Don't Quietly Accept Silent PPOs

Mark Manigan The use of silent preferred provider organizations (PPOs) is on the rise again, according to recent health industry publications. Silent PPOs have the potential to redirect millions of dollars out of the hands of physicians, impacting both patient and doctor. This makes it important to understand how silent PPOs work and to know how to handle them when you encounter one.

Silent PPOs (also known as ghost PPOs or blind PPOs) are payer arrangements that expect access to discounted medical fees without providing the physician with the referral incentives associated with a traditional PPO or HMO. Generally, in a managed care contract, PPO discounts are offered to practices in exchange for higher patient volume from the PPO.

Here’s how it works. A patient elects to obtain treatment from a physician who does not participate in his or her primary PPO network. Because the physician is out of network, the patient expects to pay a higher non-discounted fee for the service. After performing the services, the physician bills the patient’s insurance. Upon receipt of the physician’s bill, the insurance company re-prices the physician’s charges to reflect the lower rates that the physician accepts from a PPO in which he or she does participate. This figure is obtained from a database purchased from the participating PPO. The payer then issues an Explanation of Benefits (EOB) to the physician that states its payment reflects the physician’s “usual and customary” rates.

In some cases, the practice inadvertently accepts the payer’s payment. In other cases, the physician knowingly accepts payment choosing to avoid the administrative hassles and inefficient use of administrative resources. The participating PPO (the seller of the discounted information) and the payer (the silent PPO) ultimately share the difference between what is paid and what the payer would have paid without the discount information at the expense of the physician. The physician often has to make up for the lost revenue by raising rates, thereby affecting patients’ access to care.

Proposed Rules Offer Some Protection
Recently, both the courts and various legislatures have been dealing with the issue of silent PPOs. In at least one case, a federal grand jury issued a mail and wire fraud indictment against a firm that improperly brokered PPO discounts. In addition, at least some state legislatures disagree with silent PPO practices, responding with legislation specifically directed at silent PPOs.

In New Jersey, the legislature has twice introduced a bill to outlaw silent PPOs. However, the Preferred Provider Protection Act has never gotten through committee to be voted on by the entire legislature. On a more positive note, the New Jersey Department of Banking and Insurance has recently proposed regulations that would bar “all products” clauses in managed care contracts. “All products” clauses refer to a common contracting ploy in which a payer or PPO network asks a physician to sign a contract agreeing to a significant discount for its enrollees and its affiliates for all of the organization’s products. These clauses often have language providing for use of silent PPO.

Protect Your Practice
Despite the lack of legislation to protect physicians against this practice, it is possible to avoid falling victim to silent PPOs by taking a few simple precautions:

1. Start with your contract.
Make sure you negotiate a solid contract with managed care companies. Advocate for a provision in your agreement that bars the sale or distribution of agreed-upon discount rates. You can also require that the PPO notify you of any new payers joining its network and add a provision that allows for cancellation for unacceptable newcomers or if the network drastically expands or contracts.

You want to also pay special attention to the definitions of contract terms such as “payer,” “plan” and “member(s).” You need to ensure these terms specifically designate who is meant. For instance, the term “members” should be defined as the member of the managed care company you are contracting with only.

2. Request ID cards.
Physicians can obtain additional protection against silent PPOs by requesting that the PPO issue identification cards to its members. The ID should clearly state the PPO’s identity, logo and a contact number or URL. Patient insurance identification cards should be copied by office administrators upon every visit and logos should be noted before services are rendered.

3. Check your EOBs.
Practice managers should perform periodic audits of EOBs to check for discounted reimbursements and to identify these insurance practices.

4. Get help from an expert.
You may wish to obtain the advice of legal counsel in negotiating managed care agreements to reduce exposure to and losses from silent PPOs. An expert can also help you develop an office policy to help identify inappropriate reimbursements from silent PPOs and mitigate losses.

If you encounter issues related to a silent PPO, notify NJAOPS. Your situation is likely not isolated. By communicating with the association, you help us assess the scope of the situation so we can take appropriate steps to assist you and others. Silent PPOs raise numerous issues for physicians, hospitals, licensed ASCs and surgical practices. Above all else, you must maintain oversight of your patient network and continue to track payer reimbursements. Doing so will help your practice develop a reputation for vigilance, thereby deterring silent PPOs.