer’s Perspective

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4.3.4.3 Clean Claim from the Provider’s Perspective 4.3.5 Covered Services 4.3.5.1 Covered Services from the Payer’s Perspective 4.3.5.2 Covered Services from the Provider’s Perspective 4.3.5.3 Carve-Outs 4.3.6 Emergency or Emergency Medical Condition 4.3.6.1 Emergency from the Payer’s Perspective 4.3.6.2 Emergency from the Provider’s Perspective 4.3.7 Medically Necessary 4.3.7.1 Medically Necessary from the Payer’s Perspective 4.3.7.2 Medically Necessary from the Provider’s Perspective 4.3.8 Enrollee, Member, or Beneficiary 4.3.8.1 Enrollee from the Payer’s Perspective 4.3.8.2 Enrollee from the Provider’s Perspective 4.3.9 Plan Sponsor or Payer 4.3.9.1 Plan Sponsors or Payer from the Payer’s Perspective 4.3.9.2 Plan Sponsor from the Provider’s Perspective 4.3.9.3 Self-Funded Plan Sponsors 4.3.9.4 Silent PPOs 4.3.10 Products 4.3.10.1 Products from the Payer’s Perspective 4.3.10.2 Products from the Provider’s Perspective 4.3.10.3 Limited Network Programs 4.3.10.4 Affordable Care Act Exchange Products 4.3.11 Policies and Procedures 4.3.11.1 Policies and Procedures from the Payer’s Perspective 4.3.11.2 Policies and Procedures from the Provider’s Perspective 4.3.12 Other Common Definitions 4.3.12.1 Never Events 4.3.12.2 Billed Charges 4.3.12.3 Material Adverse Effect 4.3.12.4 Confidential Information 5 Policy and Procedure Amendments Debra Silverman 5.1 Unilateral Amendments 5.1.1 Payer’s Ability to Amend Contract Terms on Notice Compared with Its Ability to Amend Its Policies 5.1.1.1 Payer’s Perspective 5.1.1.2 Provider’s Perspective 5.1.2 Differentiating Between Material and Non-Material Changes 5.1.2.1 Payer’s Perspective 5.1.2.2 Provider’s Perspective 5.1.2.3 Possible Solution

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5.1.3 Differentiating Between Material Change in a Payment Policy and Application of Law 5.2 Notice 5.2.1 Notice from the Payer’s Perspective 5.2.2 Notice from the Provider’s Perspective 5.3 Carve-Outs 5.3.1 By Service Line 5.3.1.1 Payer’s Perspective 5.3.1.2 Provider’s Perspective 5.3.2 By Site of Service 5.3.3 By Benefit Design 5.4 Tips for Payers and Providers 6 Payer Programs and Policies: Utilization Management and Quality Assurance Brooke Bennett Aziere Amanda M. Wilwert 6.1 Payer Programs and Policies 6.2 What Is Utilization Management? 6.2.1 Utilization Management Programs 6.2.2 Types of Utilization Review 6.2.2.1 Prospective Review and Preauthorization 6.2.2.2 Loss of Enrollee Eligibility During Treatment 6.2.2.3 Retroactive Disenrollment 6.2.2.4 Retroactive Eligibility 6.2.2.5 Primary versus Secondary Payer 6.2.2.6 Emergency Services 6.2.2.7 Readmissions 6.2.2.8 Concurrent Review 6.2.2.9 Retrospective Review 6.2.2.10 Statistical Sampling and Extrapolation 6.2.2.11 Disease Management Programs 6.2.2.12 Care Coordination Programs 6.2.2.13 Implications for Failure to Comply with UM Program Requirements 6.2.3 Disallowance of Costs for Health-Care-Acquired Conditions 6.2.4 Review Procedures 6.2.4.1 Identity of Reviewer 6.2.4.2 Standards for Review 6.2.4.3 Appeals of Utilization Management Decisions 6.2.4.4 Liability Issues Related to Utilization Management 6.3 Quality Assurance and Quality Improvement 6.3.1 What Are Quality Assurance and Quality Improvement? 6.3.2 Allocating Responsibility for QA and QI 6.3.3 Health Improvement Activities 6.3.4 Provider Credentialing 6.3.5 Contract Participation Standards

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6.3.6 Corrective Actions 6.3.7 Payer Quality Measuring Activities 6.3.7.1 Disclosure of Payer Quality Measures 6.3.7.2 Quality-Based Provider Payment Systems 6.4 Utilization Management and Quality Assurance Takeaways CHECKLIST 7 Payment Methodologies Andrew Stein 7.1 The Payment Methodologies Landscape 7.1.1 Fee for Service 7.1.2 Capitation 7.1.2.1 Per Person Per Month 7.1.2.2 Per Person Per Year 7.1.2.3 Percentage of Premium 7.1.3 Bundled Services 7.1.3.1 Per Episode 7.1.3.1.1 Case Rates 7.1.3.1.2 Global Fees 7.1.3.2 Per Diem 7.1.4 Concierge Medicine 7.2 Risk-Based Payment Methodologies 7.2.1 Shared Risk Contracts 7.2.2 Risk Pools 7.2.3 Pay for Performance 7.2.3.1 Positive Payment Incentives 7.2.3.2 Negative Payment Incentives 7.2.3.3 Hospital Value-Based Purchasing Program 7.2.3.4 Quality Payment Program 7.2.3.4.1 Merit-Based Incentive Payment System 7.2.3.4.2 Alternative Payment Models 7.2.3.5 Other Innovation Models and Demonstration Projects 7.2.4 Government Risk-Based Payment Programs 7.2.4.1 Medicare Managed Care 7.2.4.1.1 Medicare Advantage 7.2.4.1.2 Medicare Cost Plans 7.2.4.1.3 Medicare Part D 7.2.4.2 Medicaid Managed Care 7.2.4.2.1 Risk-Based Model 7.2.4.2.2 Fee-for-Service Primary Care Case Management 7.3 Selecting a Payment Methodology 7.3.1 Evaluating the Degree of Risk 7.3.2 Examples, Problems, and Recommendations 7.3.2.1 Discounted Fee-for-Service 7.3.2.2 Traditional Capitation

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7.3.2.3 Global Fees and Case Rates 7.3.2.4 Percentage of Premium 7.3.2.5 Per Diem Charges 7.3.2.6 Risk Pools 7.3.2.7 Review of Financial Records 7.3.2.8 Exclusivity and Related Provisions 7.3.2.9 Confidentiality of Negotiated Rates 7.4 Navigating Legal Matters 7.4.1 Fraud and Abuse Considerations 7.4.1.1 Federal Anti-Kickback Statute 7.4.1.2 Federal Stark Law 7.4.2 Laws Regulating Physician Incentive Arrangements 7.4.2.1 The Physician Incentive Plan Statute 7.4.2.2 The Physician Incentive Plan Regulations CHECKLIST 8 Term and Termination Provisions Michael F. Schaff 8.1 Term of the Agreement 8.1.1 Generally 8.1.2 Initial Term 8.2 Renewal Provisions 8.2.1 Renewal and Payment Rate Concerns 8.2.2 Contract-Tracking Systems; Internal Surveys 8.3 Termination Provisions 8.3.1 Termination Without Cause 8.3.2 Termination for Cause 8.3.3 Expiration of Term Without Renewal 8.3.4 Cross Default and Termination 8.4 Compliance with Law and Termination 8.5 Rights and Obligations after Termination 8.6 Qualified Health Plan Provider Contracts 8.6.1 Term Considerations 8.6.2 Termination Provisions CHECKLIST 9 Insurance Requirements and Indemnification Adam C. Varley 9.1 Theories of Liability 9.1.1 Contractual Theories 9.1.1.1 Breach of Contract and Warranty 9.1.2 Tort Theories 9.1.2.1 Negligence 9.1.2.2 Selection of Providers (Negligent Credentialing) 9.1.2.3 Utilization Review 9.1.2.3.1 Negligent Design and Implementation

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9.1.2.3.2 ERISA Preemption Issues 9.1.2.4 Vicarious Liability 9.1.2.4.1 Respondeat Superior 9.1.2.4.2 Ostensible or Apparent Agency 9.1.2.4.3 Inherent Function 9.1.2.5 Tortious Interference with Contract 9.1.2.6 Breach of Fiduciary Duty/Bad Faith 9.1.2.7 Misrepresentation 9.1.2.8 Financial Incentives 9.1.2.8.1 New Payment Models in the Affordable Care Act 9.1.3 Regulatory Liability 9.1.3.1 Provider Exclusion 9.1.3.1.1 Antitrust 9.1.3.1.2 Network Adequacy; Narrow/Limited Networks 9.1.3.2 Data Breach 9.1.3.3 ACO and Similar Payment Models 9.2 Insurance Coverage Issues 9.2.1 What Coverage Is Required? 9.2.2 Who Is Covered? 9.2.2.1 The Difference Between Additional Insured and Named Insured 9.2.3 Changes in Coverage 9.2.4 Cooperation in Defense of Claim 9.3 Indemnification 9.3.1 Equitable Indemnity 9.3.2 Avoiding Expanded Liability 9.3.3 Mutuality 9.3.4 Defense of Claims 9.3.4.1 Overview of Defense 9.3.4.2 Notice 9.3.4.3 Information Sharing 9.3.5 Insurance Coverage for Indemnification 9.3.6 State or Federal Government Payers 9.3.7 Effect of State Law 9.3.8 Coverage of Board Members, Agents, and Employees; Ordinary Business Risk 9.3.9 Deleting or Forgoing Indemnification 9.3.10 Limitations of Liability 9.3.11 Tax Exemption Issues 9.3.12 Business Associate Agreements CHECKLIST 10 Other Material Contract Provisions Mark S. Kopson 10.1 Claims Submission 10.1.1 Time Periods 10.1.2 Clean Claims 10.2 Payment

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10.2.1 Time of Payment 10.2.2 Remedies for Late Payment or Nonpayment 10.2.3 Overpayment and Underpayment 10.2.4 Enrollee Payments 10.2.5 Coordination of Benefits 10.2.6 Subrogation 10.2.7 Authority of Multi-Provider Group to Accept Payments for Its Members 10.3 Subcontractor Relationships 10.3.1 Medicare Advantage Subcontractors 10.4 Patient Relationships 10.5 Steerage 10.6 Assignment and Mergers and Acquisitions 10.6.1 Assignment 10.6.2 Mergers and Acquisitions 10.7 Nondiscrimination 10.8 Amendment 10.9 Entire Agreement 10.10 Governing Law and Construction 10.11 Confidential and Proprietary Information 10.12 Notice 10.13 Exclusion 10.14 Force Majeure CHECKLIST RESOURCE GUIDE 11 Provisions Related to Data Sharing Jacqueline B. Penrod 11.1 Medical Record Ownership 11.2 Records and Data Issues 11.2.1 Quality Assurance and Utilization Review 11.2.2 Inspection and Audits of Provider Records 11.2.3 Ownership and Use of Claims or Provider Data 11.2.3.1 Primary Use of Data 11.2.3.2 Secondary Use of Data 11.2.4 Performance Scores and Rankings 11.2.5 Balancing Data Protection with Interoperability Requirements 11.2.6 Complying with HIPAA 11.2.6.1 Business Associate Requirements 11.2.6.2 The HIPAA Minimum Necessary Standard 11.2.6.3 Records Requests – Obligations and Limitations 11.2.6.4 Compliance with the HIPAA Electronic Transaction Standards CHECKLIST RESOURCE GUIDE 12 Dispute Resolution James W. Boswell

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12.1 Introduction 12.2 Dispute Resolution in Health Plan Contracts 12.2.1 Weighing the Advantages and Disadvantages of Arbitration Relative to Court 12.2.2 Staged Dispute Resolution Procedures 12.2.3 Affordable Care Act Additional Requirements for Claims Dispute Resolution Procedures 12.2.4 Selection of a Dispute Administering Organization 12.2.5 Internal Administrative Procedures 12.2.6 Nonbinding Conciliatory Procedures 12.2.7 Binding Adjudicatory Procedures 12.2.8 Class Arbitration Restrictions 12.3 Resolution of Disputes When Provider and Payer Are Not Contracted 12.4 Common Areas of Dispute 12.4.1 Coverage Disputes 12.4.1.1 Medically Necessary Treatment 12.4.1.2 Emergency Medical Care 12.4.1.3 Site of Service 12.4.1.4 Experimental Treatments 12.4.1.5 Mental Health Parity 12.4.1.6 Clinical Trials 12.4.1.7 Enrollee Verification 12.4.2 Claims and Payment Disputes 12.4.2.1 Clean Claim/Late Payment Penalties 12.4.2.2 Level of Payment for Out-of-Network Services 12.4.3 Special Procedures for Out-of-Network Disputes under State Surprise Billing Laws 12.4.4 Other Areas of Dispute 12.4.4.1 Termination 12.4.4.2 Credentialing 12.4.4.3 Silent Acceptances 12.4.4.4 Rate Modification 12.4.4.5 Level of Payment under Contract Terms 12.5 Procedures Required by Law CHECKLIST 13 Protecting Against Insolvency Andrew C. Helman 13.1 Background—The Types of Bankruptcy Relief and Common Reasons Companies Seek Insolvency Protection 13.2 Pre-Contracting Due Diligence 13.3 Negotiating Terms to Mitigate Risks Associated with Insolvency 13.3.1 Financial Statements—Ongoing Review 13.3.2 Regulatory Information and Confidentiality Clauses 13.3.3 Reinsurance Policies 13.3.4 Insolvency Insurance

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13.3.5 Financial Reserve/Solvency Requirements 13.3.6 Payment Delays and Losses 13.3.6.1 Provisions Addressing Late Payments 13.3.6.2 Interim Payments 13.3.7 Assurance or Security 13.3.8 Rights of Offset 13.4 Settlement 13.5 Contract Termination 13.5.1 Termination Provisions—Pre-Bankruptcy/Insolvency 13.5.2 Expediency 13.5.3 Issues Arising in a Bankruptcy Case or Insolvency Matter 13.5.3.1 Applicable Law 13.5.3.2 Assumption and Rejection of Contracts under the Bankruptcy Code and Related Insolvency Matters 13.5.3.3 Obtaining Payment from a Debtor/Insolvent Party 13.5.3.4 Relief from the Automatic Stay 13.5.3.5 Court Approval of Payment Arrangements 13.5.3.6 Preferential Transfer Claims 13.6 Exposure in RBO Risk Withholds 13.6.1 Payer and Provider Considerations and Protections in Risk Contracts 13.6.2 Payer Considerations and Protections in RBO Contracts CHECKLIST RESOURCE GUIDE 14 Medicare Managed Care Contracting Lisa G. Han 14.1 Introduction 14.2 Overview of Medicare Advantage and Part D Programs 14.2.1 MA Plans 14.2.1.1 Coordinated Care Plans 14.2.1.1.1 Health Maintenance Organizations 14.2.1.1.2 Preferred Provider Organizations 14.2.1.1.3 Special Needs Plans 14.2.1.2 Private Fee-for-Service Plans 14.2.1.3 Medical Savings Accounts 14.2.2 Part D Prescription Drug Benefit Plans 14.3 Medicare Managed Care Contracting 14.3.1 MA Organization’s and Part D Plan Sponsor’s Agreement with CMS 14.3.2 MA Organization’s Contracts with First-Tier Entities; First-Tier Entities’ Agreements with Downstream Entities 14.3.3 Contracting Strategies for MA Organizations and FDRs 14.3.3.1 Mandatory Provisions 14.3.3.2 Optional Provisions 14.3.3.3 Key Issues 14.3.3.3.1 Risk Adjustment Data Submission

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14.3.3.3.2 Certification of Accuracy, Completeness, and Truthfulness of Data 14.3.3.3.3 Compliance with MA Plans’ Policies and Procedures 14.3.3.3.4 Refund of Overpayment; Right to Offset; Audit Methodology 14.3.3.3.5 Access to Records 14.3.3.3.6 Subcontracting; Delegation 14.3.3.3.7 Termination Without Cause and Appeal Rights 14.3.4 Network Adequacy and Deeming Network 14.3.4.1 Telehealth Providers 14.3.5 Social Determinants of Health 14.3.5.1 Overview of Social Determinants of Health 14.3.5.2 Special Supplemental Benefits for the Chronically Ill 14.3.6 Dispute Resolutions for Providers 14.3.6.1 Contract Provider Dispute Resolutions and Appeals 14.3.6.2 Non-Contract Provider Dispute Resolutions and Appeals 14.3.7 Contracting Strategy for Part D Plan Sponsors 14.3.7.1 Pharmacy Access Requirements 14.3.7.2 Performance Standards 14.3.7.3 PBM Data Transparency Requirements 14.3.8 Contracting Strategy for FDRs 14.3.9 Offshore Contracting Arrangements 14.3.10 Examples of Contract Provisions 14.3.10.1 Subcontract/Delegation with FDRs 14.3.10.2 Right to Monitor and Revoke 14.3.10.3 Compliance with Laws and Regulations and CMS Instructions 14.3.10.4 Provision of Risk Adjustment Data and Other Information 14.3.10.5 Reporting and Refunding Overpayment to CMS 14.3.10.6 Audit and Access to Records 14.3.10.7 Prompt Payment 14.3.10.8 Indemnification 14.4 Conclusion 15 Medicaid Managed Care Kathrin E. Kudner Gerald “Jerry” L. Aben 15.1 The Medicaid Program 15.1.1 Eligibility and Enrollment for Medicaid 15.1.1.1 General Eligibility 15.1.1.1.1 Expansion of Medicaid under the Affordable Care Act 15.1.1.1.2 Work Requirement 15.1.1.2 Enrollment 15.1.2 Scope of the Medicaid Benefit 15.1.3 Access to Covered Medicaid Services

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15.1.4 Medicaid Payment 15.1.5 The Federal Matching Program 15.2 Medicaid Managed Care 15.2.1 General Requirements Applicable to Medicaid Plans 15.2.2 Examples of Medicaid Plans 15.2.3 Dual Eligibles Program 15.3 The State Plan and Waiver Program 15.3.1 The State Plan 15.3.2 Section 1915(b)—Freedom of Choice Waiver 15.3.3 Section 1915(c)—Home- and Community-Based Services 15.3.4 Combined Section 1915(b) and 1915(c) 15.3.5 Section 1915(i)—Home- and Community-Based Services 15.3.6 Section 1915(k)—Community First Choice Option 15.3.7 Section 1932 Programs 15.3.8 Section 1115—Medicaid Reform 15.3.9 Section 1332—Health Innovation 15.4 Medicaid Managed Care Contracting Issues 15.4.1 Contract with the State Medicaid Agency 15.4.2 Contract Between the Managed Care Plan and the Provider 15.4.3 Contract Requirements 15.4.3.1 Organizational Structure/Governing Body 15.4.3.2 Program Integrity 15.4.3.3 Behavioral Health Integration 15.4.3.4 Information Systems 15.4.3.5 Patient-Centered Care 15.4.3.6 Population Health Management 15.4.3.7 Subcontracting 15.4.3.8 Covered Services 15.4.3.9 Provider Credentialing 15.4.3.10 Access and the Provider Network 15.4.3.11 Nondiscrimination 15.4.3.12 Quality Assessment and Performance Improvement Program 15.4.3.13 Form of Payment 15.4.3.14 Cost Sharing and Hold Harmless 15.4.3.15 Enrollee Rights 15.4.3.16 Compliance 15.4.3.17 Confidentiality 15.4.3.18 Marketing 15.4.3.19 Provider/Beneficiary Communications 15.4.3.20 Medical Records 15.4.3.21 Reporting Requirements 15.4.3.22 Insurance and Indemnification 15.4.3.23 Withdrawal and Termination

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15.4.3.24 Audit and Inspection 15.4.3.25 Grievance and Appeal 15.5 Change of Ownership/Control 15.5.1 Required Notice/Approval 15.5.2 Approval by Government Agency 15.6 Liability 15.7 Specialized Medicaid Plans 15.7.1 Behavioral Health 15.7.2 Post-Acute Care 15.8 The Children’s Health Insurance Program 15.8.1 Design of CHIP Programs 15.8.2 Delivery of CHIP Services 15.8.3 Contracts with CHIPs 15.8.4 Changes with the Affordable Care Act 15.9 Future Issues in Medicaid Contracting 15.9.1 Managed Care Contracting Review Redesign Project 15.9.2 340B Discount Drug Program 15.10 Conclusion RESOURCE GUIDE 16 Direct-to-Employer Contracting Matthew Amodeo 16.1 Introduction 16.2 The Rise of Self-Insured Plans and D2E Arrangements 16.3 Primary Distinctions from Third-Party Payer Arrangements 16.4 Allocation of Financial Risk 16.5 Types of D2E Arrangements 16.5.1 Wraparound Incentive Arrangements 16.5.2 Full Network/Product Arrangements 16.5.3 Center of Excellence Arrangements 16.6 D2E Contracting Options 16.7 Network Adequacy 16.8 Legal Issues 16.8.1 ERISA 16.8.1.1 ERISA Preemption 16.8.1.2 ERISA Fiduciary Duty Requirements 16.8.2 State Business-of-Insurance Issues 16.8.3 State Licensing Requirements 16.9 Conclusion RESOURCE GUIDE 17 Considerations in the Absence of a Contract Between Provider and Payer Robin Fisk Christian Puff 17.1 Introduction 17.2 Process Flow in the Absence of a Contract

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17.3 Sources of Terms in the Absence of a Contract 17.4 Access to the Member’s Benefits 17.5 Specifying Rates for Out-of-Network Services 17.5.1 Surprise Medical Billing 17.5.2 Payer-Established Out-of-Network Payment Rates 17.6 Single Patient Agreements 17.7 Silent PPOs–Unintended Network Participation 17.8 Appeal Issues for Out-of-Network Providers 17.9 Strategic Considerations for Pursuing an Out-of-Network Strategy 17.10 Conclusion Appendix A Glossary of Health Plan Contracting Terms Appendix B Table of Sample Clauses Appendix C Physician Group Practice Provider Agreement Template with Commentary Leah B. Stewart

Index

xxxiii 6 Payer Programs and Policies: Utilization Management and Quality Assurance

Brooke Bennett Aziere Amanda M. Wilwert Foulston Siefkin LLP

A payer’s utilization management and quality assurance programs are fundamental to the working relationship between payer and provider, but they are often overlooked as part of the contract negotiating process. Providers tend to focus on negotiating reimbursement rates, but payer utilization management and quality assurance programs can have a significant impact on reimbursement. Utilization management (UM) is a general term that describes the process by which a payer decides whether health care services are appropriate for coverage under an enrollee’s plan. Quality assurance (QA) refers generally to procedures designed to promote the quality of health care services received by enrollees. Because there is considerable overlap between UM and QA activities, both functionally and because QA entails evaluating all programs including UM, these two programs often are discussed together. The purpose of this chapter is to provide an overview of the key considerations related to UM and QA programs under managed care contracts, to identify the competing interests of payers and providers with respect to such considerations, and to offer contract language designed to describe alternative approaches to defining the parties’ respective rights with regard to these programs.

6.1 Payer Programs and Policies When defining the relationship between a provider and a payer, the rights and obligations described in the contract itself often are only the “tip of the iceberg.” Typically, the contract contains the most basic elements of the relationship between a payer and a provider and relegates the operational details to the payer’s set of policies and procedures or provider manual (referred to in this chapter collectively as the Manual). This certainly is true with respect to a payer’s UM and QA policies and procedures, the details of which are virtually always captured in the Manual.

The payer almost always retains the unilateral right to modify the Manual at will.1 A typical contract will require the provider to “abide by and comply with such policies and procedures as the payer shall implement from time to time.” From the payer’s perspective, maintaining maximum flexibility is essential to (i) accommodating the changing needs of the marketplace for its enrollees and plan sponsors; (ii) administering a large network with numerous types of providers, including new product and quality initiative development; (iii) implementing changes based on the payer’s automated internal systems; and (iv) meeting the needs of other payers accessing the network, such as self-insured employer groups.

1 Refer to Chapter 5, Policy and Procedure Amendments, for further discussion. 103 6. Healt h Pl ans Cont r act ing Handbook: Eight h Edit ion 1

On the other hand, the provider needs to be able to review the Manual and understand the effect on the provider’s operations and what is required to comply. In addition, the provider will want, to the maximum extent possible, to restrict changes made to those policies (or at least limit their application to the provider) while the contract is in effect. The provider will want to avoid changes that under- mine the benefit of its negotiated bargain, as well as changes that interrupt the provider’s practice or are administratively burdensome because of the time, expense, or staff retraining required to comply. In conjunction with attempting to negotiate restrictions on a payer’s ability to amend its Manual, the provider should be aware of any state law requirements for advance notice of changes to the Manual. For example, New Hampshire law requires that a payer make its most current Manual available to providers “prior to the execution” of the contract.2 Colorado requires a payer to give 90 days’ advance notice of “material changes” to a contract and defines “material changes” to include changes to administrative procedures. Colorado providers have 15 days to object to the change, and if the parties are unable to resolve the objection, the provider can terminate upon 60 days’ notice.3 Even if a provider operates in a state where state law requirements do not require advance notice, providers can learn important lessons from those states that do and request similar language in their respective payer contracts.

Sample 6.1-A: Payer Programs (Payer Friendly)

Provider shall abide by and comply with such policies and procedures as Payer shall implement from time to time. Payer may amend its policies and procedures from time to time in its discretion, with notice to Provider.

Sample 6.1-B: Payer Programs (Provider Friendly)

Provider shall abide by and comply with Payer’s policies and procedures as set forth in the Manual; provided, however, that if any provision in the Manual is inconsistent with any provision in this Agree- ment, the applicable provision of this Agreement shall prevail. Payer represents and warrants that, as part of the process of negotiating this Agreement, Payer has given Provider the Payer’s most current Manual, including all updates. Provider acknowledges that Payer may amend the Manual from time to time in accordance with this Section. Except for changes required by applicable law, Payer shall limit Manual changes to no more than once per calendar quarter. Before the effective date of any amendment to the Manual, Payer shall give Provider actual notice of the change by mailing a printed update, postage prepaid to the [Specific Provider Person responsible for reviewing Manual changes] or making the updated Manual provisions available electronically with a summary describing the changes and links to the specific location of each change in the Manual. Payer shall give Provider 90 days’ advance notice of any Material Change to the Manual. The change shall not become effective during the notice period. For purposes of this Section, a Material Change is a change from the Manual provisions in effect on the Effective Date that requires substantial Provider time or expense to implement. If Provider determines that a change is a Material Change, Provider shall have 15 days to raise any objections to the change. If Provider objects to the change and Provider and Payer are unable to resolve the matter, either party shall be entitled to terminate upon 60 days’ notice.

2 N.H. Rev. Stat. Ann. §420-J:8 VIII(b). 3 Colo. Rev. Stat. § 25-37-104. 104 Payer Pr ogr ams and Pol icies: Ut il izat ion Management and Qual it y Assur ance 6.2.1

6.2 What Is Utilization Management? Utilization management is a central element of managed care and thus is a key feature of any managed care contract. According to URAC (formerly known as the Utilization Review Accreditation Commission), an organization that publishes standards for health care organizations and accredits them, UM is the independent, unbiased evaluation of the medical necessity, appropriateness, and efficiency of the use of health care services, procedures, and facilities under the provisions of the health benefits plan.4 UM can also encompass the payer’s more active involvement in the care of its enrollees, including assisting with the planning of a course of treatment. UM can take place at many points in the health care delivery cycle, including preauthorization review, concurrent review, or retrospective review. A payer’s UM program is designed to evaluate health care on the basis of appropriateness, necessity, and quality of the service. As payers have gained more experience with UM, they have increasingly incorporated case management, drug utilization management, or disease management programs into their UM programs. A payer’s UM and QA programs usually work hand-in-hand. The QA process will typically include elements such as physician profiling, measuring quality performance standards,5 clinical practice guidelines, and credentialing. Although the payer usually controls its own UM program, the provider maintains a strong interest in this aspect of a managed care arrangement for several reasons: ● the provider may opt to partner with the payer to perform some UM functions; ● the payer’s UM program will affect the provider’s operations and administrative costs; ● the payer’s UM program can significantly affect the provider’s payment; ● any payer delegation of the UM function to a third-party UM company could affect the man- ner in which the function is performed; and ● the provider may decide to advocate on behalf of its patients for a specific service or course of treatment.

6.2.1 Utilization Management Programs Problem: The contract will obligate the provider to comply with the payer’s UM program. Oftentimes, there is a lack of transparency regarding the components of the UM program. How many claims will be reviewed during a quarter? What will be the credentials of the payer’s UM reviewers—nurse reviewer or physician reviewer? In the case of a physician reviewer, will the physician be a specialist or general practice physician? What UM policies will apply—the payer’s internal policies, Centers for Medicare & Medicaid Services (CMS) policies, or the policies of national review companies such as InterQual or Milliman or a delegated third-party UM company? In order for a UM program to work smoothly, payer

4 Details regarding URAC’s Health Utilization Management Accreditation standards are available at https://www.urac. org/programs/health-utilization-management-accreditation. 5 For a description of Quality Performance Standards for participants in the Shared Savings Program of the Centers for Medicare & Medicaid Services (CMS), see 42 C.F.R. Part 425, Subpart F—Quality Performance Standards and Reporting; see also Medicare Program; Medicare Shared Savings Program: Accountable Care Organizations and Medicare Program: Waiver Designs in Connection With the Medicare Shared Savings Program and the Innovation Center; Proposed Rule and Notice, 76 Fed. Reg. 19528, 19571–91 (Apr. 7, 2011).

105 6.2. Healt h Pl ans Cont r act ing Handbook: Eight h Edit ion 1

and provider each need to be able to perform a series of detailed and time-sensitive tasks and understand the policies and process that will apply to the parties. Solution: Careful review of the payer’s UM program is crucial for both parties. If possible, the entire UM program should be reviewed prior to execution of the contract. Providers want to give consideration to some components that affect the provider such as the guidelines for services the provider frequently renders. Providers need to ask questions about how the UM program will work in real practice. Questions ranging from the structure of the program to the qualifications of reviewers should be addressed. ● Does the payer outsource its UM program to a third-party UM company? ● Is that third-party UM company familiar with state and CMS requirements for the managed care program? ● What are the qualifications for reviewers? ● If the provider is a children’s specialty hospital frequently providing liver transplants to children, does the provider want a pediatric specialist reviewing the medical necessity of transplant services? If not too lengthy, the UM program could be attached as an exhibit; indeed, some states require this.6 In recognition of the payer’s need to amend its UM program periodically, including incorporating changes that can reduce the provider’s administrative burden, the parties can agree on a process for review and approval of changes to the UM program that will have a material effect on the provider’s operations. Providers can also consider developing their own UM addendums for inclusion in the contract with the payer. These addendums can address a number of the questions raised above. For example, if a provider wants a physician to complete its UM reviews or wants the reviews to occur on provider premises, then this requirement should be set forth in the addendum. The addendum is something that should be prepared in advance of contract negotiations with the payer. It contains details about how the provider wants the UM relationship to work between payer and provider. It serves as an important tool to help identify and raise potential issues and concerns during the contract negotiating process. Careful review of the UM program prior to execution of the contract will benefit both the payer and the provider. The parties will know what is expected and can ensure their operations will facilitate the UM program.

Sample 6.2.1-A: Utilization Management Program (Payer Friendly)

As a condition for payment for Covered Services, Provider agrees to participate in and comply with the UM Program and QA Program (UM/QA Program) utilized by Payer to promote the efficient use of resources. Provider shall comply with and, subject to Provider’s right to appeal as provided in the UM/QA Program, be bound by such UM/QA Program. Failure by Provider to comply with the requirements of this paragraph will be deemed to be a material breach of this Agreement.

6 See, e.g., Va. Code § 38.2-3407.15(B)(9). 106 Payer Pr ogr ams and Pol icies: Ut il izat ion Management and Qual it y Assur ance 6.2.2.1

Sample 6.2.1-B: Utilization Management Program (Provider Friendly)

Provider agrees to participate in and cooperate with the UM Program and QA Program (UM/QA Program) utilized by Payer, subject to Provider’s right to appeal any adverse decisions. Provider has been given Payer’s most up-to-date Manual and applicable policies and procedures related to the UM review process. Payer and Provider agree to meet and discuss any changes to the UM provisions in the Manual that may materially affect Provider’s obligations. If any provision in the Manual is inconsistent with any provision in the Agreement, the applicable provision of this Agree- ment shall prevail.

Sample 6.2.1-C: Utilization Management Program (Provider-Friendly Addendum Setting Forth Provider’s UM Review Policy)

Provider agrees to participate in and cooperate with the UM Program and QA Program (UM/QA Program) utilized by Payer, subject to Provider’s right to appeal any adverse decisions. Provider has been given Payer’s most up-to-date Manual and applicable policies and procedures related to the UM review process. Payer and Provider agree to meet and discuss any changes to the UM provisions in the Manual that may materially affect Provider’s obligations. Provider shall abide by and comply with Payer’s policies and procedures as set forth in the Manual; provided, however, that if any provision in the Manual is inconsistent with any provision in this Agreement or Addendum, the applicable provision of this Agreement shall prevail.

6.2.2 Types of Utilization Review Utilization review (UR) is often referred to interchangeably with UM in the health care industry, but it is a subset of UM. Whereas UM entails the payer’s active participation in planning and manag- ing an enrollee’s course of care, UR tends to be passive, involving the payer’s review of the treatment proposed or provided to an enrollee in order to decide whether the treatment is a covered service under the enrollee’s plan. There are generally three types of UR: prospective, concurrent, and retrospective. Prospective review involves preauthorization before the initiation of treatment to determine medical necessity. Concurrent review is performed during the course of treatment and involves monitoring to determine whether the care continues to be appropriate and necessary. Finally, retrospective review is performed after the treatment has been completed.

6.2.2.1 Prospective Review and Preauthorization Payers have traditionally required prior authorization or preadmission certification before a provider delivers inpatient or certain outpatient services to an enrollee. The prospective review c onducted for such certification generally involves confirmation that (i) the patient is an enrollee, (ii) the con- templated services are covered by the enrollee’s health plan, (iii) the level or type of treatment sought (or both) is consistent with applicable UM program policies, and (iv) the provider is approved for the provision of such services to enrollees. Prospective review often gives rise to four related issues.

107 6.2.2.1 Healt h Pl ans Cont r act ing Handbook: Eight h Edit ion

The first issue concerns the process the provider must follow for verifying eligibility of the enrollee, including when notice must be given to the payer. Every payer has its own system or procedure for this verification. Increasingly, payers are offering, and many providers are insisting upon, real-time confirmation of eligibility, benefit design, and payment, including the enrollee’s payment obligations, on a 24-hour per day, 7-day per week basis. The second area concerns how quickly a payer is required to provide certification of medical necessity and what information will be available to the provider at the time it seeks certification from the payer. Providers are requesting information about which benefit plan covers the enrollee; relevant specifics of the benefit design; the amount of the enrollee’s financial obligation, including whether a deductible has been met; any coverage limits; and whether the enrollee is covered through a self- insured group. The third issue concerns whether the provider may rely on a payer’s eligibility verification to bind the payer to pay the eventual claim. This is a separate question from whether the provider may rely on the payer’s prior authorization that the specific services will be covered. The fourth issue concerns the extent to which a payer may use subsequently available information to overturn or adjust its initial authorization. Compliance with preauthorization requirements can be overlooked in the contract negotiation process, which can lead to devastating consequences. If a provider misses a preauthorization time frame, the payer can deny the claim. It does not matter that the services were medically necessary. It does not matter that the patient benefited from care. Lack of timely preauthorization allows the payer to deny a claim essentially on a technicality. Problem 1: There should be a system for verifying enrollee eligibility that can be relied on by the parties to the contract. Solution 1: Payers have several ways to identify their eligible enrollees: (i) identification cards, (ii) enrollee lists given to providers, (iii) telephone verification of eligibility, (iv) online search capability, or (v) a combination of these methods. The provider should carefully review the specific procedure in the contract for enrollee eligibility verification, and the payer should include a system summary as a contract exhibit, if possible.

Sample 6.2.2.1-A: Enrollee I.D. Card (Payer Friendly)

Payer, as part of its Enrollee identification process, shall make available to Provider electronic eligibility information regarding all current Enrollees. Provider shall receive regular updates regarding all current Enrollees who have selected or have been assigned to Provider. Payer shall provide each Enrollee with an identification card, properly identifying Payer, the Enrollee’s name, eligibility dates and identification number and information on where to submit required notices to provide Covered Services to an Enrollee. Provider agrees that all reasonable efforts shall be made to verify the eligibility and status of Enrollees. The verification process shall include, but not be limited to, checking Enrollee identification cards and Enrollee listings, or, if necessary, contacting Payer. Provider may call Payer’s eligibility service center to verify eligibility on normal business days from 8:00 a.m. until 5:00 p.m.

108 Payer Pr ogr ams and Pol icies: Ut il izat ion Management and Qual it y Assur ance 6.2.2.1

Sample 6.2.2.1-B: Enrollee I.D. Card (Provider Friendly)

Payer shall provide identification cards to all Enrollees. Payer shall assure that information on the identification cards clearly identifies the Enrollee’s eligibility date, Enrollee’s identification number, the applicable telephone number where Provider may reach a UM representative, the applicable claims address and a telephone number where Provider can verify eligibility, the product covering the Enrollee, the entity responsible for payment, and certification information in order to provide Covered Services to an Enrollee. The parties understand that an Enrollee must present his or her identification card to Provider upon a request for Covered Services.

Problem 2: If the UM program allows for telephonic or electronic preauthorization, the contract should specify time frames for the provider to notify the payer and what information the provider will receive in return.7

Solution 2: The contract or a preauthorization exhibit should set out the time periods within which the provider must notify the payer and the payer must respond to preauthorization requests. The contract or Manual should also describe the procedure for preauthorization for each type of service, if there are different requirements. For example, telephonic or electronic preauthorization may be sufficient for routine, noninvasive care, whereas an invasive procedure may require a second medical opinion. The parties may also wish to exempt certain services from the preauthorization requirement. In such a case, it is preferred that the exempt services be listed in the contract instead of in the Manual, as the Manual can be unilaterally amended, as noted above. Problem 3: Many payers that provide a system for telephonic or online verification of eligibility make that system available 24 hours a day, 7 days a week. This real-time availability causes payers to require real-time notification for preauthorization purposes. Generally, payers want notification within 24 hours of the admission or the next business day. Additionally, if the payer’s verification system is available only on a more limited basis, providers may need to provide services without having obtained prior verification. Problem 3 illustrates the need for providers to evaluate their internal operations related to the preauthorization process. Is notification within 24 hours reasonable from an operations standpoint? Does state law allow a longer period for notification? Should the provider ask for a longer period of time to make the preauthorization request? For example, a patient presents through the emergency department with a gunshot wound. Should the payer be allowed to deny all payment for inpatient services because the provider waited until day 3 of the subsequent inpatient admission to request authorization? If the payer and provider cannot agree on a longer notice period, consider specifying circumstances when the notice period can be waived or extended for good cause or a lesser consequence. Problem 3 also demonstrates the need for the parties to be familiar with any applicable state law requirements relating to UR. Arizona law requires a payer that requires prior autho-

7 As part of its internal process, the provider needs to develop a system that tracks or records any telephonic or electronic preauthorization in the event the payer later takes the position that it did not receive preauthorization. For example, if the provider sends a preauthorization to the payer electronically, the provider needs to document delivery confirmation to the payer in the patient’s medical or case management records. 109 6.2.2.1 Healt h Pl ans Cont r act ing Handbook: Eight h Edit ion

rization to “provide twenty-four hour access by telephone or facsimile for enrollees and providers to request prior authorization for medically necessary care.”8 Solution 3: The contract should address the provider’s responsibility for obtaining prior verification at times when the system is not available. If the proposed preauthorization notification time period will not work from an operations standpoint, then the provider needs to negotiate a longer time period. The contract should also address who bears the financial responsibility for services provided without prior verification during those times when the system is not available or when prior verification is not requested, including when prior verification is prohibited by law. Rather than face denial of payment, the provider may seek an alternative process, such as retrospective review to ensure payment for services that would have been approved as medically necessary if verification had been timely obtained. This should be stated in the contract.

Problem 4: On some occasions, the payer may reverse an initial verification of eligibility when it determines that the prospective enrollee is not truly eligible for the benefits sought. Solution 4: The provider may negotiate for the right to rely on identification cards, enrollee lists, and online or telephone authorizations provided by the payer. The provider may also seek to incorporate a provision guaranteeing payment for services rendered in reliance on the payer’s identification and authorization systems unless the provider has actual knowledge of ineligibility. The payer may wish to expressly state in the contract that verification of eligibility does not guarantee the payment of benefits. See also Section 6.2.2.3, Retroac- tive Disenrollment, below. In light of the challenges with enrollment, premium payment, and the “grace period” during this period of uncertainty caused by the launch of health insurance exchanges, payers are reluctant to assume the risk arising from verifying coverage for an individual who may or may not turn out to be an enrollee. Problem 5: Upon review of a claim, the payer may deny payment for services that were preauthorized because the payer believes that the treatment provided differs from the treatment authorized or that the enrollee’s actual condition differed from the condition described in the request for prior authorization. Solution 5: Sometimes a patient’s initial diagnosis changes during the course of evaluation or it becomes medically necessary to alter a preauthorized course of treatment. The provider may negotiate for the right to a binding determination of coverage so long as the provider gave the payer information that was accurate to the best of its knowledge at the time it requested authorization. The payer may reserve the right to reevaluate the medical necessity of services rendered during the course of treatment or after services are delivered. Some- times it is possible to reach a compromise that limits the payer to disallowing coverage for certain limited reasons expressly stated in the contract.

8 Ariz. Rev. Stat. § 20-2803(E).

110 Payer Pr ogr ams and Pol icies: Ut il izat ion Management and Qual it y Assur ance 6.2.2.2

Again, state law may affect the permissible terms of the contract. For example, Illinois law restricts a payer to rely “solely on the medical information available to the attending physician or ordering provider at the time the health care services were provided.”9

Sample 6.2.2.1-C: Enrollee Verification and Preauthorization (Payer Friendly)

Except in an emergency, prior to providing any Covered Services to a person who is purport- edly an Enrollee, Provider will follow Payer’s verification and authorization procedures to verify that such person is an Enrollee and that the services to be provided constitute Covered Services.

Sample 6.2.2.1-D: Enrollee Verification and Preauthorization (Provider Friendly)

Payer shall furnish Provider with a system for identifying all Enrollees as described in Exhibit ___. Except for emergency care, Provider shall confirm Enrollee status and secure Payer preauthorization before rendering services. Upon a request for Enrollee treatment, Provider shall contact Payer by telephone to confirm Enrollee status. Payer shall confirm Enrollee’s eligibility for benefits and issue a certification decision within ___ hours of receiving Provider’s request. Upon verification by the Payer of the Enrollee’s membership status, Payer shall give to Provider a preauthorization code indicating approval upon which Provider may conclusively rely for the delivery of the preauthorized services to the Enrollee. If Provider obtains such verification, Payer shall not retroactively deny payment unless: (i) the services are not provided as described in the request for preauthorization; (ii) the Enrollee’s condition materially differs from the condition described at the time of preauthorization; or (iii) the services are not found to be Medi- cally Necessary.

In recent years, some payers have been replacing their prior authorization requirements with a requirement of prior notification. The goal is to replace the process of reviewing and making an advance conditional coverage determination with an opportunity to identify enrollees embarking on a complex or costly course of treatment and to engage them in one or more active forms of medical management, as described below.

6.2.2.2 Loss of Enrollee Eligibility During Treatment An enrollee may lose eligibility for benefits while the enrollee is an inpatient or in the midst of a course of treatment. This can happen because the enrollee exhausts his or her benefits10 or because the enrollee’s coverage ends, including due to nonpayment of premiums. Problem: Who is responsible for the cost of ongoing treatment in the event of loss of eligibility? From the provider’s perspective, it may not be fair to penalize the provider

9 215 Ill. Comp. Stat. Ann. § 134/85(e)(3); see also Ariz. Rev. Stat. § 20-2803(F) (stating payer “that gives prior authorization for specific care by a provider shall not rescind or modify the authorization after the provider renders the authorized care in good faith and pursuant to the authorization”). 10 See the limits on a payer’s ability to offer plans with lifetime or annual benefit caps at Section 2711 of the Public Health Service Act, as added by Section 1001(2)–(4) of the Patient Protection and Affordable Care Act, Pub. L. No. 111-148.

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