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Managed Care Contracts

Managed care is a health care delivery system organized to manage cost, utilization, and quality. Every healthcare provider must settle on a managed care contract between itself and the payer.

According to, the contract between a clinical laboratory or other health care professional and a managed care organization (MCO) such as a provider-sponsored network, integrated delivery system, health maintenance organization, or other health care plan, is the fundamental document which frames, defines and governs their relationship. Contractual provisions can affect payment, office organization, practices and procedures, and confidential records as well as clinical decision-making.

Findlaw states, “A good managed care contract, like any other form of business agreement, is clear, consistent, comprehensive, and concise. It will conform to both the intent of the parties, setting out their respective rights and responsibilities, and the requirements of state and federal law.”

For example, Medicaid managed care provides for the delivery of Medicaid health benefits and additional services through contracted arrangements between state Medicaid agencies and managed care organizations (MCOs) that accept a set per member per month (capitation) payment for these services.

Depending on the market share of the health plan and the services offered by the healthcare provider, the negotiability of the contract will vary. Well-established managed care plans that have a large market share typical use form contracts. Newer managed care plans that have little market share and want broad provider participation are generally more willing to negotiate terms.

The Patient Protection and Affordable Care Act and the move toward accountable care has put a much greater emphasis on quality measures than in previous years.

Healthcare providers must prove in contract negotiations how well they manage quality and cost; such proof is usually provided with a comprehensive set of quality measures reported directly from the electronic health record (EHR). This can be straightforward for a single practice using the basic reporting functionality of its EHR, a more complex managed care plan might require features that an EHR vendor doesn’t offer.

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