Physician practices are often deceived by a billing practice that creates payment discounts for payors who are not entitled to them. Under these arrangements, indemnity (i.e. commercial insurance) payors obtain PPO-type discounts without the health care provider’s consent. This is known as the “Silent PPO." Depending on patient volume, health care providers such as physicians and hospitals could be losing a significant amount of revenue dollars due to these inappropriately applied discounts.
A Silent PPO works this way: First, a PPO makes its roster of preferred providers and contracted rates available to other payors and brokers the list for a fee. The discounts typically are applied to patients who are covered by an employer or payor that has not contracted with the PPO. Next, let us suppose a patient is in a traditional indemnity plan that pays 80% of the usual and customary of a doctor’s fee. The patient visits the doctor for treatment and the office verifies the patient’s indemnity coverage. The office then submits a bill to the patient’s insurance company. At this point, the payor is obligated to pay 80% of the usual and customary fee with no discount. The payor would like to receive some sort of discount so it seeks one from a PPO or a broker. If the physician has signed a contract with any PPO, the indemnity payor will likely have gained access to this information. The payor usually pays a fee to the PPO for access to its physician roster and related discounted rates. If the indemnity payor has access to this information, it could then reprice the doctor’s billing, taking the discount the physician has agreed to with the PPO, and simply disclose the PPO discount (which the patient does not belong to) on the payor’s EOB form that accompanies the payment.
Once the Explanation of Benefit (EOB) has been received by the doctor’s office from the indemnity payor referencing the PPO discount, one of several things usually happen. First, the office staff may overlook the discrepancy, especially if the doctor has a contract with the PPO that is mentioned. Secondly, the staff may actually notice the discount and appeal directly with the indemnity carrier. This is when the indemnity payor may tell the staff it is “affiliated” with the PPO in question, and that it received a discount if one of its indemnity enrollees visits a doctor under contract with the PPO. Unless the doctor’s PPO contract states such, the doctor (or any other health care provider for that matter) is due back the incorrectly applied discount.
All health care providers should be on the look out for these types of illegal discounts. EOBs obviously should be scrutinized very carefully from this point forward. Finally, the American Hospital Association suggests the following clauses be in or added to managed care contracts: (1) That any discounts will be extended only to enrollees of the PPO who have cards identifying them as such; (2) That types of entities that can be added to the network are identified in advance, and that providers receive timely notice when payors or employers are added, and (3) That the sale or other unauthorized use of contract rate information is specifically prohibited.