A contract is a legal binding agreement between two parties that is aimed to execute a certain objective. It is a kind of arrangement wherein a certain action is pledged in exchange for a specific proposition or offer. In order for a contract to be valid, four essential elements must be present in a contract.
Firstly, two parties should exist in the contract.
One party is presenting an offer while the other party is accepting the offer as a form of return for whatever specifications are requested in the contract.
Secondly, the contract should indicate that both parties give their consent or are willing to enter into such an arrangement. Such intention should show that the person giving the offer is capable of providing the offer, while the party accepting the offer should be able to clearly show his/her acceptance of the offer. In addition, both parties must be willing to enter an agreement without any other hidden conditions. Thirdly, a purpose or objective should be indicated in a contract. The purpose should be detailed enough to clearly show what is requested or expected in exchange for the specific offer.
And lastly, adequate consideration or an adequate value must be indicated as offer in the contract, in the form of money or in kind. The consideration or compensation can not be given to the accepting party prior to the acceptance of the offer. The act of accepting an offer constitutes a deal. Certain offers have a limited time of availability, wherein an expiration date is indicated and the offer can not be accepted after the said date, unless the offer is renewed or stands indefinitely. In addition, the party presenting the offer has the right to withdraw its offer, but only before an acceptance is received.
Once an offer is accepted, the contract may not be modified or revised. Changes in the offer may only be incorporated during the negotiation stage of the agreement, which then makes a contract some kind of a bargain. Similarly, physicians enter contracts with managed care organizations (MCOs) or health management organizations (HMOs) in order to promote their services. The four essential elements of a contract should be carefully studied before accepting any offer or signing any contract.
For example, as for the element of willingness and capability to enter a contract, a physician should initially must find out the MCO/HMO’s length of operation and financial stability, because this will give the physician an idea whether the company is capable to pay him at a regular schedule. In addition, it would be good to contact some colleagues who have signed contracts with the same company, in order to determine the strengths and weaknesses of the organization and to unearth any unwritten conditions or policies.
The physician should also investigate the identity of the MCO/HMO, and any other parties in the contract, should there be more than two parties indicated in the contract. The most overlooked element of a contract between a physician and an MCO/HMO is the purpose or objective of the contract, which describes a several definitions of services and people that will be covered by the health plan, both during emergency and out-patient consultation events.
A comprehensive study of the contract may possibly prevent misunderstandings between the two parties and therefore provide a clear-cut description of the services that the physician is expected to deliver. Another important element of a physician-MCO/HMO contract is the obligations of each party. It is usually indicated in the contract that the physician will actively maintain his/her medical practice documents such as licenses, certifications, registrations and permits in order to provide his/her services to patients.
The physician should also inform the MCO/HMO of any modifications on his/her status as a practicing physician. In turn, the MCO/HMO presents its rules and regulations to the potential physician or health care provider working under their company. All policies, guidelines, reviews and appeals should be revealed in order to have its physicians working at the standardized efficiency and competency. The physician’s compensation should be indicated in a physician-MCO/HMO contract. Details including the amount and schedule of payment should be clearly stated in the contract.
Payment modes may be in form of per diem, per case, per service or a certain percentage of the premiums. The physician, in turn, should understand the protocol for filing claims and any other arrangements or coordination with the MCO/HMO, including the limited time when these documents may be filed. The MCO/HMO should also indicate in the contract that the physician will receive his/her salary on a regular basis. A physician-MCO/HMO contract may be terminated by either mutual agreement of both parties, or with sufficient cause or reason from the physician, or without cause or reason from the physician.
However, a 30-day notice is usually required before any termination takes effect, to provide ample time for the physician to finalize any current patients, cases, services and/or referrals. Contracts are legally binding documents which must be carefully studied and considered before pursuing an agreement and letting the contract take full effect. Every contract has its specific details and all sections of the contract should be well understood and explained.