What Problems are Created When Healthplans Offer Providers “Take it or Leave it” Contracts (contracts of adhesion)?
Contracts of adhesion, commonly referred to as "take-it-or-leave-it" contracts, are standard form contracts drafted by one party (typically the party with more power or resources) and presented to the other party (usually the less powerful or resourceful) with little or no opportunity for negotiation. In the healthcare industry, when health plans offer providers such contracts, several problems can arise:
Limited Negotiation: Providers often have little to no ability to negotiate the terms presented by the health plans. This can lead to situations where providers feel compelled to accept terms that may be unfavorable or not fully aligned with their practice needs and values.
Imbalance of Power: These contracts reinforce the power imbalances between large health insurance companies and individual healthcare providers or smaller clinics. The Halthplans have the leverage to dictate terms due to their size and control over access to patient populations.
Financial Pressures: Contracts of adhesion often include payment terms that are less favorable to providers. These can include lower reimbursement rates, complex billing stipulations, and additional administrative burdens that can financially strain a healthcare provider's practice.
Reduced Quality of Care: When providers are under financial stress or dealing with unfavorable contract terms, it can inadvertently affect the quality of care they offer. For instance, they might need to see more patients in less time to maintain financial viability, which can reduce the time spent per patient and potentially lower the quality of care.
Restrictive Clauses: These contracts may include clauses that restrict providers from making independent decisions about patient care or from joining competing networks. Such restrictions can limit providers’ professional autonomy and ability to make decisions based solely on medical best practices and patient needs.
Increased Administrative Burden: Often, contracts of adhesion come with detailed and complex requirements for documentation, reporting, and compliance. These requirements can be onerous and time-consuming, detracting from time that could otherwise be spent on patient care.
Provider Dissatisfaction and Burnout: The frustrations stemming from non-negotiable contracts and the feeling of being undervalued can contribute to provider dissatisfaction and burnout. This not only affects the health and wellbeing of the providers themselves but can also lead to higher turnover rates within provider practice groups, clinics and hospitals.
Legal and Ethical Concerns: Such contracts can lead to ethical dilemmas where providers might feel compelled to make decisions that align with contract stipulations rather than with what is best for patient care. Additionally, there might be legal challenges if the terms are overly restrictive or perceived as unfair.
Patient Access and Choice: Contracts of adhesion can limit the variety of providers available within a network, impacting patient choice and access to care. If providers choose not to accept these contracts due to unfavorable terms, patients may have fewer options for healthcare providers within their insurance network. Providers who specialize in culturally diverse population prefer to not work with Healthplans.
Market Competition: By limiting providers' ability to negotiate or participate freely in the market, these contracts can stifle competition, which can have broader effects on healthcare costs and innovation.
To address these issues, (a) it’s important for healthcare providers to seek legal advice before signing such contracts and (b) for policymakers to consider regulations that ensure fairness in contract negotiations within the healthcare industry. Collective bargaining or forming provider associations can help individual providers or smaller practices gain more leverage in negotiations with Healthplans. Legislation could also be considered that would prohibit Healthplans from offering contracts that are unenforceable (i.e., ambiguous, faulty, ill-defined, etc.).
DISCLAIMER and PURPOSE: This discussion document is intended for training, education, and or research purposes only. The information contained herein is based on the data and perspectives available at the time of writing. It is subject to revision as new information and viewpoints emerge.
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