|
Silent preferred provider organizations (PPOs) continue to exist, taking money out of the pockets of physicians. Under a silent PPO arrangement, the managed care organization (MCO) typically sells or leases its PPO provider network to the third party or insurance broker. A third party, which usually does not offer a PPO plan or policy, obtains a database of preferred provider rates from a MCO or a discount insurance broker. Some silent PPOs are truly silent, meaning that a contractual relationship between payer and physician cannot be traced. In other cases, the physician unknowingly contracts with a managed care organization to allow the selling or renting of the physician’s name and discounted rate. Most major health plan contracts contain provisions that let them enter into contracts with other payers on behalf of a physician. One health plan may have hundreds of affiliates and a foot and ankle surgeon may be participating in contracts with these “unknown” affiliates.
How Does a Silent PPO Work?
The following example demonstrates how a silent PPO works. A patient covered by a contract that allows access to any provider receives treatment at Provider A. Provider A sends a bill in the amount of $10,000 to the patient's insurer. The insurer then contacts a PPO, third-party administrator, or discount broker that has access to a list of contracting organizations with discounted arrangements with Provider A. The insurer remits a discounted payment to Provider A and references the specific PPO discount on its explanation of benefits (in this example, the discount is assumed to be 30%). Provider A receives a payment of $7,000 (the $10,000 billed for the patient less the 30% PPO discount), $2,000 of which is paid by the patient as a coinsurance payment, and $5,000 of which the insurer pays. The insurer pays an access fee to the PPO, usually a percentage of the savings. An access fee of 40% would result in a payment of $1,200 to the PPO and a $1,800 cash savings to the insurer.
How Might Silent PPOs be Avoided?
Before entering into contracts with MCOs, foot and ankle surgeons should consider the following:
- Is the PPO willing to include language in the contract requiring that all clients who have access to the discounts have a contract with the PPO?
- Does the PPO guarantee that its logo will be present on the patient’s insurance card? Such a guarantee ensures that the patient’s insurer has a standing relationship with the PPO. Without this guarantee, the PPO is relatively free to broker its discounts.
- Does the contract impose more obligations than those imposed by a typical commercial PPO?
- Does the explanation of benefits (EOB) disclose the source of the discount?
- Does the contract authorize the discount being claimed?
- Will the physician have access to the payer’s client list(s) to the contract and have the right to approve any additions? These lists can protect providers against unknown and uncompensated risks.
- Are a PPO’s activities limited to large accounts? If so, the PPO probably is brokering its discounts to insurers and looking to save money on major services provided to patients they are covering.
If these questions are not addressed satisfactorily, it may not be appropriate to pursue contract negotiations.
Some laws prohibit a payer from taking a discount with respect to a particular medical claim unless the payer has a contract with the PPO network. Many provider contracts have relatively loose provisions allowing the PPO to lease its network to payers not specifically identified in the contract. Keep in mind that prevention of unfair and inappropriate discounting occurs prior to signing the initial contract with a managed care organization. It is highly recommended that foot and ankle surgeons look into who has legitimate access to their discounts and consult with an attorney during the negotiation process with MCOs. |