Physician Costs and Getting Paid Properly
Friday, July 4th, 2008 Administrative complexity and inefficiency are major cost-drivers in a largely fragmented health care delivery system. A typical physician practice contracts with a dozen or more health plans and must contend with each payer’s way of contracting, credentialing, preauthorizing, coding, billing and reimbursing.
Health insurer contracting and billing represent the major sources of administrative burden for physicians. Physicians divert substantial resources – as much as 14 percent of their total revenue – to ensure accurate insurance payments for their services, according to the AMA’s first National Health Insurer Report Card on claims processing, released last month.
Even in a typical physician office without a fully automated practice management system, replacing traditional paper and telephone calls for insurance administration – i.e., claims submission, referral and preauthorization requests, and patient eligibility verification – with electronic transactions brings a per physician savings of more than $42,000 annually, according to a Milliman Inc. study released January 2006.
Some administrative burden is self-imposed by physicians, particularly small or medium-sized practices that are busy seeing as many patients as possible and don’t take the time to think about standardizing their workflow for efficiency.
The main focus of administrative simplification initiatives has been standardization of data flow between physicians and health insurers. Health insurers reported to physicians the correct contracted payment rate only 62 to 87 percent of the time. When health insurers report an amount that does not adhere to the contracted rate, it adds additional, unnecessary costs to the physician practice to evaluate the inconsistency.
Rating Payers
Saturday, June 28th, 2008 Some health insurance companies rate doctors on their performance. Now doctors are turning the tables.
The American Medical Association issued its first health insurance report card at the group’s annual meeting Monday. The primary focus is on how quickly and accurately doctors get paid.
“Physicians are spending 14 percent of their total revenue to simply obtain what they’ve earned,” said Dr. William Dolan, an AMA board member.
The report card is an effort to reduce the cost of claims processing to doctors and help them as they negotiate contracts with insurance companies, he said. The report card will help patients if it reduces wasteful administrative costs, Dolan added.
The report card compares Medicare and seven national commercial health insurers on the timeliness and accuracy of claims processing. It is based on a random sample drawn from 3 million claims.
There are no grades like A, B and C, and many of the technical measures may not mean much to most patients. But business leaders and health policy makers are interested in cutting an estimated annual $210 billion in wasted administrative claims processing costs, AMA leaders said.
Four years ago, Dr. Marcy Zwelling got so frustrated with the time and cost of making sure she was paid accurately by insurers that she stopped dealing with them. She now runs a so-called “boutique” practice. Most of her patients pay her an annual fee out of their own pockets.
“The best thing is, I get to be a doctor” instead of a claims processor, said Zwelling, of Los Alamitos, Calif. She says she doesn’t make any more money than she did when she accepted insurance, but she has more time with patients.
UnitedHealthcare had the lowest rate of contract compliance, according to the AMA report. About 62 percent of medical services billed were paid by UnitedHealthcare at the contracted rate, compared with 71 percent for Aetna and 98 percent for Medicare.
UnitedHealthcare spokesman Gregory Thompson said doctors and their billing services share responsibility for prompt payment. “Data show there is often a significant lag time between when services are provided and physician claims are submitted,” he said.
He said UnitedHealthcare has improved its electronic claims systems and noted the AMA gave the company higher ratings on other measures.
Medicare performed better than the private insurers in most areas, said Dr. Lawrence Casalino, a University of Chicago health economist and former physician. Commercial insurance plans compete by promising employers that they are tough on holding down the cost of claims, he said.
“There’s no question that administrative costs for doctors and the country would be a lot lower in a single-payer system,” Casalino said in an interview after the meeting. But a market-based system has advantages of competition, choice and innovation, he said. “Are the benefits enough to justify the cost?”
Peter Lee of the Pacific Business Group on Health welcomed the report card, but said he hoped the AMA would look at a broader range of areas that would be helpful to consumers.
“Increased payments to physician’s means increased premiums and increased costs in a system that is spiraling out of control,” Lee said.
Susan Pisano, a spokeswoman for America’s Health Insurance Plans, said that for claims to be processed accurately and quickly it takes two parties: insurers and doctors.
She complained that while insurance companies that rate doctors generally share the information with doctors before they make it public, the AMA did not share its report with insurers before releasing it online Monday.
By CARLA K. JOHNSON, Associated Press Writer
AMA (PSA) National Health Insurer Report Card
Credentialing – To Delegate or Not To Delegate
Monday, May 5th, 2008 The National Committee for Quality Assurance (NCQA) sets the standard for credentialing in managed care. Defined as the “process by which a managed care organization (MCO) authorizes, contracts with, or employs practitioners who are licensed to practice independently to provide services to its members”, credentialing simply means making sure that a practitioner is qualified to render care to patients. Each MCO sets its own qualifications and then structures its processes to ensure that the practitioners meet these qualifications.
This blog entry is intended to provide the reader with an overview of credentialing requirements and the credentialing process, including delegation of some or all of the credentialing activities.
Each managed care organization (MCO) is responsible for establishing the criteria for participation within the health plan. The basic elements for a physician are likely to include the following:
1. Valid and current licensure
2. Appropriate education and training
3. Curriculum Vitae (CV)
4. Clinical privileges at a hospital
5. Valid Drug Enforcement Agency (DEA) certificate
6. Board certification (if required by the MCO or specified by the practitioner)
7. Work history
8. Malpractice insurance
9. History of liability claims
Regardless of the guidelines set, the MCO must put a system in place that ensures that its practitioners meet these standards before they are accepted as an active provider within the health plan. This system or process is commonly referred to as credentialing.
The credentialing process is just that – a process. It consists of a series of activities designed to lead to a decision to accept or reject an individual’s application to participate in the MCO as an active health care provider. A simple credentialing process is outlined below:
Application – Practitioners expressing an interest in participation with the MCO, and/or practitioners who meet the MCO’s organizational needs and administrative requirements, are invited to apply.
Initial Screening – Before proceeding with the next step, the application is reviewed to determine that it is complete.
New Provider Site Visit – The applicant is notified that a new provider facility assessment and medical record keeping process audit must take place.
Primary Source Verification – NCQA stipulates that seven criteria must be verified from the primary source because they identify the legal authority to practice as well as the relevant training and experience. MCOs may choose to use an external agency to collect information from the primary sources. If this is the case, the MCO has delegated this component of the credentialing process and must assume oversight functions. The criteria that require primary source verification include:
1. Valid license to practice
2. Status of clinical privileges at primary admitting facility
3. Valid DEA certificate, if applicable
4. Education and training of practitioners
5. Board certification if the practitioner states that he/she is board certified
6. Current adequate malpractice insurance
7. History of professional liability claims
File Preparation – Immediately following the initial screening, the file is prepared for presentation to a Credentialing Committee.
Data Entry – After all required data elements have been received, the individual practitioner’s credentialing file is entered into the MCO’s credentialing database and prepared for presentation to a Credentialing Committee.
The Decision – The decision to accept or reject an individual’s application is made by a Credentialing Committee.
References:
National Committee for Quality Assurance, The 2007 MCO Standards and Guidelines and Survey Tools
Related Web Site:
http://www.ncqa.org/ (NCQA)
The Doctor Will See You Now – Online!
Tuesday, April 1st, 2008 If you could have the equivalent of a doctor’s appointment – via the Web – without actually going to the doctor, would you do it? Would you be willing to pay for it?
Some doctors and health insurers are betting that patients will hand over a co-pay or more for the convenience of describing their symptoms from work or home.
Aetna and Cigna have announced that they will pay for doctors’ visits on the Web. The insurers think their customers – employers – will like the service because it can improve efficiency and might prevent more expensive problems. Insurers pay less for a Web visit than for a meeting with the doctor, and employees don’t have to miss work for an appointment.
This and similar programs are still in their infancy but will undoubtedly continue to grow; just as online banking has flourished. With convenience comes responsibility and patients more than ever will need to try and determine any out-of-pocket costs.
At www.USAHealthcareCosts.com patients can determine usual, customary, and reasonable charges for any AMA-approved CPT code within the U.S. Physician’s can also publish their prices via this web-portal, further strengthening provider relations.
Physician Payments Decreasing & Health Insurance CEO Compensation Increasing
Saturday, March 29th, 2008 CMS projects it will pay 10.1 percent less in 2008 than it did in 2007 for services provided to Medicare beneficiaries by physicians. These reductions will continue annually, and it is predicted that the total cuts will be about 40 percent by 2016. At the same time physician expenses are expected to increase 20% over the next few years.
Also, physicians likely consider Medicare payment rates in the context of what they receive from other payers, especially private insurers; as private insurers typically pay “a percentage of Medicare (known as RBRVS – Resource Based Relative Value System.”)
The average physician makes $149,000 per year, it may sound like a lot but it is not! Physicians pay $6,000 to $20,000 per year per physician just to file and administer insurance claims. Factor in malpractice, student loans, and other related business expenses and that $149,000 dwindles rapidly. Physicians lose countless numbers of dollars from non-payment of claims (float.) Another trick used by the insurance company is to say it never received the claim.
The insurance industry is playing to the physicians’ weakness to increase the profit from the float. Where does that profit go? Who is really making the money? You might want to sit down.
United Health Group
CEO: William W McGuire
2005: $124.8 million
5-year: $342 million
Aetna
CEO: John Rowe
2005: $22.1 million
5-year: $57.8 million
Cigna
CEO: H. Edward Hanway
2005: $13.3 million
5-year: $62.8 million
Humana
CEO: Michael McAllister
2005: $2.3 million
5-year: $12.9 million
WellPoint
CEO: Larry Glasscock
2005: $23 million
5-year: $46.8 million
We would like to thank Ira Kirschenbaum, MD for the statistics above, posted on his Thursday, August 23, 2007 WebMD blog: CEO Compensation: Who Said Health Care is in a Financial Crisis?
Not Currently Assessing Your Managed Care Contracts? Consider This
Most experts agree that the contractual relationships between healthcare providers and managed care organizations (MCOs) have not matured as expected from a strategic, financial, or operational perspective. In fact, the integrity and longevity of many managed care contracts has deteriorated.
Attorney General Andrew Cuomo of New York is conducting an industry-wide investigation of health insurers into allegations that reimbursement rates were manipulated. (1)
At the center of the scheme is Ingenix, the nation’s provider of health care billing information, which serves as a conduit for rate data to the largest insurers in the country. Mr. Cuomo intends to sue Ingenix, its parent, UnitedHealth Group, and three additional subsidiaries.
Mr. Cuomo has issued 16 subpoenas to the nation’s largest health insurance companies, including Aetna, Cigna and Empire Blue Cross/Blue Shield.
The investigation “calls into question the validity of a system that health insurers have used for years to reimburse physicians and their enrolled members,” Nancy Nielsen, president-elect of the American Medical Association, said in a statement. ”By controlling and manipulating UCR calculations, health insurers can keep reimbursements artificially low.” (2)
For UnitedHealth, the New York investigation comes only a few weeks after California regulators said they were seeking to fine a different UnitedHealth unit up to $1.3 billion over allegations of claims violations.
All Is Not Lost
Healthcare financial managers should be prepared to assess their portfolio of managed care contracts because preservation of the current portfolio may lead to deterioration of the organization’s financial and service position. More importantly, proper management can significantly increase revenues.
We strongly encourage you to review your group’s existing payer contracts. You and your providers should fully understand your contracts and fee schedules. (3)
Data and technology are essential to evaluate physician’s managed care contracts. Continuous performance and process improvements are critical to the vitality of any organization.
Electronic access to your managed care contracts and fee schedules gives you the capability to appropriately set fees, rank and compare payers, verify correct payment, and perform hypothetical analysis on any contract offer.
(1) The New York Times
By REUTERS
Published: February 13, 2008
(2) Nancy H. Nielsen, MD, PhD, AMA President-elect
Feb. 13, 2008 Press Release
(3) MGMA – Medical Group Management Association
Managed Care Contracting
On-Demand Technology
Wednesday, March 12th, 2008 For years physicians have been sold solutions that rely on complex software packages which require staff to wrangle with; often resulting in little to no benefit. Physician practices have become so frustrated that they are now out-sourcing many processes.
Physicians are not the only businesses to face this dilemma; think of how the banking and travel industry have evolved over the past few years. Consumers don’t think twice about accomplishing their banking needs online. Orbitz has all but replaced travel agents and when is the last time someone had to find you a hotel room – Hotels.com is one of many who can accomplish this for you on demand.
Physicians now have a choice between business-as-usual or harnessing the effectiveness of the internet; EMR’s is just one example. Practices work harder to get paid less – why is this? Well this is easy enough to answer – thousands of payers and more reimbursement rules than anyone could ever imagine. Another “software package” is not the answer; costs, training and updates alone make this an ineffective solution; often leading to abandonment.
Well what is a viable solution? Again think of the banking and travel industry – there are many others; they have pooled their talents/services, shared information, and provided it on-demand via the internet. Physician practices have the same opportunity. Individual physician practices are becoming as extinct as travel agents – the answer is to form a group, network, IPA, and the like. With the group(s) in place, coupled with on-demand web based solutions, physicians can now find their way through the thousands of payers and the reimbursement rules which make them work harder for less.
Web based solutions and group formation provides for information sharing, real-time analysis, convenience, little to no training, easy implementation, and ultimately reduced costs. Most importantly physicians and their practices now have a comparative advantage with payers. Any type of contract analysis is now available, real-time – whether it is regionally, nationally, or by CPT code.
On-demand services can provide financial benefits to physician practices of all sizes and specialties. Every practice needs solutions that will allow them to provide top-quality care and enhance profitability. These on-demand services will also allow physician practices to remain competitive in the ever-changing world of healthcare and contract management.
Employer Healthcare Expenses
Saturday, March 8th, 2008 Tracking expenses carefully is vital to a company’s success. With health insurance premiums making up an ever-growing portion of those expenses, insurance companies are under increased pressure to make it as easy as possible for policy holders to check on and understand their expenses.
In 2005, employer health insurance premiums increased by 9.2 percent – nearly three times the rate of inflation. The annual premium for an employer health plan covering a family of four averaged nearly $11,000. The annual premium for single coverage averaged over $4,000.
Some companies report that health insurance costs now rival the amount they pay for raw materials. Insurers that provide policies for smaller firms, or administer claims for large companies, are under increasing pressure to hold down their expenses as clients constantly hunt for less expensive payers.
Premiums for employer-based health insurance rose by 9.2 percent in 2005, the fifth consecutive year of increases over 9 percent. All types of health plans — including health maintenance organizations (HMOs), preferred provider organizations (PPOs) and point-of-service plans (POS) — showed this increase.
BI (Business Intelligence) Supports Decreased Expenses and Self-Service Reporting
There are business intelligence tools that can turn the healthcare cycle into a profitable one for medical providers, employers, and insurers alike. Insurers can provide self-service tools that allow employers to request and receive ad hoc reports and analyses online at a time that best suits them.
Data can be available online, through secure portals, in a way that makes it easy for companies to reconcile enrollment rosters for covered employees and the claims submitted, analyze cost and utilization trends, and make decisions regarding benefit plan options.
Data may be analyzed across various employee and plan segments. The ability to perform self-service reporting is considered so crucial that employers now routinely ask about self-service capabilities in RFP’s to insurers.
HSA’s (Health Savings Accounts) May Be the Answer
With health insurance premiums outpacing inflation by some 300% companies are seeing the advantages of HSA’s and beginning to design and price health plan offerings that fulfill employee personal and financial needs, while controlling corporate health care costs.
Shopping for Health Care Prices Can Be Pretty Confusing
From the President of the United States to the president of the biggest employer in town, it seems as if everyone is urging Americans to become better “shoppers” for health care. Get a high-deductible insurance plan. Open a health savings account. Call around and find the best deal on medical treatments, then pocket the savings. Sounds great: But just try it. Even as some employers, insurers and politicians tout consumerism in health care as the newest and best way to control rapidly rising medical inflation, it’s still exceedingly difficult to be a medical care consumer.
Most hospitals and doctors can’t or won’t quote a price for care. Quality information — such as mortality and complication rates — is available for some hospitals and some procedures, but information on individual doctors is rare. Even when prices are quoted, the data given might be nearly useless if they reflect “charges,” which few people pay, rather than actual negotiated rates. “If you walk into a (doctor’s office) and ask, ‘What does it cost?’ they can’t tell you. Nationally, few consumers try to shop or negotiate on price. Only 11% of adults say they had negotiated with a doctor, hospital or other health care provider to try to get a lower price, according to a Kaiser Family Foundation/Harvard/USA TODAY poll last year.
But that is slowly changing, driven in large part by employers’ push to get insured workers to pay more attention to cost. Like it or not, the focus in controlling rapidly rising health care spending is now on the consumer. Benefit analysts and organizations such as the Kaiser Family Foundation that survey employers say insured patients are going to spend more of their own money, not just on premiums, but every time they go to the doctor, pick up a prescription or get admitted to the hospital. Proponents of making price and quality data public say it will spur a more marketplace approach to health care as medical providers see what others are charging — and try to remain competitive — and patients who have to spend more of their own money on deductibles and co-payments select the more cost-efficient providers. The primary thing that will drive this is getting the consumer engaged.
Others are skeptical, saying health care might never be a true marketplace. “One of the false notions … is that only if providers fess up about their true prices can consumers get the kind of choices they find at Travelocity and CarMax,” says an editorial in the March 27 issue of Modern health care, a trade magazine covering the hospital and health industry. “The reality is that the most costly health care decisions are made by sick, scared patients in emergencies.”
Some say the debate is larger than simply a discussion about price, but more a reflection on the type of insurance people want or are offered. “It’s not about whether consumers should shop for health care like plasma TVs,” says Drew Altman of the Kaiser Family Foundation. “It’s about two fundamentally different approaches to health care: comprehensive and less comprehensive with high-deductible plans. Which does America want?”
Finding useful information; sometimes patients can’t shop: Riding in the back of an ambulance is no time to do price comparisons. Even when consumers know ahead of time that they’ll need a specific treatment; prices quoted by those hospitals, doctors and private data firms that do provide them are often based on an average or some other measure that might not be relevant, especially for those with insurance. HealthGrades, a private firm that sells data on prices for 55 different treatments, acknowledges that the prices it quotes are averages — and are not specific to any one hospital — but they are based on information about what insurers paid for the services. A typical report, which sells for $7.95, shows how much the patient would pay, how much the health plan might pay, as well as the total list price of a procedure, which is roughly equivalent to “charges.” Such information might be a starting point for an uninsured patient or one with a large deductible. But most patients with insurance might find the information not relevant to their particular policy.
True costs hard to find; Shannon Sylvia, who runs her own company in Leominster, Mass., outside Boston, says she called recently to find out how much it would cost for a dermatologist visit. At the time, she was without insurance and would pay the entire bill out-of-pocket. “They said they had to see me to know what they were going to do,” says Sylvia, who went and had a couple of skin marks taken off. Weeks later, the bill arrived: $79. She’s relieved it’s not more and says she’ll try getting price information in the future when she needs medical care.
Naomi Lopez Bauman, a public policy consultant in Shreveport, La., did negotiate ahead of time when she had her first baby last year. She and her husband, both self-employed, had individual insurance policies that did not cover maternity care. After selecting a doctor she liked, Lopez Bauman negotiated a flat fee for all the prenatal care and delivery, about $2,000, based on what she had learned about charges for such care from her father-in-law, who is an obstetrician, and other sources. She then called local hospitals to find out the cost of delivering a baby. She chose the hospital that was twice as expensive as the others, because she liked its services.
Despite the planning, the birth cost the couple more than expected because Lopez Bauman had to have a cesarean section, which cost about $8,000 for the hospital. Even with the added expense, she was pleased. “My husband and I are somewhat frugal,” says Lopez Bauman. “But one thing that I feel strongly about is I don’t want to skimp on my health care. When it came to having my first child, I’m not very price-sensitive. I want to know I’m getting the best care.”
Both Sylvia and Lopez Bauman illustrate a roadblock that some employers and insurers might face when they try to get patients to compare on cost and quality: Price might not matter if they like their doctors. Even if she found out her medical providers were more expensive, “I would not shop around. I love my doctors and can’t imagine going anywhere else,” Sylvia says.
Obtaining price or quality information from medical providers can be difficult. A few insurers are trying to provide more information:
United Healthcare
In about 100 markets nationwide, United is offering price information on 100 different hospital-based procedures based on its negotiated rates in those areas. For example: Hip-replacement surgery at one hospital is listed as $13,700 to $16,250, while at another a few miles away, the surgery is $10,800 to $13,699. The prices include all expected costs for the surgery, including doctor fees, anesthesiology, etc. The amount patients pay varies depending on the structure of their health insurance policies.
Humana
In southeast Wisconsin, Humana has offered an exclusive network to a coalition of businesses that lists the prices for 30 inpatient and six outpatient conditions or procedures, including heart attacks, mastectomies and colonoscopies. The prices quoted reflect the rates Humana has negotiated. For example, the total cost of knee-replacement surgery runs from $31,450 to $34,050 at higher-cost hospitals and $16,900 to $18,350 at lower-cost hospitals. The amounts patients pay toward those costs vary, depending on the benefits in their policies.
Aetna
In a pilot project in the Cincinnati area, Aetna is listing the negotiated rates among 5,000 doctors. For each doctor, 25 different services are listed. For example, among the prices listed for a cardiologist are the cost for an established patient to have an office visit for minor problems, $44.83; the cost of a three-dimensional heart study, $621; and the price of a heart ultrasound, $244. Patients pay all or a portion of those prices, depending on the type of plan they have. HealthMarkets - the Dallas-based health plan, which sells to individuals, the self-employed and small groups, lists negotiated rates for 20,000 different procedures among the 437,000 doctors and nearly 4,000 hospitals in its network.
Cost-sharing for workers; the move for a more public airing of the costs and quality of health care runs parallel with a growing interest by employers in offering insurance with higher deductibles and other cost-sharing by workers. The percentage of companies offering high-deductible policies — those with $1,000 or more annual deductible for single and $2,000 for families — doubled in one year, from 10% in 2004 to 20% in 2005, according to the Kaiser Family Foundation.
The Bush administration and others strongly support such high-deductible insurance, which can be coupled with health savings accounts, allowing policyholders to save money tax-free toward medical costs. In a speech to hospital executives last week, President Bush promoted health savings accounts as a way to drive price information and, ultimately, lower costs.
“Under the current system … most Americans have no idea what the actual cost of their treatment is,” he said. “So patients have no reason to demand better prices, and the health care industry is under little pressure to lower prices.” Supporters of high deductibles, including John Goodman of the National Center for Policy Analysis, say people who must use more of their own cash for care will be more judicious users of medical services. Goodman and others want more price and quality data available because, without it, people cannot shop.
The growing demands of employers for the information are helping push the medical industry to re-evaluate its long-standing hesitation to provide data on quality and cost. “The hospital industry has been very skittish about disclosing infection rates and things like that, as have doctors,” says Jim Unland of the Health Capital Group, a Chicago-based firm that does consulting for the health care industry. “This whole bringing sunlight to the industry is a huge change.”
But even with pressure from employers and the government, it’ll take time for useful data to be available. “We are probably three to five years away from having that information in a way consumers can really use it,” says Peter Lee of the Pacific Business Group on Health, a coalition of employers on the West Coast.
Silent PPO’s
Saturday, March 8th, 2008Contract Management Is Crucial
Preferred Provider Organizations (PPO’s) are frequently among the best payers. However, physician practices must be vigilant to assure that only patients entitled to a discount are receiving the negotiated fee. Otherwise, your practice will be extending a discount to individuals and insurance companies who should be paying your billed charges in full.
Silent PPO’s
Assume the following scenario: An individual insured by a small regional insurance company in Florida is visiting Texas and becomes ill. He calls your practice because he saw your ad in the Yellow Pages. Your front office fits them in and he is treated by you.
Since your practice does not have an agreement with the patient’s insurance company, you should receive your total billed charge. (The insurance company would generally pay an amount it determines to be the usual, customary and reasonable fee, and the patient is liable for the balance of your charges.) Many practices will not require any payment from the patient at the time of the encounter (other than co-payments noted on the insurance card), but will wait for the payment from the insurance company, and then “balance bill” the patient for the difference between the billed charges and the amount paid by the insurance company.
Instead, your practice receives an explanation of benefits for that patient claiming a discount based on the PPO fee schedule of MegaHealth (a PPO your practice has contracted with). Since you have contractually agreed not to bill MegaHealth enrollees for amounts in excess of the negotiated fee, this discounted fee is all you get.
Here is what happened. The Florida insurance company, when it received the bill from your practice, began shopping for a discount. MegaHealth provided its list of preferred providers, and they saw they had a match with your practice. The Florida insurance company sent the claim to MegaHealth for “re-pricing” (insurance talk for applying the MegaHealth discount to your claim). MegaHealth sent your practice an explanation of benefits on the usual MegaHealth forms, with payment at the MegaHealth discounted rate. MegaHealth billed the insurance company for the discounted fee paid to your practice, plus an extra fee. The extra fee is often based on a percentage of the savings to the insurance company, based on the MegaHealth discount as opposed to your billed charges. Your practice was just victimized by a “silent PPO.”
There are several ways a practice can protect itself from silent PPOs. One of the most obvious ways is to heed the old saying that if something appears to be too good to be true, it probably is. Insurance is a very competitive industry, and most employers base their purchasing decision predominately on price. To keep prices competitive, networks and insurers use their purchasing power to reduce fees to physicians and other providers of health care. If a network offers fees significantly above those of other payers in the area, you must be especially vigilant. How can they compete if they are paying you so much more than other networks or insurers? One possible (perhaps probable) answer is that they are not competing at all. Their business plan is simply to reduce the fees otherwise paid by insurers to your practice, and to take a profit from selling the discount they have obtained from your practice through the preferred provider agreement.
You should review each managed care agreement. In this regard, the definition of “Payer” in the PPO participating provider agreement is critical. Many plans define a “Payer” as “an individual, organization, firm or governmental entity, or self-insured account that has executed an agreement with MegaHealth.” This definition would allow MegaHealth to “rent” its network in the manner set forth above. In other words, the contractual language quoted would give MegaHealth the authorization needed from your practice to run a “silent PPO.” Presumably, you granted MegaHealth a discounted fee in return for inclusion in a provider directory, which “steers” patients to you. Of course, in the scenario discussed above, it was your Yellow Page ad that drove the patient into the office.
To address this issue, the definition of “Payer” should very clearly provide that the term relates solely to MegaHealth, affiliated entities in the insurance company holding group, and self-funded employee benefit plans that use MegaHealth as an administrator. It would be helpful if the definition of “Payer” specifically provided that the discounts being negotiated will not be accessible to any party other than those described above. Even better, some health plans are willing to provide a list of self-funded employers which have access to these discounts. It would be prudent to assure that such a list is given, and to check the list regularly against explanations of benefits received, to assure that the discounts negotiated with MegaHealth are not being “rented” to other parties.
In addition, the participating provider agreement should provide that the MegaHealth discount is only available to enrollees who present an insurance card with the MegaHealth logo on the card. If your practice copies the patient’s insurance card at the initial encounter (especially when the patient is a new patient) and compares the card to the explanation of benefits received, a silent PPO can be detected relatively quickly. If the MegaHealth logo was not on the insurance card, then no MegaHealth discount should be allowed. This precaution will help your practice administrator focus quickly on which preferred provider agreements to focus on first.
In many areas of managed care contracts physician practices are being pushed to the limit with escalating costs and declining reimbursements. Make sure that your practice only provides a discount to payers that are entitled to the discount.
