The Basics of a Medical Billing Contract
A medical billing contract is an agreement between a healthcare provider and a medical billing service that outlines all of the terms of their working relationship. A medical billing contract is the primary way to ensure that both parties are fully informed about what to expect from the working relationship, and an important tool for protecting both parties’ interests.
When a practice trains its own staff to perform medical billing, the process is usually an informal arrangement. However, when a healthcare provider decides to hire a billing service or outsourcing company to handle its medical billing, a strong medical billing contract protects both parties . A medical billing contract addresses liability, compensation, claims, duration of contract, and confidentiality, to name the most important aspects. It will usually also address how any disputes will be resolved.
It is always recommended to have an attorney draft and/or review an agreement prior to its execution. While the temptation may be to use an existing form contract, practitioners need to be aware that many medical billing companies use form contracts that favor their interests over the healthcare providers.
Essential Elements of a Medical Billing Contract Template
Once you are ready to decide on a medical billing company, it’s time to enter into a contract with them. A contract provides a legal framework in which both parties define their responsibilities, rights, and obligations. The contract must be clear for both parties, and everything needs to be covered in the contract, so there are no surprises later on. Since there are legal aspects to a contract, it is strongly advised that you have your contract vetted by a lawyer or experienced attorney, just so everything is covered. A bad ruling on a contract can bring financial losses to your practice. So what type of components should a good medical billing contract template have? Here are a few: Payment terms: It’s important that payment terms are discussed and agreed to by the medical billing company. This agreement should include how services will be billed and method of payment. Will your practice pay per hour of services, per claim processed, or a flat percentage of collections? Decide on what type of arrangement you’d like to have. Service agreement: This section of the contract should outline the relationship between your practice and the medical billing company. The scope of services should clearly define what services will be provided and what work will be done. What are the medical billing company’s obligations when it comes to working on your behalf? Is the medical billing company responsible for collections or will they be outsourcing that work? Compliance: There should always be good practices in place to ensure compliance. You want to avoid any legal issues, so indicate in the contract the measures that will be taken to ensure compliance. Are the medical billing company’s staff trained on compliance? Are they up to date on the HIPAA and HITECH Acts? Confidentiality: Since the medical billing company will have access to sensitive and confidential medical reports and documents, it is extremely important that a confidentiality agreement is included in the contract. Outline what is considered confidential and how the information should be handled. This should also detail what should happen in case of a breach of confidentiality.
Legal Framework Surrounding Medical Billing Contracts
It is important to address many legal issues when drafting a medical billing contract template. For example, it needs to be compliant with healthcare regulations and likely will involve a noncompete clause and a liquidated damages clause. This article will consider the legal issues that impact how a medical billing contract template is prepared.
Health Care Regulations
In addition to laws governing the execution of contracts, HHS regulations will govern contracts between medical billing companies and physicians. Most obviously, the anti-kickback and Stark Laws will affect how payments are structured. In particular, the Anti-Kickback Law prohibits payment to or from court referring activities, such as referrals from the medical billing company to a physician for medical services. Although medical billing companies can accept referrals, remuneration cannot be tied to the referral.
However, the Anti-Kickback law provides a number of exceptions, including the following: the percentage compensation exception, which allows for compensation to increase or decrease with the increase or decrease of the volume or value of the services performed; the services exception, which allows payment based on a services rendered fee; the space rental exception, which allows for payment of rental of medical office space; the equipment rental exception, which allows for payment for the rental of equipment as long as the rental is for fair market value and the fair market value is paid under conditions not necessarily tied to referrals; the personal services and management contracts exception, which allows for compensation for services provided by an independent contractor. If an exception applies, it is safe harbor. If it does not, the Anti-Kickback Law will apply.
Penalties
Criminal penalties under the Anti-Kickback Law are extremely severe, including imprisonment ranging from five to ten years and/or a fine up to $250,000 per offense for the physician giving the kickback or $100000 and up to three times the monetary value of the kickback for the medical billing company. The civil penalties assessed may be even larger under the False Claims Act.
Stark law provisions also apply. Under Stark law, if there is a compensation arrangement between a physician or immediate family member of a physician and the medical billing company, then the medical billing company cannot present claims to third-party payors until no compensation is paid. In addition, the medical billing company cannot file claims whenever the claim or claim line involves a designated health service, without regard to whether the designated health service is provided pursuant to a compensation arrangement with the physician.
The penalty for Stark law violations is treble damages for damages incurred or $15,000 for claims submitted in violation of the federal law. Several states also have penalties for violating their state versions of the law, with penalties ranging from $2000 to treble damages.
Clarification of the Legal Consequences of Breaches
A contract template should clearly define the consequences of breach. In other words, what happens if the medical billing company pays the physician for referrals, or if the physician refers patients to the medical billing company? By defining the consequences, including whether a party will have to return payments received, the parties can clarify the regulatory issues that will occur and how they will be addressed. Depending on the particular prescription at issue, the penalty may be the return of money, fines or imprisonment, as discussed in the preceding section.
In addition, a contract should contain a liquidated damages clause addressing whether and how the physician will be penalized for referring patients to the medical billing company. As mentioned above, under the Anti-Kickback Law, violations can result in imprisonment and up to $50000 in fines for each instance of improper payment. Therefore, it is important that the contract define the consequences of violations. For example, the liquidated damages clause could provide a lower amount than the maximum possible fines, provide a version of graduated penalties, and provide for penalties beyond liability to third-parties, such as criminal liability, civil fines or debarment.
Tailoring a Medical Billing Contract Template
A template can get a practice or a billing service pretty far, but nothing will survive a challenge as well as a specific, customized contract. Say you start out with the basic framework and clauses of a sample medical billing contract, but then develop a schedule of your duties. Most medical billing contracts list out the services being provided by the company. You may need to revise this section, depending on how accommodating you wish to be: If you are a good problem-solver, a practice may never call with its problems; on the other hand, they may repeatedly seek you out when there’s an issue. Either way, describe your duties here with an eye toward specific services being provided, exclusions and limitations, and, depending on your situation, the practice’s responsibility. Are you liable if a provider sees a patient without a referral? Are you responsible for the practitioner’s billing, or is the browser-based software doing the work? Who implements corrective measures should a compliance issue arise? Is the practice’s payor contract’s denial management program doing all it can to appeal incorrectly denied claims?
To avoid misunderstandings about how claims will be handed in the first place, the section describing claims submission should be thorough. Will you be responsible for preparing and submitting claims? Will other entities such as IT, third-party vendors, or the practice itself play a role? "Does the practice need to sign off on everything that’s submitted?" advises one lawyer who works a lot with physician practices. "How robust do you want your contract to be, or do you trust those provisions in the [vendor’s] contract?"
Another very important section of your contract will be the dispute resolution clause: "How do you resolve disputes if the contract is terminated?" For example, if the practice is terminating the contract because it believes you haven’t been performing to expectations, what if you think it is? Where there’s money at stake, disputes may arise that could either hurt the relationship or end it.
"Is there a way to reconcile that [without a lawsuit]?" wonders one attorney who also does a lot of work with physician practices. "How do you get to an equitable resolution of your dispute? Maybe there’s a mediation or arbitration clause, maybe there’s a short amount of time to file a complaint. There are lots of ways to do it, but that’s something you want to have spelled out rather than relying on state contract [laws]."
Business terms should be detailed: When and where will services be delivered? What kind of oversight will you provide? Will your staff be on-site, and what is the scope of their authority? How will vendor services be invoiced, and what type of reporting will you be providing to the practice? What are the minimum required performance metrics? And so on.
There are other sections of a medical billing contract that can be very specific for a practice: business hours and availability, scope of work, additional fees, review procedures, invoicing and payment methods, and allowable fees. Compliance issues will also be a major concern for many practices that have joined accountable care organizations, clinical integration networks, or other continuum of care contracts. It would be useful to focus on the new health-care laws, ensuring that the practice understands requirements and the penalties for data breaches, for example. The specifics of your contract can help set the stage for compliance, and create an avenue for the practice to come to you with questions or concerns. Again: Specifics are what will allow billing services and practices to move forward in an ordered way and not after being slapped with a lawsuit.
Pitfalls to Avoid
One of the biggest mistakes I see in medical billing contract templates are fringe benefits that seem to be included as a policy consideration. This is the equivalent of a "free" lunch. I see this most often in medical practice where malpractice is covered for a fee but not clearly defined. Consequently, it is assumed that all reasonable charges are covered. Perceived issues with this have been the basis of litigation for shareholders in practice groups. The failure to describe the extent of malpractice coverage is a boondoggle waiting to happen. A contracted party needs and deserves to know his or her coverage as a matter of basic contract law. See contracts 101.
Another problem I see arises when the medical billing contract template attempts to make the contracted party responsible for things outside of its direct control. An example of this which we see often in physician practice or agency services agreements is some sort of quantitative compensation formula linked to performance metrics. If those metrics are out of the control of the contracted party you need to question why are they included in the contract. Furthermore, showing the carrot stick to a contracted party will likely lead to lots of difficult questions and discussions about the metrics concern. And once again you have breached contract 101.
If your medical billing contract template is unclear and vague you will lose control of the interpretation of unclear terms much the same way as in any agreement . It is recommended that you review each term and phrase you use in your agreement to determine if that term has an "industry standard" meaning and what that meaning is. For instance, there is an industry standard meaning for the word "assignable." Moreover, it is likely not what a layman might think. When someone from the industry uses the word "assignable" they are often referring to whether the contract can be assigned to a third party. Try asking lawyer who has been drafting agreements in your industry for years for help with these words. Most are happy to help over lunch. Remember though that when you ask your lawyer for help it could be billed at $600 per hour so be honest about what you mean. "Assignability" is just one example of words to be cautious about using.
Finally, after you complete your medical billing contract template it is very important that you get legal review. Assuming your medical billing contract template is clear and unambiguous, having it reviewed by your business lawyer is a smart idea because they may see it from the other side of the aisle. One thing I know for sure: it is shocking how many lawyers will give assistance with basic matters.
There are no doubt other ways to innovate in your legal documents for healthcare providers. At the very least get your billing contract template reviewed by a healthcare lawyer.
Staying Compliant and Updated
A critical aspect of having a reliable medical billing contract template is ensuring that it stays compliant. You can think of your template as a living document, which will require regular and frequent updates that reflect the most recent healthcare regulations and industry standards. If your template is not updated frequently and you enter into an agreement with a medical billing company using an outdated document, then you could be exposing your practice to liability. So, what sorts of items should be covered in your update process?
DENAs and NPI numbers
New Direct Enrollment Applications for Medicare
State Law Changes
CMS Proposals
Medicaid Pay Rates
HRSA Guidelines and Programs
HITECH Frequently Asked Questions
Data Updates
233(A) Data Updates
Healthcare regulations change frequently and it is important to stay informed of new changes, this includes knowing when to add, remove, or change provisions in your medical billing contract template. You should designate one person in your practice who is responsible for regularly reviewing your template and initiating the necessary updates. This will ensure that your contract document reflects the current state of affairs in the healthcare industry and gives you a document that you can be proud to uphold.
How Templates can Help
Medical billing contracts form the basis of your relationship with the healthcare provider and its billing company. As many practitioners and billing companies discover, creating a unique agreement for every client can be time consuming and cost prohibitive. That is before to factor in any changes that may be needed because of practice specific circumstances. As a result, having a medical billing contract template for use with all your clients, allows you to save both time and money.
Another time saving advantage of having a contract template, whether it is a single agreement for all clients or multiple agreements for different types of practitioners, is knowing that your contracts are not unique to each client. This means your health care attorneys will be able to streamline their review of each contract agreement. Not only will this save attorney time , but it will also reduce the cost of doing business with a healthcare attorney.
When it comes to efficiency, there is one other thing to keep in mind. Having a contract template allowing you to simply input practice specific information for each healthcare provider will not only save you time drafting contracts, it will create a uniform agreement for all your clients. While there may be times when a billing company needs a specialized contract for a particular client, the vast majority of your clients will have nearly identical contract terms and conditions. Additionally, a standard form of agreement allows you to easily identify any instances of both an unauthorized alteration to the contract and any unexpected changes that may be needed by a practice.