SILENT PPO’s Might be Stealing Money From Your Practice

June 29, 2005

The silent Preferred Provider Organization (PPO) continues as a managed care trend that physician practice need to constantly pay attention to.  A silent PPO involves unauthorized and undisclosed selling of PPO provider network lists along with the accompanying negotiated discounts for that network to third party payors and brokers.  The third party usually does not have any obligation to abide by the original PPO’s contractual agreement with physicians, allowing them to receive the benefit of paying a discounted fee to a physician without the physician receiving the benefit of a patient base. In other words, a silent PPO is an insurance scheme that extracts discounts from doctors and other healthcare providers such as hospitals without permission.

In most instances, a physician’s office staff only becomes aware that the doctor was enrolled in a silent PPO when services are provided to a patient who is not covered by the PPO.  Say you treat a patient with indemnity insurance and expect to receive your regular fee. To avoid paying you that much, the insurance company contacts a broker or PPO that sells rosters of doctors who have contracted with PPO’s. Then the insurer, without your authorization, applies the discount you’ve granted to a legitimate PPO, shortchanging you on your fee. And your staff isn’t likely to discover the ‘mistake,’ because it’s too time-consuming to compare each explanation-of-benefits form (EOB) with every patient’s insurance coverage. In other words, silent PPOs don’t steer any patients your way; they just take your money. And everyone but the doctor benefits. The insurer pays less, and the broker and the PPO that sold its list typically split 30 percent of the insurer’s ‘savings’.

This practice may violate a contract in which a discount applies without a health insurance plan reciprocating for participation in published directories of participating physicians, exclusive practice relationships, purchase plans, and other like benefits.  All medical practices should carefully review their managed care contracts, giving particular attention to “all payor” clauses that may permit the managed care organization to sell or rent its negotiated discount.  Additionally, physicians should investigate any instances when payment is less than what had been negotiated in their contract with a payor.

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