Contract language review
Before signing an agreement with a payer, always request the full contract text, which is called the base agreement. Thoroughly review the contract’s terms before you sign so you can flag areas of concern and negotiate alternative language. Contract language can be negotiated at the same time as rates.
While the payer may not allow changes to some language, you should understand the terms because they outline the rights and responsibilities of you and the payer under the contract. In some cases, you may decide not to sign a contract with unfavorable terms, or you may sign but with an understanding of your options for terminating the agreement early if problems arise. Understanding contract language also allows for detailed comparison of payer contracts, so you can prioritize payers that offer more favorable contracts.
Term and termination
Effective date
The effective date is the date on which the contract takes effect or becomes operative and enforceable. The payer ultimately decides the effective date of the agreement. If you hope to make a contract effective as quickly as possible, ask about the earliest possible effective date and what steps must be completed to meet that timeline.
The effective date of an agreement should be clearly stated. Payers may have already filled in the effective date when they send the unsigned contract for review. Otherwise, it’s left blank for the payer to fill in later, after the physician has signed the agreement. The downside is that the payer may take some time to credential and load the contract when they aren't bound by a timeline.
If the payer does not fill in the effective date until sometime after you return the signed agreement, there is no binding date on which the contract becomes effective.
Concerning language
“Effective Date: ______ (or later date that credentialing is complete).”
Better language
“This Agreement is effective on July 1, 2023 (the “Effective Date”).”
If the effective date is included in the unsigned agreement, check with the payer on the deadline for returning the signed agreement and any other requested documentation. If the effective date isn’t in the unsigned agreement, be sure to check regularly with the network management representative for when the agreement becomes effective.
Term of contract
The term of the contract is the period of time from the execution of the contract until its conclusion, unless the contract is terminated early.
The base agreement should state the initial term of the agreement, if applicable, and whether the agreement automatically renews.
While you are in the initial term, payers may not allow you to renegotiate rates or terminate the agreement, so it’s important to be wary of a lengthy initial term, especially if you have concerns with the contract.
Concerning language
“The initial term of this Agreement shall be for three (3) years…Either Party may terminate this Agreement without cause following the end of the initial term…”
Better language
“The term of this Agreement shall commence on the Effective Date and shall have an initial term of one year. The Agreement will automatically renew for consecutive terms of one (1) year unless either Party provides notice of non-renewal at least sixty (60) days prior to the expiration date of the Agreement...”
Some agreements or amendments, such as those with alternative reimbursement methodologies, may not automatically renew, because the payer may first need to review performance and satisfaction of terms. In such cases, the payer has the option to provide the physician with a new contract to replace the expiring agreement or to just allow the contract and relationship to expire.
Termination
The termination of a contract means to end the contract before its specified term. Terminations can be with cause or without cause, depending on the contract’s terms. Terminations with cause apply when one party believes the other has not fulfilled the terms of the agreement or has committed some other act, such as violation of law or willful misconduct, that constitutes cause as defined by the agreement. Terminations without cause are permitted by the contract for any reason, unrelated to fulfillment, as long as the specified amount of notice is provided. Typically, terminations without cause provisions are the same for both parties. By contrast, the grounds for terminating with cause may be different for the payer than for the physician.
The contract should include a termination provision specifying how many days of notice each party must give before ending the contract. This number of days’ notice is typically shorter for a termination with cause than without cause; otherwise, there would never be a need to terminate with cause when the non-breaching party could simply terminate without cause by providing the same amount of notice. Some states require a minimum number of days of notice by law. For terminations with cause, the agreement should also outline a process to resolve a breach of contract before termination, including the opportunity to cure or remedy the breach within the specified notice period. Flag any requirement for a lengthy notice period, especially for termination with cause.
When reviewing the time period for termination notice, consider the impact to your own practice. That is, if the physician considers the contract to be fair and/or wants to continue the relationship without disruption or frequent re-negotiations, a longer notice period for a without cause termination may be beneficial. By contrast, if the physician feels the terms of the contract are unfavorable or otherwise wants the option to get out of the agreement without cause, a shorter notice period would be desirable.
Before terminating your contract with a payer, be certain to:
Identify whether there are any obligations or requirements related to termination. Some plans may require physicians to continue caring for their patient population until replacement physicians can be found, which may extend past the date the contract is terminated.
Ascertain whether you can terminate one plan only or if the contract includes an “all products” provision requiring you to terminate all plan offerings from that payer. If you’re unsure, check with the payer.
Determine if the contract requires a particular process for termination. For example, the contract may require that notification of termination be sent by certified mail.
Tip: Regardless of the method of notice, document your delivery of the termination notice, in case the payer later claims they did not receive or process the notice.
See the free contract assessment worksheet (PDF) to help you evaluate whether you should terminate a contract.
Academy advocacy on payers
Learn more about the Academy’s advocacy for dermatologists and their patients with private payers.
Participation
Products
The contract should clearly name the products it covers, such as commercial, Medicare Advantage, Medicaid, workers compensation, etc. These may be identified in product attachments that follow the base agreement.
Tip: Ask the network management representative if there are any specific networks or plans in your market where you will not be a preferred or participating physician.
Check for language that states you will automatically become a participating physician in any new products the health plan introduces. There should be a process for objecting to participation in new products.
Concerning language
“Payer may add Products or Plan Types by providing thirty (30) days written notice to Physician with the applicable Product Attachment and Rate Schedule. Failure of Physician to object in writing to the additional Product during the thirty (30) day notice period shall constitute acceptance by Physician. If Physician objects to participation, Payer may terminate the entire Agreement.”
Better language
“Payer may add Products or Plan Types by providing ninety (90) days written notice to Physician with the applicable Product Attachment and Rate Schedule. Participation in the additional Product will only become effective with written agreement signed by Physician to add the additional Product or Plan Type.”
Tip: Make sure to read all correspondence from payers. These communications could be notices of amendments to add products or plans that may warrant your response.
Referrals
Typically, payers require physicians to refer to other participating physicians and other healthcare entities, and they may impose a penalty if patients are referred to non-participating physicians or entities. Payers may also have preferred vendors, such as for lab services, which can impact reimbursement and access.
Concerning language
“Contracted rates will be reduced by 5% for a 6-month period if non-participating physicians or other entities are used more than 10% of the time.”
Better language
“Physician(s) will use his/her/their best efforts to refer to other Participating Physicians or other entities.”
Identify language specifying restrictions on or penalties for referrals. When possible, work with the payer to remove or adjust the restrictive language.
Amendments
The process for making amendments to contracts varies widely. The best practice for physicians is that amendments are only adopted by mutual consent, which is usually indicated by requiring each party’s signature on the amendment. However, some contracts state that the payer can unilaterally amend the agreement, sometimes even without notice.
Concerning language
“Payer may amend this Agreement at any time by providing thirty (30) days written notice to Physician. Failure of Physician to object in writing to the amendment during the thirty (30) day notice period shall constitute acceptance of the amendment by Physician. If Physician objects to the amendment, Payer may exclude the Physician from the Product to which the amendment relates or may terminate the Agreement.”
Better language
“This Agreement may only be amended with the mutual written agreement signed by both Parties.”
Tip: Check your state laws on requirements for notice of amendments. While some states mandate that payers notify providers of any changes to a payer contract, others do not. See Important considerations beyond the contract for more information.
Physicians should beware of unilateral amendment language in their contracts and try to negotiate with payers to exclude such language.
Tip: Some contracts specify that the payer can unilaterally amend contracts to be in accordance with regulations or statutes. For example, this is commonly seen with Medicare Advantage plans. Such provisions are often not negotiable, but they are typically less concerning than other amendments made at will by the payer.
Claims-related deadlines and processes
Payer contracts generally include terms around claims submission and payment. If these terms are not included in your contract, check the provider or administrative manual for this information.
See the AMA resource Common payment issues and how to handle them for more information on identifying and handling claims-related issues.
Timely filing
The timely filing period is the deadline for filing a claim with a payer. Generally, a longer period — such as 180 days from the date of service — is better for physicians.
Prompt pay
The prompt pay timeframe specifies how many days the payer has to provide reimbursement upon receipt of a clean claim, meaning a claim that can be easily processed without the need for additional information. It’s generally better for physicians if the prompt pay timeframe is short, such as 30 days upon receipt of a clean claim.
Tip: Check your state laws on prompt pay, and make sure the terms of your contract align. Some states have laws or regulations that apply interest penalties for late payments of clean claims. See Important considerations beyond the contract for more information.
Appeals
The contract may set a limit on how long you have to appeal claims. If not in the contract, this language may appear in the payer’s administrative manual. Be sure to identify any such restrictions to ensure your appeals process meets deadlines and requirements.
For assistance with appeals, use the Academy’s private payer appeal letter tool.
Recoupments
Recoupment means the recovery of money that was unduly paid out. Some contracts specify how long a payer has to recoup payments. If such language is not in the contract, check the provider or administrative manuals to see if the payer specifies a time limit for recoupments. Where possible, add a time limit such as one year so the payer cannot recoup money indefinitely. It’s best if the timeframe for physicians to appeal claims is longer than the timeframe for payers to recoup money.
Dispute resolution
Contracts should specify a process and timeline for dispute resolution, such as requiring binding arbitration and precluding litigation of disputes. Payers may not be willing to alter their dispute resolution language, but you should review it carefully to understand the process. You should also check state law to ensure that the dispute resolution process in the contract is permitted in your state. California, for instance, has very specific rules for arbitration provisions.
Note: There is a difference in dispute resolution for Medicare Advantage (MA) contracted and non-contracted physicians. For non-contracted physicians, MA plans have to cover and reimburse in the same manner as original Medicare. See the CMS website for more information.
For contracted MA physicians, the negotiated contract terms will apply. In negotiating with MA plans, it is important for physicians to know that MA plans are allowed to reimburse separately from original Medicare and can include their own coding and payment edits, such as bundling services.
Eligibility
Some payers use contract language to shift the burden of verifying patient eligibility to the physician. However, the payer should be responsible for updating and maintaining eligibility status to ensure it remains accurate. If the physician verifies patient eligibility with the payer, but the payer later determines that the plan member was not eligible at the time of service, the payer should be obligated to reimburse the physician.
Concerning language
“Prior to rendering services, Physician may review the patient’s identification card and contact Health Plan to obtain the most current information on patient eligibility. However, such information provided by Health Plan is subject to change. If Physician provides health care services to an individual and it is later determined that the individual was not eligible at the time the services were rendered, those services will not be eligible for payment under this Agreement. Payments made for those services may be recovered as overpayments.”
Better language
“If Physician verifies patient eligibility based on information provided by the Health Plan and provides health care services to an individual and it is later determined that the individual was not eligible at the time the services were rendered, Health Plan will reimburse Physician for services provided in good faith and may not retroactively recoup payments.”
* This information is provided for educational purposes only; individual physicians must make independent judgments about payer contracts. The AAD cannot provide legal advice to its members. For specific questions or individual cases, we encourage members to speak with their legal counsel.
Additional Academy resources
See this AMA PDF on key terms and considerations to review in payer contracts.
Access other resources on private payers, including our private payer appeal letter tool.
Learn more about the Academy’s advocacy for dermatologists and their patients with private payers.
