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The Ohio Health Care Simplification Act (House Bill 125) was signed into law on May 25, 2008. This Bill is the result of almost two years of legislative action promoted by the Ohio State Medical Association to provide some level of protection to physicians as they contract with managed care plans.

While not a perfect piece of legislation by any means, the Act does provide some important protections and clarity to physicians as they consider accepting certain managed care contracts.

The key provisions of the Act include:

1. Full Fee Schedule.

Some managed care plans would not provide a summary of the fee schedule to physicians in advance of signing the agreement and physician would only become aware of the fee schedule after they had submitted claims. The statute requires that the physician is to be provided a copy of the full fee schedule and the manner in which the fee will be paid to the physician at the time the contract is to be signed.

2. Summary of Terms.

Many of the managed care contracts were written in a manner almost incomprehensible to even an experienced insurance contract lawyer. The statute requires that any plan is required to provide to the physician a summary disclosure form that outlines the (a) compensation terms, (b) the products/networks covered by the contract, (c) the duration of the contract, (d) the entity responsible for processing claims, and (e) the method to resolve any disputes arising under the contract. While the summary does not replace the actual language of the contract, it should provide an overview of key provisions so that a physician can determine whether or not he or she wishes to sign the agreement.

3. Prohibitions on “Selling Networks.”

In the past, some managed care plans would take their list of providers and “rent” or “sell” that list of providers to other plans. Under the terms of the original contract (which rarely were studied carefully by the physician), the original contract authorized such a process. The net effect of this “sale” was that a provider suddenly found themselves required to accept patients covered by a different managed care plan with reimbursement terms that the physician would otherwise have declined and would not have signed a managed care agreement with that second provider. Under the terms of their first contract, however, they were contractually bound to accept the less favored plan resulting in problems for the physician.

A second aspect of this process was a “most favored nation clause” under which the first contract would specify that the physician would accept from one provider the lowest rate that the physician would accept from any other provider. By virtue of the “sale” of provider networks, occasionally physicians found themselves locked into lower rates for the original agreement solely because one of the other managed care contracts had a different reimbursement rate. This conduct is now also prohibited under this statute.

4. Future Product Clauses are Abolished.

Some managed care providers offer multiple types of plans, some of which are fee for service, some of which are capitation plans, or combinations. In the past, if a physician signed a managed care agreement with a system to accept one plan, frequently the contract required the physician to accept any and all plans sponsored by the same entity, even if the physician would otherwise have rejected those plans. Under the statute, the physician cannot be forced to take all the plans, although the statute provides that the carrier can elect to terminate the physician’s contract on 180 days notice if the physician declines to accept other product plans offered by the same carrier.

5. Shorter Credentialing.

Unlike government plans where a physician can provide service and later bill the government once credentialing was approved, many managed care plans prohibit a physician who is not credentialed at the time the services is performed from ever billing the managed care company. Some of the managed care companies have taken an extraordinary length of time to approve the credentials of applying physicians. The new statute requires the plan to carriers to respond to credential applications within 90 days. Regrettably, the statute does not require the plans to accept all qualified physicians, but it at least requires them to expedite the credentialing process.

Further, the statute mandates that all providers accept a single standard credentialing form. The form selected was that sponsored by the Council for Affordable Quality Health Care (CAQH) and the information that can be requested by the managed care company is limited to that in the credentialing form. In the past, some carriers had demanded a significant amount of information that created a burden on physicians applying for credentials. The credentialing section further provides that the physician may pre-apply for credentials. In some circumstances where physician was changing employers, he or she had to wait until they started work at the new employer before they could apply for credentials, thereby creating a period of time where the physician would have no ability to bill for managed care patients. The credentialing provisions go into effect on September 8, 2008.

6. Phase-In Periods.

The statute goes into effect beginning June 10, 2008. Any new contracts entered into after that date must be in compliance with the statute. For contracts that were already in effect, those contracts cannot be renewed after June 10, 2008 without complying with the new statute.

7. Dispute Resolution.

All contracts must provide for binding arbitration for any contract disputes arising under the new statute.

There are some other miscellaneous provisions in the Act that focus specifically on providers other than physicians. The Act also creates an Advisory Committee to examine the feasibility to develop a more streamlined process for claims adjudication and eligibility criteria.

While the statute eliminates some of the glaring abuses with managed care contracts, it is only the first step in providing some significant bargaining power between managed care providers and individual physicians. We urge all physicians to confer with their practice administrators to identify managed care agreements that are currently in effect and to evaluate the terms of new managed care contracts as they are offered to your practice. While many contracts are valuable to the physician, there may well be certain plans that the best choice is to simply say “no.”