Payer mergers make silent PPOs’ a threat
Payer mergers make silent PPOs’ a threat
By Elizabeth Gallup, MD, JD, MBA
So you think your practice and your market are safe from the provider discounts that are common in more mature managed care markets? Before you start bragging to your medical school classmates, take a look at your office’s explanation of benefit statements sent out by the insurers you contract with. You may be giving away discounted services without even realizing it.
This scam is known in the industry as a "silent PPO," and if you’re not careful, your practice may be the victim.
"Silent PPO" is the name for what happens when an indemnity insurer pays a provider a fee that is discounted by the amount that the provider has negotiated with a PPO. In effect, the indemnity insurer is masquerading as a PPO so it can pay the PPO’s discounted fees.
Here’s how this scheme often works:
1. Patient A is enrolled in an indemnity plan.
2. When a physician performs an in-office procedure, an office staffer calls the payer and verifies that the patient is covered by an indemnity plan that pays 80% of the patient’s bills up to $5,000, for example, and 100% above that amount.
3. After Patient A is treated and released, the practice sends a bill to the patient’s insurance company, billing at full price.
4. The payer would rather not pay full price, so it calls a PPO broker, or third-party administrator (TPA), that has access to lists of providers and discount levels for several legitimate PPOs. The broker searches its rosters and discovers that the physician has signed a contract with PPO X that calls for a 25% discount. The broker sends a fax to the payer with that information.
5. The payer then recalculates the physician’s bill, discounting 25% from the original $4,000 bill. The explanation of benefits (EOB) will have a notation specifically referring to the PPO X discount, citing it as the reason for the lower price.
6. Upon receiving the document, the accounting department verifies that the physician has a contract with PPO X. Unless staff members search the patient’s admission records, such as the photocopy of the patient’s insurance card, they won’t be aware that the patient is not a member of PPO X.
7. Meanwhile, the insurer and the hired TPA split the profits between the provider’s usual fee and the PPO discount that has been applied.
Is this legal? It depends. If there is no language in the contract specifically restricting a PPO the physician contracts with from selling information pertaining to the contractual relationship to an outside party, it probably is not illegal. Your best bet is to look for or request specific contract language.
Some hospitals and large group practices are now taking the silent PPOs on. This makes economic sense because the unauthorized discounts add up to a very high dollar amount.
One of the most important and cost-effective ways a practice can address this situation is to carefully examine all PPO contracts before they are signed. Usually a practice focuses on the fee schedule in a PPO contract. However, a thorough search should be made for language that allows the PPO to sell its fee schedules to other PPOs. If such language is present, it should be struck. If no such language precluding the sale of fee schedules exists, request the inclusion of language stating the PPO cannot barter, trade, sell, or otherwise transfer the discount to any entity that does not steer patients to the practice. If a PPO will not allow such language to be added to their contract, consider not participating in its plan. Most reputable PPOs either already have such language in their contracts or will be happy to include it.
What is most vexing about silent PPOs is their insidious nature. It is hard to track the losses. To find out if you are a victim of a silent PPO, you must examine all the EOBs that come through the billing office. Then the EOB must be compared with the agreement in place with a PPO, if there is one, and against the patient’s insurance plan. This is costly and time-consuming, which is why it is often not done, especially in small physician practices.
Another trend seen by one practice administrator we know is when payers try to sneak this type of language in during contract renegotiations. This practice administrator told us this has happened twice in the last two years both times following an absorption of a more traditional insurance company by a carrier that predominantly sells HMO products.
A physician group or hospital may also ask to be given notice of any affiliate payer before it gives out its list of staff or affiliated physicians. That way it can be ascertained that the payers are employers, and not other PPOs that are silent.
In short, silent PPOs are becoming a bigger and bigger problem with many providers. As individual doctors and small practices organize and the larger organizations become more vocal in opposition to silent PPOs, perhaps the practice will be quelled or at least its rate of growth slowed.
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