Provider Contract Guidelines for MCOs and IPAs

I. Requirement to Obtain Contract Approval

  1. An applicant shall submit for DOH approval drafts of all contracts (and material amendments to such contracts) related to the provision of medical services. This includes contracts between:
    • a managed care organization (MCO) and a provider;
    • an MCO and an independent practice association (IPA), for the IPA to make the services of providers available to the MCO’s enrollees, as described in 10 NYCRR§98-1.2(w);
    • an IPA and providers; and
    • an IPA and another IPA, in accordance with 10 NYCRR § 98-1.5(b)(6)(vii)(e)(1).

    Such contracts and amendments must comply with the requirements of these Guidelines, 10 NYCRR Subpart 98-1, and all other applicable statutes and regulations.

    Contracts between a workers’ compensation preferred provider organization (PPO) and a provider or IPA must also be submitted for Department approval. However, separate guidelines have or will be developed with respect to the submission and approval of such contracts.

  2. A contract or amendment subject to these Guidelines should be for medical services and technical and administrative services (as defined in Section I.D.5 below) only. Arrangements to delegate management functions (as defined in Section I.D.4. below) should be addressed in a separate agreement. Therefore, these Guidelines do NOT apply to contracts:
    • between an MCO and a management contractor; or
    • between an MCO and IPA, for the IPA to perform management functions (see Section I.C. below).
  3. Delgation of Management Functions to an IPA. When an IPA agrees to make the services of a network of providers available to an MCO’s enrollees, the MCO and the IPA enter into an agreement (IPA medical services contract). If the MCO also wishes to delegate management functions to the IPA, the MCO and the IPA must enter into a management contract separate from their IPA medical services contract. These Guidelines set forth requirements applicable to IPA medical services contracts. The requirements for management contracts are dealt with in a different set of guidelines.

    As indicated in the previous paragraph, an IPA medical services contract must not address management functions (as defined in Section I.D.4. below) that the IPA will be furnishing to the MCO. An IPA medical services contract may address related technical and administrative services (as defined in Section I.D.5. below), including provider credentialing, that the IPA will be furnishing to the MCO, as long as those technical and administrative services are not related to delegated management functions.

    Claims adjudication/payment is defined as a management function in 10 NYCRR § 98-1.11(j). Therefore, if claims adjudication/payment is to be delegated to the IPA, it must be addressed in the management contract, and not in the IPA medical services contract.

  4. As used in these Guidelines:
    1. "MCO" includes:
      • traditional health maintenance organizations certified pursuant to Public Health Law (PHL) § 4403;
      • special purpose MCOs, also known as prepaid health services plans (PHSPs), certified pursuant to PHL § 4403-a;
      • HIV Special Needs Plans (HIV SNPs) certified pursuant to PHL § 4403-e; and
      • managed long term care plans certified pursuant to PHL § 4403-f.
    2. "IPA" includes, in addition to independent practice associations, a pharmacy or laboratory with the legal authority to contract with other pharmacies or laboratories to arrange for or provide services to enrollees of a New York State MCO.
    3. "Material amendments" include but are not limited to:
      • any change to a required contract provision;
      • any change to or addition of a risk sharing arrangement other than the routine trending of fees or other reimbursement amounts;
      • the addition of an exclusivity, most favored nation, or non-compete clause;
      • any proposed subcontracting of the existing contractual obligations of an IPA;
      • any proposed subcontracting of the statutory or regulatory responsibilities of an MCO; and
      • any proposed revocation of an approved subcontract.

      Authority: 10 NYCRR § 98-1.2(aa).

    4. "Management functions" are elements of an MCO governing body’s management authority. Some management functions, listed in 10 NYCRR § 98-1.11(i), must not be delegated by an MCO to another person or entity. Other management functions, listed in 10 NYCRR § 98-1.11(j), may be delegated to another person or entity, but only pursuant to a management contract approved by DOH.
    5. "Technical and administrative services" refers to any functions (other than medical services) that an MCO is not prohibited from delegating by 10 NYCRR § 98-1.11(i), and that are not functions listed in 10 NYCRR § 98-1.11(j) requiring DOH approval of a management contract. Administrative services include administrative expenses provided through the contract that the MCO would otherwise have reported on the MCO’s own cost report. They do not include administrative expenses incurred by an IPA or provider in the course of performing the IPA or provider's business.
    6. The revisions to the Guidelines issued January 1, 2007 and contained herein apply to new contracts, template contracts with new providers, and amendments to existing approved contracts submitted to the New York State Department of Health (DOH) for review on or after January 1, 2007. They shall not apply to previously approved contracts and approved amendments in effect as of January 1, 2007, or contracts and amendments submitted to DOH for review and approval and received by close of business December 31, 2006.

      Existing contracts approved before January 1, 2007, and contracts and amendments submitted by close of business December 31, 2006 and subsequently approved by DOH, should be revised to conform to the provisions of these Guidelines no later than the following, whichever occurs first:

      1. the next material change to the contract;
      2. the next renewal of the contract;
      3. the deadline specified by DOH as a condition of approving an MCO change of control, acquisition, merger, expansion, or the like; or
      4. for all contracts other than hospital contracts, December 31, 2008.

      Contract amendments to conform to these Guidelines do not have to be submitted for DOH review and approval if the only changes to the contract are: (a) the substitution of the January 1, 2007 Standard Clauses Appendix for the previous version; and (b) the addition or amendment, as necessary, of language to provide that in the case of inconsistencies between the Standard Clauses Appendix and other provisions of the contract, the Standard Clauses shall control, except to the extent that applicable law requires otherwise.

      Authority for Department of Health review of provider contracts: PHL § 4402(2)(a), 10 NYCRR §§ 98-1.5(b)(6), 98-1.7(b)(2), 98-1.8(b), 98-1.13(a), 98-1.18(a), (b).

II. Contract Review Process

  1. Submission Requirements. DOH review will commence upon receipt of ALL of the following:
    1. One (1) electronic copy of each contract or material amendment submitted for approval, in a standard searchable PDF format on a closed session CD-R (not CD-RW), with copy/read permissions, that meets the following requirements:
      • the Standard Clauses Appendix (Attachment 1), without modification, must be attached to the contract (not required for material amendments) and the provisions of such Appendix must be expressly incorporated by reference in the contract;
      • each contract or contract amendment must be for medical services and technical and administrative services only (see Section I.B. above);
      • each contract or contract amendment must have an MCO-assigned unique identifier made up of any combination of letters and numbers; a new unique identifier must be assigned whenever the contract or amendment is modified;
      • each contract or contract amendment must be dated, and all amendments must reference the date of the originally approved contract;
      • all new and amended language shall be underlined and all deleted language bracketed, or otherwise highlighted (e.g. a redlined version) for ease of review;
      • a contract between an MCO and IPA must be submitted together with all related contracts between the IPA and providers; contracts between an IPA and an IPA must be submitted together with all related MCO/IPA and IPA/participating provider contracts; in the case of material amendments to approved contracts, only the specific contracts being amended must be submitted for review.
    2. A completed DOH-4255, "Contract Statement and Certification" (Attachment 2) for each contract or material amendment, bearing the same MCO-assigned unique identifier as the submitted contract or amendment. In all cases, the certification must be signed by an officer of the MCO or the MCO’s legal counsel.
    3. All required supporting documentation as described in these Guidelines and on the DOH-4255

    This material should be submitted: (a) if the MCO is a managed long term care plan, to DOH’s Bureau of Continuing Care Initiatives, Empire State Plaza, Corning Tower Building, 20th Floor, Albany, New York 12237; or (b) for all other MCOs, to DOH’s Bureau of Managed Care Certification and Surveillance, Empire State Plaza, Corning Tower Building, 19th Floor, Albany, New York 12237. Incomplete submissions will not be accepted for review.

    If at any time during the review process, modifications are made to the submitted contract or contract amendment that render inaccurate any statements made in the "Contract Statement and Certification" (DOH-4255), the MCO must submit a new, corrected, and signed DOH-4255.

    After DOH approval is received, the MCO must submit an electronic copy of the executed contract or contract amendment in a standard searchable PDF format on a closed session CD-R (not CD-RW), with copy/read permissions. The signature page demonstrating execution of the contract or contract amendment may be a scanned electronic image included in the electronic submission, or submitted as a hard copy with the CD-R. If a material amendment is made to a contract that permits amendment by notice to a provider, then an electronic copy of the notice sent to providers to implement the amendment must be sent to DOH to fulfill this requirement.

  2. 30 Day Review:

    Contracts and material amendments will be reviewed within 30 days of receipt of a complete submission if:

    1. there are no risk arrangements, or the payment arrangement is fee-for-service with withholds or bonuses less than 25% of payments, or all risk arrangements fall under State Insurance Department (SID) Regulation 164, or the risk transferred is for a single, directly-provided service (except inpatient hospitalization), for which the provider accepts all medical risk (see risk levels one and two in section VI.B. below); and
    2. the DOH-4255 certification is signed, dated and notarized; and
    3. the contract expressly provides that the parties agree to incorporate all modifications required by DOH for approval, or to terminate the contract if so directed by DOH.
  3. 90 Day Review:

    Contracts and material amendments will be reviewed within 90 days of receipt of a complete submission if:

    1. there are risk arrangements that do not meet the requirements of the 30 day process in B.1 above (see risk levels 3, 4, and 5 in section VI.B. below); and
    2. all information and supporting documentation required, as described in the Financial Review of MCO Contracts section of these guidelines (see section VI. below), is included (including the contractor‚s or guaranteeing parent‚s most recent certified audited financial statements and proof of financial security deposit, if required); and
    3. the DOH-4255 certification is signed, dated and notarized; and the contract expressly provides that the parties agree to incorporate all modifications required by DOH for approval, or to terminate the contract if so directed by DOH.
  4. Contract templates
    1. MCO/provider. DOH will approve template provider contracts (or amendments to such contracts) that: (a) conform to the requirements of these guidelines; and (b) involve only a Level 1 or Level 2 risk arrangement, and/or fall under Regulation 164, as described in section VI.B of these guidelines. An approved template contract may be executed with multiple providers without separate DOH approval unless material revisions are included in the individual contract with the provider. Notwithstanding DOH approval of a template agreement, MCOs must still obtain separate SID approval of each specific provider agreement if so required under Regulation 164.

      DOH must issue separate prior approval for each specific provider contract involving Level 3, Level 4, or Level 5 risk arrangements, as described in section VI.B of these guidelines.

    2. MCO/IPA. DOH will approve template MCO/IPA contracts (or amendments to such contracts) that conform to the requirements of these guidelines. However, upon execution of an MCO/IPA contract and prior to implementation, the executed contract must be submitted to DOH, along with the IPA/participating provider contract, to ensure that the entity with which the MCO is contracting is an approved IPA and to review the financial arrangements, if applicable.
    3. IPA/IPA. DOH will approve template IPA/IPA contracts (or amendments to such contracts) that conform to the requirements of these guidelines. However, upon execution of an IPA/IPA contract and prior to implementation, the executed contract must be submitted to DOH, along with the MCO/IPA and IPA/participating provider contracts, to ensure that the entities are approved IPAs and to review the financial arrangements, if applicable.
    1. If, after submission of a contract for both State Insurance Department (SID) and DOH review, SID determines that the risk arrangement does not fall under Regulation 164, the plan should prepare a revised contract statement and resubmit the contract for DOH review. If DOH issues comments requesting revisions to the agreement, and the MCO fails to satisfactorily respond within the timeframe specified by DOH, DOH will disapprove the agreement and require the MCO, if it wishes to pursue the contract, to restart the review process by sending a new submission of the agreement to DOH. The new submission must address any outstanding comments. DOH will consider extenuating circumstances before terminating its review of the agreement.
    2. If at any time after DOH approval, a contract originally certified on the DOH-4255 as falling under Regulation 164 but exempt from filing for SID approval of the risk arrangements, loses its exempt status, that is, the 12 month medical payments are expected to exceed threshold amounts, the MCO is responsible for seeking SID approval of the agreement and notifying DOH in writing of the change in status and the application for SID approval.

III. Date of Contract Implementation

  1. Any contract or amendment that does not satisfy the requirements of Section II above may not be implemented without the prior written approval of DOH.
  2. The parties may implement a contract or a material change when 30 or 90 days, as applicable, have elapsed after receipt by DOH of an application that meets the requirements of Section II above, including but not limited to: expressly incorporating by reference in the agreement the terms of the Standard Clauses Appendix; submitting a signed DOH-4255; and submitting all required financial documentation and other supporting documentation. Such implementation is subject to DOH final approval and to making any modifications required by DOH.

    A contract or material amendment that is implemented after 30 or 90 days, as applicable, but prior to final approval by DOH, shall contain express provisions whereby the parties agree that the contract or material amendment is subject to final DOH approval, that the parties will make any modifications to the contract or material amendment required by DOH, and that the parties will terminate the contract or material amendment if so directed by DOH.

  3. Contracts and material amendments cannot be implemented prior to the 30th or 90th day, unless DOH (and, if applicable, SID) has completed its review and issued written approval.
  4. Contracts between an MCO and IPA may not be implemented in accordance with the requirements of this Section unless all related contracts between the IPA and providers meet the same requirements.
  5. Under no circumstance may the applicant implement a contract or material amendment if:
    1. DOH, by written notice, has expressly withheld permission for the parties to proceed pending further review of the contract, or DOH has issued a written disapproval of the contract or material amendment; OR
    2. SID approval under Regulation 164 is required, and SID has not issued a written approval or has issued a written disapproval of the contract or material amendment.
    1. DOH will routinely select a sample of approved contracts and contract amendments submitted from all MCOs for full verification of consistency with applicable laws, regulations, guidelines, and the submitted "Contract Statement and Certification" (DOH-4255).
    2. Notwithstanding the issuance by DOH of a final written approval of a contract or material amendment, DOH may require the parties to make modifications to the contract or take other corrective action if DOH subsequently discovers, through verification review or by any other means, that, contrary to representations made by the MCO, including the Contract Statement and Certification (DOH-4255), the contract contains provisions which are inconsistent with such representations and/or which are not in conformance with applicable laws, regulations, or Guideline provisions. An MCO’s failure to make required modifications to the contract or to take other corrective action, as directed by DOH, may result in enforcement action in appropriate circumstances.

IV. General Contracting Requirements and Prohibitions

Contracts must be between the MCO and the provider, or the MCO and an IPA. It is not acceptable for provider contracts to be between the provider or IPA and the MCO's parent or subsidiary corporation, or between a provider and an MCO's management contractor.

An MCO may contract with its parent, or a sister or subsidiary entity or other entity licensed or certified in another state, in order to make available (i) services and (ii) the benefit of discounted rates for its enrollees traveling out-of-state. An MCO may contract with a sister or subsidiary MCO or other MCO operating within New York to make available services and discounted rates to its enrollees incidentally when traveling within New York but outside of the MCO's New York service area. An MCO may contract with purveyors of pharmaceutical supplies to purchase such supplies at discounted rates, and with entities performing laboratory testing to obtain discounted rates, provided that arrangements with providers of such services to New York enrollees comply with federal fraud and abuse requirements and New York law.

The prohibition against the unauthorized corporate practice of medicine precludes any corporation or unlicensed entity from providing or arranging to provide professional services unless licensed or otherwise authorized in statute or regulation. In light of this, an MCO may only contract with licensed providers, professional corporations, professional services limited liability companies or partnerships, limited liability companies or corporations legally licensed, registered or certified to provide the contracted for services, or IPAs. An MCO may not contract for health care services with any other entity that arranges to provide professional services through a contracted provider network.

V. Mandatory Contract Provisions

  1. Generally. This section lists provisions that must be included or addressed in contracts between providers and the MCO, or providers and an IPA. In addition, a contract between an MCO and an IPA, or between an IPA and an IPA, must require these provisions to be included in IPA contracts with providers.

    Many of these required provisions are included within the Standard Clauses Appendix that must be attached to and incorporated into the contract. If a required provision is addressed in the Standard Clauses Appendix, it does not need to be duplicated in the main body of the contract. No amendments or revisions to the Standard Clauses Appendix will be approved. In the list below, required provisions that are addressed in the Standard Clauses Appendix are indicated by a parenthetical reference to the location of the provision within such Appendix.

    1. The contract must include a provision stating that it is the only agreement between the parties regarding the arrangement established therein. (SC § B.1)
    2. If a contract is to be implemented prior to DOH approval, as discussed in Section III.B above, it must include a provision to the effect that any changes to the contract required by DOH will be made by the parties and that the parties agree to terminate the contract at the direction of the Department effective 60 days subsequent to notice, subject to PHL § 4403(6)(e).(SC § B.1)
    3. The contract must include a provision whereby the parties agree to be bound by the Standard Clauses attached to and incorporated into the agreement. The parties must further agree that to the extent there are any inconsistencies between the other provisions of the agreement and the Standard Clauses, the Standard Clauses shall control, except to the extent applicable law requires otherwise and/or to the extent the parties to the contract have voluntarily agreed to provisions that exceed the minimum requirements of the Standard Clauses. The following is a sample of an acceptable incorporation by reference provision:

      "New York State Department of Health Standard Clauses for Managed Care Provider/IPA Contracts," attached to this Agreement as Appendix, are expressly incorporated into this Agreement and are binding upon the parties to this Agreement. In the event of any inconsistent or contrary language between the Standard Clauses and any other part of this Agreement, including but not limited to appendices, amendments and exhibits, the parties agree that the provisions of the Standard Clauses shall prevail, except to the extent applicable law requires otherwise and/or to the extent a provision of this Agreement exceeds the minimum requirements of the Standard Clauses.

    4. The contract must include enrollee non-liability language that prohibits providers from billing enrollees, the New York State Department of Health, or the City of New York, for services covered by the MCO. (SC § C.1)

      Authority: Insurance Law § 4307(d); PHL § 4403(1)(c); 10 NYCRR §§ 98- 1.5(b)(6)(ii), 98-1.6(c), 98-1.13(i), 98-1.18(b).

      1. The contract must include a provision that requires providers to make enrollee medical records and other personally identifiable information available to the MCO and to the IPA (if applicable), with appropriate consent/authorization, for purposes including preauthorization, concurrent review,quality assurance, and payment processing; and to the NYSDOH, at no expense to the State, for management audits, financial audits, program monitoring and evaluation, licensure or certification of facilities or individuals and as otherwise required by State law. This provision shall include an express acknowledgment by the provider or, if applicable, an IPA, that it shall also provide to the MCO and to the State (at no expense to the State), on request, all financial data and reports, and information concerning the appropriateness and quality of services provided, to the extent authorized by law. These provisions shall by express statement in the contract survive termination of the contract for any reason. (SC § D.1)

        Authority: 10 NYCRR §§ 98-1.13(l), 98-1.18(b); PHL 4404(1); HIPAA and 45 CFR §§ 164.502(a)(1)(iii); 164.512(a), (d). See also 45 CFR § 164.506(b).

        See also paragraph 26(e) below with respect to Medicaid and Family Health Plus records access.

      2. The contract must include a provision whereby the MCO and the provider agree that the MCO will obtain consent directly from enrollees at the time of enrollment or at the earliest opportunity, or that the provider will obtain consent from enrollees at the time service is rendered or at the earliest opportunity, for disclosure of medical records to the MCO, to an IPA or to third parties. If the Agreement is between an MCO and an IPA, or between an IPA and an IPA, the IPA agrees to require the providers with which it contracts to agree as provided above. If the agreement is between an IPA and a provider, the provider agrees to obtain consent from the enrollee if the enrollee has not previously signed a consent for disclosure of medical records. (SC § D.4)

        Please note that under existing law, an adult is without legal authority to consent to the release of medical records of another adult.

    5. In primary care practitioner contracts, there must be a provision for 24-hour coverage and back-up coverage when the participating physician is unavailable. Twenty-four (24) hour back-up call service is acceptable provided appropriate personnel receive and respond to calls in a manner consistent with the scope of their practice. (SC § B.6)

      Authority: 10 NYCRR §§ 98-1.6(f), 98-1.13(d), (h), 98-1.18(b).

    6. The contract must include clear provisions on the reimbursement of providers, including fees for each service or risk arrangements. The contract must prescribe:
      1. the method by which payments to a provider, including any prospective or retrospective adjustments thereto, shall be calculated;
      2. the time periods within which such calculations will be completed, the dates upon which any such payments and adjustments shall be determined to be due, and the dates upon which any such payments and adjustments will be made;
      3. the records or information which the MCO will rely upon to calculate payments and adjustments; and
      4. the dispute resolution procedures.

      See Section VI below for additional financial requirements.

      NOTE: If a contract is to be amended, the revised contract must specify the calendar date on which any proposed change to a payment rate will take effect, without regard or reference to the date the contract amendment is fully executed.

      NOTE: DOH approval of a contract or amendment is based upon provider solvency and related financial standards and does not constitute an affirmation as to the reasonableness of the payments agreed to by the parties in the contract or amendment. Approval of a contract or amendment by DOH does not guarantee that the level of reimbursement in the contract or amendment will be recognized in premium rates paid to the MCO by New York State for participation in and services provided under any government sponsored managed care or health insurance program.

      Authority: PHL §§ 4403(1)(c), (e), 4403-a(3), 4406-c(5-a); 10 NYCRR §§ 98-1.5(b)(6)(i), 98-1.6(b), 98-1.11(d).

    7. MCOs may not impose deductibles. Copayments and coinsurance are the only allowable enrollee cost-sharing mechanisms. Contracts should not reference deductibles. The exception is that an MCO may impose deductibles pursuant to: (a) a point of service (POS) contract; or (b) to the extent permitted by DOH and SID, a High Deductible Health Plan (HDHP) combined with a health savings account (HSA). Use of the term "deductible" may be made in these contexts, or the contract may refer to "permitted deductibles", defined as a deductible associated with a POS contract or approved HDHP.

      Authority: 10 NYCRR § 98-1.6(f) requires the availability and accessibility of health care services to enrollees. The department interprets that regulation as prohibiting the imposition of front-end deductibles since they impede access to care.

    8. The contract must include a provision stating that any material amendment to the contract requires prior approval of the Department of Health, and shall be submitted for approval at least 30 days, or at least 90 days if there are risk arrangements that do not meet the 30 day criteria, in advance of anticipated execution. (SC § B.2)

      Authority: 10 NYCRR §§ 98-1.5(b)(6)(iv), 98-1.18.

    9. The contract must include provisions that are not inconsistent with the following:
      1. Assignment of an agreement between a MCO and an IPA, institutional network provider, or medical group provider that serves five percent or more of the enrolled population in a county, or the assignment of an agreement between an IPA and an institutional provider or medical group provider that serves five percent or more of the enrolled population in a county, requires the prior approval of the Commissioner. (SC § B.3)

        Contracts between a hospital (as defined in PHL § 2801) and licensed practitioners, professional corporations or professional services limited liability companies do not require DOH approval; however such contracts should include provisions necessary to permit the hospital to meet its contractual obligations to the MCO or IPA.

      2. Termination or non-renewal of an agreement between a MCO and an IPA, institutional network provider, or medical group provider that serves five percent or more of the enrolled population in a county, or the termination or non-renewal of an agreement between an IPA and an institutional provider or medical group provider that serves five percent or more of the enrolled population in a county, requires notice to the Commissioner. Notice to the Commissioner is also required if the termination or non-renewal of a medical group provider contract will leave fewer than two participating providers of that type within the county. Unless otherwise provided by statute or regulation, the effective date of termination should not be less than 45 days after receipt by the Commissioner of notice by either party, provided, however, that termination by an MCO may be effected on less than 45 days notice when it can be demonstrated to the department prior to termination that, e.g., a hospital has lost JCAHO accreditation or malpractice insurance coverage, or other circumstances have arisen which justify or require immediate termination. Notice to the Commissioner must include an impact analysis of the termination or non-renewal on enrollee access to care. (SC § E.1)

      NOTE: PHL § 4406-d prohibits termination of a health care professional contract by an MCO or IPA without notice and the opportunity for a hearing, subject to certain exceptions; non-renewal is permitted on 60 days notice and shall not be considered a termination under § 4406-d. (SC § E.2)

      Authority: PHL § 4406-d(2)(f), 4406-d(3); 10 NYCRR §§ 98-1.8(b), 98-1.13(c), 98-1.18(a), (b).

    10. In a contract providing for arbitration or mediation of disputes, there must be a provision expressly acknowledging that the Commissioner of the Department of Health is not bound by arbitration or mediation decisions. Arbitration or mediation shall occur within New York State, and the contract shall provide that the Commissioner will be given notice of all issues going to arbitration or mediation, and copies of all decisions.(SC § F.1)
    11. The contract must include a provision ensuring the retention of enrollee medical records generally for a period of six (6) years after the date of service, and in the case of a minor, for three (3) years after majority or six (6) years after the date of service, whichever is later. (SC § D.3)

      Authority: 10 NYCRR §§ 98-1.12(n), 98-1.18(b).

    12. The contract must include a continuation of treatment clause whereby the provider agrees that in the event of MCO or IPA insolvency or termination of the contract for any reason, the provider shall continue, until medically appropriate discharge or transfer, or completion of a course of treatment, whichever occurs first, to provide services pursuant to the subscriber contract, Medicaid Managed Care contract or Family Health Plus contract, to an enrollee confined in an inpatient facility, provided the confinement or course of treatment was commenced during the paid premium period. Such provision shall by express statement survive termination of the agreement. (SC § E.4)

      Contractors may also include express provisions addressing the ninety day transitional care available to enrollees involved in an ongoing course of treatment at the time his/her provider's disaffiliation with the plan at the enrollee's option or, as to an enrollee who has entered the second trimester of pregnancy on the effective date of termination, through the delivery of post-partum care directly related to the delivery pursuant to PHL § 4403(6)(e). Addressing this enrollee option in provider contracts will help ensure provider awareness of these provisions.

      Authority: PHL § 4403(6)(e); 10 NYCRR §§ 98-1.6(f), 98-1.13(a), 98-1.18(a), (b). (See also paragraph 25(b) below).

    13. Contracts between MCOs and IPAs may provide for automatic assignment of the IPA's provider contracts to the MCO in the event of termination of the MCO/IPA contract; the IPA‚s contracts with providers should also contain this provision. In the alternative, the MCO/IPA contract and the IPA's provider contracts shall provide that in the event of termination of the MCO/IPA contract, the provider agrees to continue to provide care to the MCO’s enrollees pursuant to the terms of the MCO/IPA provider agreement for 180 days following the effective date of termination, or until such time as the MCO makes other arrangements, whichever first occurs. Such provisions shall by express provision survive termination of the MCO/IPA contract. (SC § E.3)

      Authority: PHL §§ 4403(1), (5), (6), 4404.

    14. Coordination of Benefits (COB) monies generally become property of the MCO. Providers may participate in collection of COB on behalf of the MCO, with COB collectibles accruing to the MCO. Pursuant to contract, COB may accrue to providers. However, with respect to enrollees eligible for medical assistance, or participating in Child Health Plus or Family Health Plus, providers must maintain and make available to the MCO records reflecting COB proceeds collected by the provider or paid directly to enrollees by third party payers, and amounts thereof, and the MCO shall maintain or have immediate access to records concerning collection of COB proceeds. (SC § C.2)

      MCOs are subject to audits under the Medicaid, Child Health Plus and Family Health Plus programs, including audits which can be conducted without notice by the Office of the State Comptroller for COB collected for enrollees in these government programs, and therefore must have records concerning collection of COB proceeds available.

    15. An MCO or IPA may not transfer liability for its own acts or omissions to a provider, by indemnification or otherwise. (SC § B.7) (See also paragraph 25(e) below)

      Authority: PHL § 4406-c(5), 10 NYCRR § 98 1.18(a), (b).

    16. A contract between an MCO and an IPA for the IPA to make the services of providers available to the MCO’s enrollees should not address any utilization review activities to be conducted by the IPA. An IPA may only perform utilization review activities for an MCO if: (a) the MCO has delegated this function to the IPA in a separate management contract approved by DOH; and (b) the IPA has registered as a utilization review agent in accordance with the requirements of Article 49 of the PHL. (SC § G.1)

      Authority: 10 NYCRR §§ 98-1.5(b)(6)(vii), 98-1.11(j)(7), 98-1.18 and PHL Article 49.

    17. In provider contracts, there must be a provision indicating that the provider shall comply fully and abide by the rules, policies and procedures that the MCO (a) has established or will establish to meet general or specific obligations placed on the MCO by statute, regulation, or DOH or SID guidelines or policies and (b) has provided to the provider at least thirty (30) days in advance of implementation, including but not limited to:
      • quality improvement/management;
      • utilization management, including but not limited to precertification procedures, referral process or protocols, and reporting of clinical encounter data;
      • member grievances; and
      • provider credentialing. (SC § B.4)

      Authority: 10 NYCRR §§ 98-1.12, 98-1.14, PHL §§ 4402, 4403.

    18. In provider contracts, there must be a provision indicating that the provider will not discriminate against the enrollee based on color, race, creed, age, gender, sexual orientation, disability, place of origin, source of payment or type of illness or condition. (SC § B.5)

      Authority: The Constitutions of the United States and of New York State; applicable state and federal statutes.

    19. Contracts must provide for compliance with the Federal Americans with Disabilities Act (ADA). (SC § B.10)
    20. In provider contracts, there must be a provision requiring the provider to agree to comply with the HIV confidentiality requirements of Article 27-F of the Public Health Law. (SC § B.11).

      Authority: 10 NYCRR § 98 1.13(m).

    21. "Exclusivity" clauses, whereby a provider must agree not to contract with any other MCO or IPA, while not per se illegal under the anti-trust laws, are not viewed favorably by DOH as they may limit access and provider choice by enrollees.
    22. "Exclusion" clauses, whereby a provider must agree not to accept enrollees of one or more specified MCOs, are not viewed favorably by DOH as they may limit access and provider choice by enrollees.
    23. "Most Favored Nation" clauses, whereby, for example, a plan may unilaterally reduce a negotiated rate to a provider where the provider negotiates a more favorable rate with a competing plan, while not per se illegal under the anti-trust laws, have been actively discouraged by DOH.
    24. The contract must include a provision whereby the parties agree to comply with the requirements of the Managed Care Reform Act of 1996 (Chapter 705 of the Laws of 1996) and Chapter 551 of the Laws of 2006, and all amendments thereto. (SC § B.8) In addition, at the option of the parties, contracts may expressly address specific provisions of these chapter laws, such as:
      1. Sections 4403(6) and 4408(1)(m) and (n) of the PHL require plans to establish procedures for enrollees who meet certain criteria to access certain specialist care.
      2. Section 4403(6)(e) of the PHL requires that plans allow for a period of "transitional care", for enrollees who meet certain criteria, from health care providers who will no longer be members of the plan network, provided that the providers agree to certain terms under which they will provide such care.
      3. Section 4406-c of the PHL provides that a health care provider shall not be prohibited from engaging in certain patient advocacy activities. PHL § 4406-c applies to IPA's as well as to MCO's.
      4. Section 4406-d of the PHL requires an MCO to complete its review of a health care provider‚s application to be credentialed and participate in the in-network portion of the MCO’s network within 90 days. In addition, Section 4406-d affords certain protections to health care providers with respect to termination of their contracts (with certain exceptions), including notice and the right to a hearing.
      5. Section 4406-c(5) of the PHL provides that the plan may not transfer liability for any act or omission by the plan to the health care provider except when the provider is a medical group. The intent of this provision was to recognize the joint and several liability of individual members of a medical group for the acts or omissions of the group or any member thereof. A plan may not transfer liability for its own acts or omissions to a medical group; it may, however, contractually impose or ascribe liability for the acts or omissions of an individual member of a medical group to another member of the group, or all members of the group.
      6. Section 4408-a sets forth requirements for plan grievance procedures for issues other than determinations of medical necessity, which are governed by PHL Article 49.
      7. Section 4410(4) of the PHL requires that the New York State Commissioner of Health have access to patient specific information maintained by a plan for purposes of quality assurance and oversight.
      8. Article 49 of the PHL provides detailed standards for utilization review activities performed either by the plans themselves or by registered independent utilization review agents that contract with plans to provide these functions and external appeals.
      9. Section 4900(3) of the PHL provides a standard definition for the term "emergency condition."
      10. Section 3224-b(a) of the Insurance Law requires an MCO to accept and initiate the processing of all claims submitted by physicians that conform to the American Medical Association‚s Current Procedural Technology (CPT) codes, reporting guidelines and conventions, or to the Centers for Medicare and Medicaid Services’ Healthcare Common Procedure Coding System (HCPCS).
      11. Section 3224-b(b) of the Insurance Law prohibits an MCO from initiating overpayment recovery efforts more than 24 months after the original payment was received by a physician, with certain exceptions. In addition, other than recoveries of duplicate payments, an MCO must provide a physician with written notice 30 days prior to engaging in overpayment recovery efforts. Such notice must state the patient name, service date, payment amount, proposed adjustment, and a reasonably specific explanation of the proposed adjustment.
    25. For MCOs that enroll individuals covered by the Medicaid and/or Family Health Plus programs, the contract must include a provision incorporating into the agreement the pertinent MCO obligations under the terms of the Medicaid managed care contract between the Plan and DOH (or between the Plan and New York City) and/or the Family Health Plus contract between the Plan and DOH. (SC § B.9)

      In addition, provider and IPA agreements must contain all provisions specifically required to be present by the Medicaid managed care/Family Health Plus contracts and applicable laws. These currently include:

      1. Provisions specifying that the MCO will monitor the performance of IPAs and providers with which it contracts, and that the MCO will terminate such a contract, and/or impose other sanctions, if the IPA‚s or the provider‚s performance does not satisfy standards set forth in the Medicaid managed care and/or Family Health Plus contract. (SC § B.9.a)
      2. A provision whereby: (i) the IPA or the provider agrees that the work it performs under the contract with the MCO will conform to the terms of the Medicaid managed care contract between the Plan and DOH (or New York City) and/or the Family Health Plus contract between the Plan and DOH; and (ii) if the IPA‚s or the provider‚s performance under the contract with the MCO does not satisfy standards set forth in the Medicaid managed care and/or Family Health Plus contract, the IPA or the provider agrees to take corrective action. (SC § B.9.b)
      3. A provision whereby the IPA or the provider agrees to be bound by the confidentiality requirements set forth in the Medicaid managed care and/or Family Health Plus contract. (SC § B.9.c)
      4. A provision whereby the MCO and the Provider or IPA agree that a woman‚s enrollment in the MCO’s Medicaid managed care or Family Health Plus product is sufficient to provide services to her newborn, unless the newborn is excluded from enrollment in Medicaid managed care or the MCO does not offer a Medicaid managed care product in the mother‚s county of fiscal responsibility. (SC § B.9.d)
      5. If a contract provides for a Physician Incentive Plan, compliance with applicable CMS regulations is required. This compliance is separate from the actual approval of the risk transfer arrangement. The contract must include a provision whereby the parties agree to comply with the requirements of 42 CFR § 438.6(h), 42 CFR § 422.208, and 42 CFR § 422.210, and to incorporate such requirements into any agreements between the contracting entity (provider, IPA, hospital, etc.) and other persons/entities for the provision of services under the contract. (SC § C.3)
      6. A provision for access by the Centers for Medicare and Medicaid Services (CMS) to providers’ enrollee medical records, encounter data and financial information. (SC § D.2)
      7. The MCO must include in its contracts with providers and IPAs the provisions in the Medicaid managed care/Family Health Plus contract prohibiting the use of Federal funds for lobbying, including requiring the provider or IPA, in the case of contracts that exceed $100,000, to make all required certifications and disclosures.
  2. Risk sharing requirements.
    1. For a contract involving Level 3, 4, or 5 risk arrangements, as described in section VI.B. of these guidelines, the contract must:
      1. provide for the MCO’s ongoing monitoring of provider financial capacity and/or periodic provider financial reporting to the MCO to support the transfer of risk to the provider, and include a provision to address circumstances where the provider‚s financial condition indicates an inability to continue accepting such risk; and
      2. address MCO monitoring of the financial security deposit, describing the method and frequency of monitoring and recourse for correcting under funding of the deposit to be maintained by the MCO.
    2. For any contract involving an MCO sharing risk with an IPA, the contract must include provisions whereby:
      1. the parties expressly agree to amend or terminate the contract at the direction of DOH;
      2. the IPA will submit both quarterly and annual financial statements to the MCO, and the MCO will notify DOH of any substantial change in the financial condition of the IPA; and
      3. the parties agree that all provider contracts will contain a provision prohibiting providers, in the event of a default by the IPA, from demanding payment from the MCO for any covered services rendered to the MCO’s enrollees for which payment was made by the MCO to the IPA pursuant to the financial risk sharing agreement.

VI. Financial Review of MCO Contracts

DOH financial review and approval is required for all MCO agreements that transfer financial risk for services to another entity, except for prepaid capitation agreements effective after August 22, 2001. Such prepaid capitation agreements fall under the State Insurance Department (SID) Regulation 164 and require separate SID financial approval, in addition to the DOH legal and program review. This section describes the regulatory framework for risk and risk sharing, defines different levels of risk transfer and the financial criteria that DOH applies to each level, and the criteria for determining what type of financial review a contract or amendment requires.

  1. Statutory and Regulatory Framework for Sharing Risk
    1. PHL Article 44. MCOs are licensed under Article 44 as entities that assume the obligation to provide or arrange for provision of a comprehensive range of medical services, including inpatient, in exchange for a predetermined payment amount per person per month. This is referred to as acceptance of full risk by the MCO as required by PHL § 4403 (1) (c).

      The MCO always retains its statutory obligation to maintain full risk under PHL § 4403 (1)(c) on a prospective basis for the provision of comprehensive health services pursuant to a subscriber contract or governmental program. The MCO must fulfill its non-transferable obligation to provide comprehensive health services to subscribers and enrollees in any event, including the failure of a medical risk sharing arrangement with a provider.

    2. DOH regulations at 10 NYCRR Part 98. "Risk sharing" is defined in §98-1.2(kk) as the contractual assumption of liability by a provider or IPA for the delivery of health care services to enrollees of the MCO. This assumption of liability may be by means of a capitation arrangement or some other mechanism (e.g. through withhold, pooling, or postpaid provisions). Risk sharing is sometimes referred to as accepting financial risk or "medical risk".

      Section 98-1.11 imposes financial requirements for entities licensed under Article 44, and allows an MCO to share risk with providers.

      Section 98-1.5(b)(6)(vii)(e)(1) allows an IPA, incidental to its primary IPA powers and purposes, to share risk for the provision of medical services with MCOs, and to subcapitate or otherwise compensate providers and IPAs with which it has contracted.

      Section 98-1.18(e) prohibits an MCO from entering into a risk sharing arrangement with an IPA without first obtaining approval from DOH or SID, as applicable, in accordance with these Guidelines and Regulation 164.

    3. SID Regulation 164. SID Regulation 164, "Standards for Financial Risk Transfer Between Insurers and Health Care Providers" (11 NYCRR Part 101) requires MCOs to submit to SID for approval any prepaid capitation arrangement whereby an insurer transfers all or part of its financial risk to a health care provider. If in addition to prepaid capitation payments, there is medical risk transferred via any other provisions (i.e., withhold, pooling, postpaid, etc.), DOH financial review and approval of these additional provisions is also required.
  2. Financial Review Criteria Used for Specific Risk Level Categories

    Depending on the type of entity the MCO is contracting with, and the extent of the services for which risk is transferred, different criteria will be used by DOH for contract review. Entities who provide services directly, such as physicians or physician groups, hospitals, clinics, etc. are referred to as providers. IPAs do not provide services directly but must subcontract with providers for service provision. Based on these definitions for MCO contracting entities, five general categories, or levels, of medical risk transfers, are described below:

    1. Level 1: Contracts with providers or IPAs based on fee-for-service arrangements, including withholds or bonuses up to 25% of the payment to the provider.

      Such contracts do not need to demonstrate the provider‚s financial viability or establish a financial security deposit.

    2. Level 2: Contracts that transfer financial risk to providers or group of providers (e.g. capitation) for a single specific service the providers directly provide, i.e., primary care, (except inpatient hospitalization) with the provider accepting all medical risk for that service.

      Such contracts do not need to demonstrate the provider‚s financial viability or establish a financial security deposit.

    3. Level 3: Contracts that transfer broader risk to providers (multiple services provided directly, inpatient hospitalization, or fee-for-service with withholds or bonuses of greater than 25%).

      Such contracts must demonstrate the provider‚s financial viability. If the provider‚s net worth or guaranteeing parents’ net worth is greater than zero, the contract is approvable, with no security deposit required for services provided directly. If the provider‚s net worth is less than or equal to zero, a financial security deposit must be established for the provider‚s in-network cost, as described in the next section.

    4. Level 4: Contracts that transfer risk to IPAs for a single or multiple services.

      Such contracts must demonstrate the IPA‚s financial viability and establish a financial security deposit, as described in the next section.

    5. Level 5: Contracts falling under risk level 3 or 4 above that include services not provided directly (out-of-IPA/provider network services).

      Such contracts must clearly state that the estimated part of the payment needed to provide the covered services to be referred or otherwise arranged by the IPA/provider to non-participating providers must be deposited by the MCO into a separate account designated as the "out-of-health care provider network account", in addition to meeting the criteria indicated for risk level 3 or 4 above, as applicable.

  3. Specific DOH Requirements
    1. Demonstration of Financial Viability

      The MCO must provide such information as necessary to allow DOH to determine whether a provider sharing risk with the MCO, or an IPA sharing risk with the MCO, or a provider or IPA sharing risk with an IPA, is financially responsible and capable of assuming such risk, and has satisfactory insurance, reserves, or other arrangements to support an expectation that it will meet its obligations. The provider or IPA accepting risk must demonstrate sufficient capital and solvency via submission of certified audited financial statements or comparable means, such as an accountant‚s compilation in cases where the provider/IPA is a new entity. If the contract includes a provision that a provider‚s parent organization (such as a hospital system) guarantees the provision and payment of services, the guaranteeing parents‚ certified audited financial statement can be used to establish the provider’s solvency.

    2. Financial Security Deposit Requirement

      If a financial security deposit is required, the provider/IPA must establish and provide evidence of a financial security deposit equal to 12.5% of the estimated annual medical costs for the medical services covered under the risk arrangement and paid to the provider/IPA. The financial security deposit must consist of cash and/or short-term marketable securities and be held by the MCO. Under limited circumstances, a parental guarantee may be allowed, where the parent is a provider of all services covered under the agreement. The entire amount of the required security deposit must be available prior to contract approval. Any funds already retained by the MCO for out of contracting provider‚s participating network services are not subject to the financial security deposit. To the extent that contractual limits are imposed on the ultimate amount of provider financial risk, such as risk corridors or caps on provider losses, the above requirements may be mitigated.

    3. Out-of-Network Account Requirements

      The estimated part of the payment needed to cover services to be referred or otherwise arranged by the contracting provider or intermediary to non-participating providers must be deposited by the MCO into a separate account designated as the "out of health care provider network account". This account must be maintained by the MCO for the sole purpose of paying for the services covered by the risk agreement that were rendered by providers outside the IPA/provider‚s network. Amounts deposited in the out-of-IPA/provider network account must be reconciled at least annually with out-of-IPA/provider network incurred claims and expenses for the period covered by the reconciliation, and any excess in the account must be remitted to or otherwise settled with such IPA/provider within six months of the ending date of the reconciliation period. In the event the reconciliation reports a deficit, then the MCO must bill such deficit or otherwise settle such deficit with the IPA/provider within six months of the ending date of the reconciliation period.

    4. Requirements for IPA Risk Sharing
      1. The MCO must provide a current list of the IPA’s owners, officers, directors, and limited liability company managers and members.
      2. The MCO must submit the complete text of the proposed IPA contract(s) and all attachments thereto.
      3. The MCO and the IPA must demonstrate, to DOH‚s satisfaction, that the proposed arrangement will not constitute improper incentives to providers, in accordance with physician incentive plan guidelines, and will not result in a decrease in access to, or quality of, care provided to enrollees.