PRINTER'S NO. 1099
No. 933 Session of 2007
INTRODUCED BY LENTZ, CALTAGIRONE, COHEN, CREIGHTON, JOSEPHS,
KING, KORTZ, MAHONEY, SANTONI, McILVAINE SMITH, K. SMITH AND
YOUNGBLOOD, MARCH 29, 2007
REFERRED TO COMMITTEE ON INSURANCE, MARCH 29, 2007
AN ACT
1 Regulating contracts between managed care plans and
2 participating providers; and providing for an administrative
3 penalty.
4 TABLE OF CONTENTS
5 Section 1. Short title.
6 Section 2. Declaration of policy.
7 Section 3. Definitions.
8 Section 4. Good faith negotiations.
9 Section 5. Contract standards.
10 Section 6. Determination of eligibility and covered services.
11 Section 7. Health care provider credentialing.
12 Section 8. Health care provider claim submission.
13 Section 9. Reimbursement.
14 Section 10. Administrative policies and procedures.
15 Section 11. Dispute resolution.
16 Section 12. Business lines.
17 Section 13. HIPAA compliance.
18 Section 14. Penalty.
1 Section 15. Rules and regulations.
2 Section 16. Effective date.
3 The General Assembly of the Commonwealth of Pennsylvania
4 hereby enacts as follows:
5 Section 1. Short title.
6 This act shall be known and may be cited as the Managed Care
7 Plan and Participating Provider Contracting Act.
8 Section 2. Declaration of policy.
9 The General Assembly finds and declares as follows:
10 (1) An equitable and understandable contracting
11 environment is essential to the financial stability of this
12 Commonwealth's managed care plans and health care providers
13 and ultimately to the well-being of patients and consumers.
14 (2) Changes in the last decade in this Commonwealth's
15 health care marketplace have resulted in a shifting balance
16 of power, leaving managed care plans with the leverage to
17 drive the contracting process.
18 (3) This act is intended to protect the health and
19 welfare of this Commonwealth's health care consumers by
20 ensuring that managed care plans enter into contracts with
21 physicians and other health care providers that are equitable
22 and reasonable, provide both parties with clearly articulated
23 and well-defined terms and parameters and assure the long-
24 term financial viability of both the plans and providers.
25 (4) The General Assembly declares that this act is a
26 necessary and proper exercise of the authority of the
27 Commonwealth to protect the public health and to regulate the
28 business of insurance and the practice of medicine and other
29 health professions.
30 Section 3. Definitions.
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1 The following words and phrases when used in this act shall
2 have the meanings given to them in this section unless the
3 context clearly indicates otherwise:
4 "Commissioner." The Insurance Commissioner of the
5 Commonwealth.
6 "CPT codes." Current Procedural Terminology codes
7 established by the American Medical Association or the Centers
8 for Medicare and Medicaid Services.
9 "Department." The Insurance Department of the Commonwealth.
10 "Enrollee." A policyholder, subscriber, covered person,
11 covered dependent or spouse or other person who is entitled to
12 receive health care benefits from a managed care plan subject to
13 this act.
14 "Health care provider." A physician or other health care
15 professional who is licensed or certified and regulated by the
16 Commonwealth to provide health care services to health care
17 consumers and who enters into contracts with managed care plans.
18 The term includes a physician, podiatrist, optometrist,
19 psychologist, physical therapist, certified nurse practitioner,
20 registered nurse, nurse midwife, physician assistant,
21 chiropractor, dentist, pharmacist and professional who provides
22 behavioral health services. The term also includes an integrated
23 delivery system in the context of its contractual relations with
24 managed care plans.
25 "Health care service." A covered diagnostic or therapeutic
26 service, surgical procedure, medical supplies, equipment, drugs
27 or biologics, admission to a health care facility or other
28 service, including behavioral health service, that is
29 prescribed, proposed or provided by a health care provider to
30 the enrollee of a managed care plan.
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1 "HIPAA." The Health Insurance Portability and Accountability
2 Act of 1996 (Public Law 104-191, 110 Stat. 1936).
3 "Integrated delivery system" or "IDS." A partnership,
4 association, corporation or other legal entity that:
5 (1) enters into a contractual arrangement with a managed
6 care plan;
7 (2) employs or has contracts with its participating
8 providers;
9 (3) agrees under its arrangements with the managed care
10 plan to provide or arrange for the provision of a defined set
11 of health care services to the plan's enrollees principally
12 through its participating providers; and
13 (4) assumes some responsibility for disease management
14 programs, quality assurance, utilization review,
15 credentialing, provider relations or related functions.
16 "Managed care organization." An entity that operates a
17 managed care plan under any of the following:
18 (1) The act of May 17, 1921 (P.L.682, No.284), known as
19 The Insurance Company Law of 1921, including section 630,
20 relating to preferred provider organizations, and Article
21 XXIV, relating to fraternal benefit societies.
22 (2) The act of December 29, 1972 (P.L.1701, No.364),
23 known as the Health Maintenance Organization Act.
24 (3) 40 Pa.C.S. Ch. 61 (relating to hospital plan
25 corporations).
26 (4) 40 Pa.C.S. Ch. 63 (relating to professional health
27 services plan corporations).
28 The term includes an entity, including a municipality, whether
29 licensed or unlicensed, that contracts with or functions as a
30 managed care plan to provide health care services to enrollees.
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1 "Managed care plan." A health plan that integrates the
2 financing and delivery of health care services to enrollees
3 through contractual agreements with health care providers and
4 may offer financial incentives for enrollees to use certain
5 services within the plan or to use contracted health care
6 providers rather than providers who do not contract with the
7 plan. The term includes a person or organization that contracts
8 with health care providers to render health care services to
9 enrollees of the plan or otherwise act on behalf of the plan,
10 including, but not limited to, a managed care organization that
11 operates the plan and the plan's network administrator. The term
12 does not include an ancillary service plan or an indemnity
13 service plan that is primarily fee for service and does not
14 require prior authorization, mandatory second opinions or does
15 not conduct concurrent or retrospective utilization review.
16 "Managed care plan contract." A written agreement between a
17 health care provider and a managed care plan or network
18 administrator for a managed care plan that establishes the
19 responsibilities and obligations of the parties to each other
20 and to the enrollees of the plan. The term includes all
21 attachments and appendices to the contract and other documents
22 that are referred to in the agreement that may affect the health
23 care provider's ability to make an informed decision and may
24 prompt the provider to seek additional information or
25 clarification from the health plan before entering into the
26 contract. The term does not include an employment contract
27 between a managed care organization or a managed care plan and
28 health care provider.
29 "Network administrator." A person or organization that
30 provides a network of participating health care providers to a
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1 managed care plan. The term includes an integrated delivery
2 system in the context of a contractual relationship between the
3 integrated delivery system and its participating health care
4 providers.
5 "Participating provider." A health care provider that enters
6 into a contract with a managed care plan.
7 Section 4. Good faith negotiations.
8 (a) General rule.--A managed care plan shall negotiate the
9 terms of any contract in good faith with any health care
10 provider.
11 (b) Review period.--A health care provider shall have the
12 right of at least 60 days from receipt to review any managed
13 care plan contract and amendments thereto before execution of
14 the contract or amendments is required and before revisions to
15 an existing contract become effective.
16 (c) Contract documents.--A managed care plan shall:
17 (1) Supply copies of every appendix, attachment or other
18 document referred to in the contract to allow the health care
19 provider to make an informed decision whether to enter into
20 the contract.
21 (2) Send these materials with proposed contracts to
22 health care providers.
23 (3) In the event any materials are missing or a health
24 care provider requests supplementary information, supply the
25 materials within seven business days of the request.
26 (d) Proprietary materials.--No managed care plan may be
27 required to give a health care provider any proprietary
28 materials the disclosure of which would harm the plan's
29 competitive or financial position in the marketplace.
30 (e) Reasonable contract terms.--No managed care plan may
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1 include in any contract terms or conditions to which a
2 reasonable and prudent health care provider would not agree.
3 (f) Required appendices.--Each managed care plan contract
4 shall include appendices that define:
5 (1) The managed care plan's responsibilities under the
6 act of May 17, 1921 (P.L.682, No.284), known as The Insurance
7 Company Law of 1921.
8 (2) Key terms and phrases in the contract.
9 (3) The diagnostic and therapeutic services that the
10 plan commonly authorizes.
11 (4) The prescription drug formularies commonly used by
12 the managed care plan or its pharmacy benefit manager.
13 Section 5. Contract standards.
14 A managed care plan contract shall adhere to the following
15 minimum standards to facilitate review by and negotiation with
16 health care providers:
17 (1) The managed care plan contract shall be in plain
18 English and readily understandable to the average reasonable
19 physician or other health care provider.
20 (2) The managed care plan contract shall explicitly
21 define the managed care plan's responsibilities to the health
22 care provider, the provider's responsibilities to the plan
23 and their joint responsibilities to managed care plan
24 enrollees.
25 (3) The managed care plan contract or its cover
26 materials shall clearly and conspicuously disclose to the
27 health care provider the names, telephone numbers, facsimile
28 numbers and e-mail addresses of managed care plan officials
29 who can supply the materials necessary to answer any
30 questions in order to make an informed decision about whether
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1 to enter into the contract.
2 (4) The managed care plan contract shall include an
3 indemnification clause that commits a participating provider
4 to indemnify the plan in the event of any liability claim and
5 shall clearly state that each party is fully responsible and
6 liable for its own actions.
7 (5) The managed care plan contract shall state that the
8 managed care plan may not use a health care provider's
9 agreement to the contract to represent that provider as a
10 member of any network other than the one committed to in the
11 agreement.
12 (6) The managed care plan contract shall state that the
13 managed care plan may not compel a health care provider to
14 enter into an exclusive contract that precludes the provider
15 from entering into an agreement with other entities.
16 (7) The managed care plan contract shall not exceed one
17 year in duration and may be renewed automatically only if the
18 managed care plan notifies the participating provider of the
19 pending renewal 60 days prior to the renewal date. The
20 managed care plan contract may renew automatically under the
21 same terms and conditions if the health care provider does
22 not respond to the managed care plan's reminder notice within
23 the 60-day period.
24 (8) The managed care plan contract shall include an
25 appeal process for health care providers to seek
26 reconsideration of any decision by the managed care plan to
27 terminate the contract for cause. To ensure appropriate
28 continuity of care for enrollees, the managed care plan
29 contract shall define the obligations of the managed care
30 plan and the health care providers to enrollees after the
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1 termination date of the contract. The managed care plan
2 contract shall notify enrollees of the termination of any
3 contract with a health care provider.
4 Section 6. Determination of eligibility and covered services.
5 (a) General rule.--A managed care plan shall quickly and
6 efficiently determine an enrollee's eligibility for coverage and
7 reimbursement of health care services by the plan.
8 (b) Eligibility information system.--A managed care plan
9 shall provide information systems that allow participating
10 providers to determine an enrollee's eligibility for services
11 that include either a toll-free hotline or a secure Internet
12 website.
13 (c) Erroneous statement of eligibility.--
14 (1) If a managed care plan erroneously informs a
15 participating provider that a person is enrolled and eligible
16 for services when in fact the person is not, the managed care
17 plan shall reimburse the provider for all covered services
18 rendered up to the time that the plan notifies the provider
19 and nonenrolled person of the error.
20 (2) The managed care plan may not bear any financial
21 responsibility for services that the participating provider
22 renders to the nonenrolled person after the date of
23 notification.
24 (3) The health care provider may bill the former
25 nonenrolled person for these services.
26 (d) Medical necessity.--A managed care plan shall adopt and
27 maintain a definition of "medical necessity" as health care
28 services or products that a prudent physician would provide to a
29 patient for the purposes of preventing, diagnosing or treating
30 an illness, injury, disease or its symptoms in a manner that is
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1 in accordance with generally accepted standards of medical
2 practice and clinically appropriate in terms of type, frequency,
3 extent, site and duration.
4 Section 7. Health care provider credentialing.
5 (a) Timing.--
6 (1) A managed care plan shall complete the credentialing
7 of a health care provider or health care facility within 45
8 days or less of receipt of a completed application.
9 (2) The managed care plan shall notify applicants of any
10 discrepancies and omissions in their application and
11 supporting documentation within five business days of receipt
12 of such application and shall expedite consideration of the
13 corrected application upon receipt.
14 (3) The managed care plan may not recredential health
15 care providers more frequently than is consistent with the
16 standards for health plan credentialing of participating
17 physicians established by the National Committee for Quality
18 Assurance.
19 (4) The managed care plan shall complete any
20 recredentialing of a health care provider under contract
21 within 45 days.
22 (b) Claims during credentialing.--
23 (1) A managed care plan shall agree to make retroactive
24 reimbursement for any claims that a participating provider
25 incurs during the credentialing process when the provider is
26 successfully credentialed by the plan.
27 (2) During the credentialing process, health care
28 providers may not submit their claims for health care
29 services provided to enrollees until credentialing is
30 completed.
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1 (3) If the health care provider or health care facility
2 does not successfully complete the credentialing process,
3 neither the managed care plan nor its enrollee bear financial
4 responsibility for any pending claims.
5 Section 8. Health care provider claim submission.
6 (a) Claim form.--
7 (1) A managed care plan contract shall require health
8 care providers to submit claims on the Health Care Financing
9 Administration Form 1500 or its successor, as defined by the
10 Centers for Medicare and Medicaid Services.
11 (2) No managed care plan may require health care
12 providers to submit claims electronically unless the plan
13 offers the appropriate tools and infrastructure to facilitate
14 electronic claims submission.
15 (b) Erroneous payments.--
16 (1) No managed care plan may withhold future
17 reimbursement as a means to recoup payments believed to have
18 been made in error.
19 (2) A managed care plan shall establish, disclose in
20 contracts and include in provider procedure or policy manuals
21 the administrative process by which the plan may challenge
22 and seek to recover potentially erroneous payments to health
23 care providers.
24 (3) A managed care plan shall disclose its intent to
25 challenge a potentially erroneous payment within 180 days of
26 the date of the payment.
27 (4) A managed care plan that seeks to recoup
28 overpayments made to a health care provider shall complete
29 its administrative procedures and allow the provider to
30 complete available appeal procedures within 90 days of the
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1 date it notifies the provider of its intent to seek
2 remuneration.
3 (5) For any amount in excess of $10,000, a managed care
4 plan shall allow the provider to reimburse the plan in
5 installments over not more than three years.
6 (c) Fraud.--Subsections (a) and (b) shall not apply where
7 the managed care plan suspects fraud, illegality or other
8 malfeasance regarding claims submitted and payments made.
9 (d) Claim period.--
10 (1) A managed care plan may compel health care providers
11 to submit claims or encounter data to the plan within not
12 less than 180 days nor more than 360 days from the date of
13 service.
14 (2) The managed care plan and the enrollee shall not be
15 financially responsible for claims that a health care
16 provider does not submit within the claim period.
17 Section 9. Reimbursement.
18 (a) Required disclosures.--A managed care plan contract
19 shall disclose the following information about potential
20 reimbursements:
21 (1) (i) The actuarial assumptions upon which capitated
22 payments to primary health care providers and, if
23 applicable, specialists are calculated and a mechanism
24 for health care providers to challenge or question the
25 assumptions.
26 (ii) For each capitated health care provider, the
27 health plan shall calculate and make its per-member-per-
28 month reimbursement to the provider for any enrollee who
29 selects that provider.
30 (iii) The reimbursement shall be based on the day
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1 that the enrollee enrolls in the plan, selects that
2 provider and the member or employer pays premiums to the
3 health plan.
4 (iv) At no time may a health plan, as part of any
5 capitated agreement with the health care provider, delay
6 per-member-per-month payments to the provider for any
7 enrollee until the enrollee actually begins to utilize
8 health care services.
9 (2) For health care providers who commonly participate
10 with and are paid by Medicare:
11 (i) A statement of how the managed care plan's
12 reimbursement compares to Medicare reimbursement for the
13 health care providers.
14 (ii) A table that contains the ten most commonly
15 submitted evaluation and management current procedural
16 terminology codes, if applicable, and the ten most
17 commonly submitted nonevaluation and management CPT
18 codes, showing Medicare's average reimbursement for that
19 year and the managed care plan's actual reimbursement for
20 those codes, to facilitate a direct comparison.
21 (3) Upon request, the managed care plan shall disclose
22 to a health care provider its range of payments for the 100
23 CPT codes most commonly submitted in the health care
24 provider's field of practice.
25 (b) CPT codes.--
26 (1) A managed care plan shall abide by the CPT codes,
27 modifiers and definitions as established by the American
28 Medical Association or the Centers for Medicare and Medicaid
29 Services.
30 (2) No managed care plan may arbitrarily alter the CPT
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1 code on a submitted claim or bundle multiple CPT codes into
2 one code to reduce reimbursement.
3 Section 10. Administrative policies and procedures.
4 (a) Duty to make available.--Within ten days of execution of
5 a contract with a health care provider, a managed care plan
6 shall make available all of its administrative policy and
7 procedure manuals, including, but not limited to:
8 (1) Coverage policies and technology assessments of
9 specific diagnostic or therapeutic services, drugs or
10 biologics, devices or medical supplies or equipment.
11 (2) Mechanisms for resolving administrative or clinical
12 disputes and opportunities for participating in plan
13 governance by participating providers.
14 (3) Health care provider peer review, quality assurance
15 and credentialing programs.
16 (b) Managed care plan contracts.--A managed care plan
17 contract shall describe the plan's policies and procedures as
18 they relate to the plan's relationship with its health care
19 providers. The managed care plan shall make available to any
20 health care provider considering a contract copies of procedure
21 or policy manuals typically made available to participating
22 providers.
23 Section 11. Dispute resolution.
24 (a) Arbitration.--No managed care plan may compel a health
25 care provider to accept arbitration as the sole or primary means
26 of dispute resolution between the parties. A contract may
27 provide for arbitration as an option for dispute resolution
28 available to the parties only when there is joint consent and
29 the contract describes all of the following:
30 (1) The circumstances in which arbitration is an option.
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1 (2) The procedures to seek an arbitration.
2 (3) The process for selecting a certified arbitrator.
3 (4) How the parties would share the costs of the
4 arbitration.
5 (b) Informal dispute resolution.--
6 (1) A managed care plan and a health care provider may
7 agree to an informal dispute resolution system for the review
8 and resolution of disputes between the managed care plan and
9 health care provider.
10 (2) Disputes that may be handled informally include
11 denials based on procedural errors and administrative denials
12 involving the level or types of health care service provided.
13 (3) The informal dispute resolution system shall be set
14 forth in the managed care plan contract and shall be
15 impartial, include specific and reasonable time frames in
16 which to initiate appeals, receive written information,
17 conduct hearings, render decisions and provide for final
18 review and determination of disputes.
19 (4) An alternative dispute resolution system may not be
20 used for any external grievance filed by an enrollee.
21 Section 12. Business lines.
22 No managed care plan may compel a health care provider to
23 participate in all of the managed care plan's business lines. A
24 managed care plan shall differentiate between its business lines
25 in each contract and give health care providers the opportunity
26 to affirmatively choose or defer participation in any particular
27 business line without penalty.
28 Section 13. HIPAA compliance.
29 A managed care plan contract shall delineate the obligations
30 of each party to comply with the terms of HIPAA and shall state
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1 that the managed care plan and the health care provider are
2 covered entities under the terms of HIPAA and shall comply with
3 HIPAA or any more restrictive law of this Commonwealth.
4 Section 14. Penalty.
5 In addition to any other remedy available at law or in
6 equity, the department may assess an administrative penalty for
7 a violation of this act. The penalty shall not exceed $5,000 per
8 violation.
9 Section 15. Rules and regulations.
10 The department may promulgate rules and regulations to
11 administer and enforce this act.
12 Section 16. Effective date.
13 This act shall take effect in 60 days.
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