"Unforeseen Business Interruptions"

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"Unforeseen Business Interruptions"

When problems compound upon problems, how bad can things get?

by Gil Weber, MBA
Contributing Editor

Reprinted with permission of the publisher.
Skin & Aging, Volume 10 - Issue 10
October 2002 - pages: 48-49


This wire service story from the Sacramento Bee got me to thinking about a problem that few physicians appreciate until it happens to them. Here's what the story reported:

Delta Dental strike continues
By Lisa Rapaport -- Bee Staff Writer
Published 2:15 a.m. PDT Tuesday, July 23, 2002

"More than 1,000 employees of Delta Dental in Sacramento and San Francisco remained off the job for a second work day Monday after rejecting the company's best offer for a new contract. Negotiations are scheduled to resume today.

Michael McLaughlin Jr., business agent for Teamsters Union Local 856, said the strike would continue on a day-to-day basis until a tentative agreement is reached.

Jeff Album, a spokesman for Delta, said managers continued to fill in for striking workers. The strike has shut down a phone line Delta's dentists call to verify patients' benefits, but Album said many routine questions were being handled via the Internet. Claims have not been delayed, he said."

My first thought after reading this was that they've stopped verifying benefits just 1 day into the strike. And although the spokesman states that claims are being processed, how effectively and for how long can a few fill-in managers continue to push claims through the system before things start to deteriorate? A couple of days, perhaps, and then it's likely things will start getting inconvenient for the providers.

Assume that of late, everything has been tolerable with your third-party plans. You see patients, staff sends in claims, and you're paid -- albeit less than you'd like. Things are manageable and your cash flow is steady.

Then everything changes. Payments from one of your top plans suddenly stop. Day after day you try to reach the payer but the phone lines are busy, or the messages you leave on voice mail go unanswered.

Or, perhaps, staff cannot reach anyone at the payer to verify eligibility. Without that information, staff can't schedule office visits or set up surgeries.

A few days later, you learn that for the past week there has been a strike at the payer, and the entire claims or eligibility department was out picketing on the sidewalk. The news is not good; everyone expects an extended work stoppage.

And you're thinking: Great. While they're parading, I have patients angry because we can't confirm appointments, or schedule surgery. And I'm not getting paid!

Between A Rock And A Hard Place

When you're stuck between a rock and a hard place, what, if anything, can you do?

Given that you can't get the information you need (and, perhaps, are contractually obligated to obtain prior to rendering services) should you immediately stop seeing patients from that payer? Or should you schedule patients anyway and collect payment in full, up-front, with the promise that you'll refund the money once eligibility/benefits can be confirmed? Or should you do something else?

Well, you know that your contract specifies that you can't charge an eligible patient for a covered service, yet here you can't confirm that she's eligible. Even if she is, how long will you have to wait for payment -- strikes can go on for weeks or months. As the office phones continue to ring, you wonder if you're still obligated to provide services when there's so much uncertainty.

Unfortunately, the answer in many cases is "yes." And, sadly, you may have put yourself between Scylla and Charybdis when you signed the provider agreement.

Force Majeure

Near the end of many third-party payer agreements is a short paragraph that may seem innocuous when (if?) you read through that document prior to signing. However, this section, sometimes labeled Force Majeure, can turn into a nasty surprise -- one that could cost the practice and frustrate you, your staff, and your patients. Here's a paragraph I pulled from a managed care agreement.

"Force Majeure -- Neither party shall be deemed to be in violation of this Agreement if such party is prevented from performing any of its obligations for any reason beyond its reasonable control including acts of God, acts of any public enemy, floods, strikes, statutory or other laws, regulations, rules, or order from the federal, state, or local government or any agency thereof."

There's nothing hidden here. If either party is prevented from fulfilling its contractual obligations by forces beyond its control, then it does not breach the agreement by failing to perform during that interruption. This means that for the duration of the "situation" the payer is supposed to try but is not obligated to verify eligibility or to pay any of your claims that are in its system, or that you submit during the "situation."

But if a payer was to stop paying your claims or stop verifying eligibility that would be very unfair to you. If it doesn't pay in a timely manner, or can't verify eligibility, or doesn't do something else, you're out of luck for the duration, and you'd likely have no grounds for termination ("non-performance").

Perhaps worst of all, during the time the payer shelters behind Force Majeure you could be obliged to continue seeing patients without timely compensation or without eligibility verification. Why? Because Force Majeure doesn't automatically mean bilateral release from obligations. Just because one party stops performing doesn't mean the adversely affected party can also stop.

Are You Really Stuck? For How Long?

So, if the payer shelters behind Force Majeure, are you really stuck? The answer to that will be controlled by your provider agreement.

Remembering always that you have a fundamental obligation to your patients, ask your attorney to draft language for new contracts (and for amendments to existing ones) that preserves your rights and imposes certain obligations on a payer in the event it seeks temporary release under a Force Majeure provision but you remain available to provide services. It's the payer's responsibility to figure out how to provide the necessary administrative support to accomplish this.

This continued obligation of the payer is very important. For example, if there's a disaster (e.g., flood or earthquake) and people are injured, there will be increased demand for all physician services, including yours. If you suddenly start working extra hard to care for these patients but the payer shelters behind Force Majeure, you could suffer immediate and substantial adverse financial consequences (especially if you're capitated). The collateral damage of Force Majeure will almost certainly hurt you more than it will hurt a payer.

Your attorney can create the necessary protection by inserting a provision into the agreement that states the payer's obligation to reimburse you for covered services remains in effect at all times unless you are unable to provide services. This gives the payer a measure of protection, too. You're not paid if you're not open for business.

Force Majeure is something most physicians never think about until it's too late -- after they've become trapped in a financial quagmire.

Be forewarned; be proactive.


Gil Weber, Skin and Aging's contributing editor, is a nationally recognized author, lecturer and practice management consultant to practitioners and the managed care and ophthalmic industries, and has served as director of managed care for the American Academy of Ophthalmology.

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