Stopping Silent PPO Discounting: State Laws Recognize Silent PPO Unfairness

A number of state laws now set limits on Silent PPOs and seek to protect providers from unfair and un-negotiated preferred provider discounting.

Silent PPO discounting refers to situations in which a managed care organization sells or rents the established network of negotiated fee schedule pricing and discount agreements to a third party.

Organizations that establish PPO networks are typically able to offer providers incentives, such as patient volume and marketing exposure, in exchange for the agreed-upon discounts. In contrast, a third-party rental arrangement does not provide such benefits to providers and typically involves a smaller organization with less patient volume and marketing exposure “riding the coattails” of an organization with more negotiating power. Many major health plan contracts contain provisions that specially allow for such activity and providers need seek specific protections aimed at mitigating the damage of such arrangements such as the following:

• Identification of the PPO on all patient identification cards, which gives assurance to providers that there is some effort by the PPO to drive more volume to the participating providers
• Limitations and/or disclosure regarding the contracting organization’s ability to sell or lease to large-volume accounts only

A number of state laws now actually prohibit the use of silent PPO discounting. These laws are helpful for situations where claims have been discounted by an unidentifiable third party organization which is not contracted with the provider. Some of these laws prohibit leasing arrangements and others allow such arrangements as long as proper disclosure has been made to affected parties. If your state does not have a Silent PPO law, it is still important to appeal. Your appeal should cover the following:

• Clarify contracting status. Use language such as “Please be advised, we do not participate in a contract with your organization and our name would not appear on any list of providers which you distribute.”
• Request how the discounting arrangement has been previously disclosed. A number of federal and state disclosure laws apply to medical claims processing. Insurance contracts and employee benefits plans are often required to explain in unambiguous language how both in and out-of-network medical benefits are calculated. Therefore, you want to make that point that arrangements arranged with larger insurers are not applicable to the claims in question unless the arrangement was disclosed to both provider and patient.
• Refer to your Verification of Benefits. Use language such as “Verification of Benefits was sought from your company prior to treatment. It does not appear that your discounting method was disclosed at this time. Therefore, we request payment as described in compliance with the level of benefits described during verification.”