"Eliminating the "All Products" Clause"

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"Eliminating the "All Products" Clause"

For years, physicians have been forced to accept unacceptable contract provisions. Finally, the tide may be starting to turn.

by Gil Weber, MBA, Consulting Editor

Adapted with permission from Ophthalmology Management
© Copyright, 2000. All rights reserved.
June 2000


Thanks to a never-ending economic crush, increasingly burdensome administrative requirements and onerous contractual provisions, life with managed care has been a loathsome reality for many physicians. But during the past 2 years, doctors have seen a glimmer of hope and some snippets of good news. Although there's still a long way to go, the playing field that third-party payors tipped so far from level is starting to return to equilibrium.

One down . . .

First we saw the demise of the "most favored nation" clause — a controversial contractual provision that plagued providers across the nation. This clause obligated a provider to inform the payor if he accepted a lower reimbursement rate from any other payor at any time while under contract. Upon notice that the provider was accepting less from another payor, the first payor could demand that its payments be lowered to match the other payor's rates — overriding the reimbursement rates that were originally negotiated.

In the eyecare field, this had the greatest impact on those providers contracted to the national third-party powerhouse, Vision Service Plan (VSP). Forcing this clause into its provider agreements carried enormous significance because VSP has controlled the lion's share of insured, managed vision and eye care in the country.

Finally, after years of protracted discussions and legal hearings, the Department of Justice determined that the most favored nation clause discourages competition. Furthermore, the Justice Department stated that the clause takes away a provider's ability to negotiate confidentially with other payors to craft a deal that they find mutually acceptable.

VSP eventually agreed to drop the clause from all of its provider agreements.

Another 800-pound gorilla

Aetna U.S. Healthcare, another managed care giant, has been among the most aggressive and inflexible in its dealings with physicians. Aetna has often forced physicians into no-win situations by "obligating" them to sign deals containing highly disadvantageous provisions — if the physicians want to participate and have access to any Aetna members.

The company's much-despised "all products" clause is certainly one of the most onerous provisions physicians are likely to face during contract negotiations. It states:

"Company has and retains the right to designate provider as a participating provider or non-participating provider in any specific plan. Company reserves the right to introduce new plans during the course of this agreement. Provider agrees that provider will provide covered services to members of such plans under applicable compensation arrangements determined by the company."

Aetna claims that such provisions are necessary to assure patient care continuity when members switch from one Aetna product to another. Physicians see it as a way to force participation in unprofitable, administratively burdensome plans including, perhaps, risky capitated HMO plans.

Physician advocates have argued that Aetna's "all products" clause (and similar clauses used by other payors) are far too open-ended and leave a physician subject to far greater risk than is reasonable. And they've argued that the whole idea of obligating physicians to accept unknown plans, at an indeterminate time, at to-be-determined reimbursement rates reeks of anti-competitive action. Thankfully, several states have started looking into it.

Another one bites the dust?

Already Nevada's insurance commissioner has ruled that "all products" clauses amount to illegal coercion and violate the state's Unfair Trade Practices Act. North Dakota has also outlawed "all products" clauses. Bills have been introduced, or are pending, in Illinois, Texas, and Rhode Island. And physicians began action last year in Florida and Ohio (as reported in the Orlando Business Journal, July 19, 1999; Managed Care, June 1999; and the Miami Herald, July 15, 1999).

Currently, three more states have passed — or are well on their way to passing — laws that prohibit these clauses.

Kentucky's House and Senate each passed a bill in response to intense pressure from physicians (and patients) who were fed up with the problems caused by Aetna's "all products" clause. In that state, so many physicians dropped Aetna that large numbers of patients were forced to choose new providers or change insurance companies. That, in turn, generated huge numbers of complaints to legislators, and they finally took action. The governor is expected to sign the bill, which will ban "all products" clauses.

Both houses of Virginia's legislature also recently passed a bill. The Virginia law won't ban the clauses, but does guarantee that physicians can pick and choose among products and cannot be forced to accept all plans in order to gain access to certain patients. And Maryland's legislature passed a bill that the governor is expected to sign later this spring.

Lastly, although a bill did not get through its legislature, the Texas attorney general effectively stopped "all products" clauses in a March agreement with Aetna that, among other things, bans Aetna from using such clauses in that state. Many details of the Texas-Aetna agreement are now subject to debate — i.e., is the agreement really anything more than "fluff" and window-dressing? But it seems clear that until this agreement expires in a few years, the "all products" clause should be dead in Texas.

Becoming a force for change

None of this just "happened." The bills that have been passed were the result of a lot of hard work and time spent by eyecare professionals. These bills passed though the various state legislatures because physicians in those states were able to mobilize effectively.

Onerous provisions like this continue because of a payor's market share dominance. (There's no doubt that Aetna would not have dropped "all products" clauses in any state unless they were forced to do so.) If you want to strike these provisions down, you'll have to gain the support of legislators. Change in other states won't come about until — and unless — you demonstrate to your elected representatives that you have strength, purpose and resolve.

Today, more than ever, you need to participate in the political action committees sponsored by your state medical societies, your state ophthalmology associations, the American Society of Cataract and Refractive Surgery and other national organizations. I urge you to do so.

Let's continue to level the playing field against third-party payors.


Gil Weber, consulting editor for Ophthalmology Management, is a nationally recognized author, lecturer and practice management consultant to the managed care and ophthalmic industries. He has served as managed care director for the American Academy of Ophthalmology.

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