Attorney-in-Fact Look for safeguards when reviewing clauses

by Shellie Pruden, DCMS director of medical practice relations

A physician never would blindly turn over legal decisions to a stranger, but that’s exactly what’s happening in the market. It’s a clause called “attorney-in-fact” and it’s used by IPAs, service brokers, and Internet insurance intermediaries. Although it has appropriate uses, you need to be well-informed before signing any agreements.

An attorney-in-fact clause looks something like, “Physician appoints company as physician’s attorney-in-fact with the authority to act on behalf of physician to enter into agreements with any managed care company, insurance carrier, or third-party administrator.” This means you are allowing this third party the authority to negotiate managed care contracts on your behalf. This language is the foundation of an IPA’s ability to negotiate contracts with physician-favored language. So far, this isn’t a dangerous practice. Typically, most IPAs have an opt-in/opt-out process in which a physician can decline participation in a contract negotiated on his behalf. In this scenario, you are protected when you grant an attorney-in-fact.

An attorney-in-fact provision can work to your advantage, with the following conditions. It must be limited in scope. Make sure it spells out exactly what the entity contracting on your behalf has the right to do. The contract also should allow a physician enough information, in advance of his decision-making deadline, to make an informed decision to participate. Be careful of contract provisions that obligate you to master agreements, policies, and procedures that you have not reviewed. Sometimes this language is used to force physicians to participate in renegotiated or new agreements without their knowledge and consent. In addition, ensure you have the right to make the decision to participate before the contractor has the ability to commit on your behalf. A final protection is to make sure you must opt-in in order to participate. Without this consideration, a physician may find himself participating in a contract because a deadline passed while he was on vacation or the notice was buried in a stack of paperwork.

It is important to know that although you didn’t negotiate the contract, you are responsible for every provision, every word. It’s a good idea to negotiate into your IPA contract that you will receive a copy of the entire contract negotiated on your behalf as a condition of the typical opt-in/opt-out process. At the least, make sure you have the right to review the entire contract because you will be responsible for performing under it.

“Physicians need to be careful when signing attorney-in-fact provisions because they allow the other party to stand in the shoes of the physician and execute agreements to which the physician is bound,” says Mary Emma Karam, attorney in the healthcare and litigation sections of Jackson Walker, LLP. “While IPAs need to have some authority as attorney-in-fact to sign the physician to a managed care contract the physician elects to enter, the scope of the clause should be limited. The physician should make sure he retains the right to make an election as to each offered plan, and has the right to receive and review all contract terms to which he would be obligated.”

For instance, one contract states, “Company is appointed attorney-in-fact to amend, expand, or terminate physician’s existing agreements with payor.” This provision is dangerous when it is offered by service brokers and Internet intermediaries. Such language allows the company to negotiate as your attorney to enter into agreements with health plans. Consider the phrase “. . . amend, expand, or terminate physician’s existing agreements with payor.” If you have agreements with a payor, you have given this company power of attorney to cancel or amend your existing contracts without any knowledge of its policies, contracting integrity, compliance with state law, or intent. Nowhere in this contract was a mention of opt-in or any mechanism for physicians to choose to not participate in contracts negotiated on their behalf. The company’s national-level representative explained that including this clause was the only way the company could bring the managed care companies to the negotiating table.

Internet intermediaries have emerged in the market with an attractive sales pitch. A physician who listens to the pitch and foregoes contract review or legal consultation may find himself terminated from long-standing managed care relationships. Should this happen, he will have no legal remedy because permission was contractually granted. Many of these companies are not willing to negotiate an attorney-in-fact and, therefore, leave physicians with a choice of allowing a stranger the power to cancel contracts or find that they must walk away from the business. Although walking away seems a difficult business decision, the potential consequences may far outweigh the benefit of accessing patients through these contracts.