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The taming of the wild west – PPO regulation is getting serious

The PPO world is about to get more complicated, and likely less profitable – for the PPOs.
The National Conference of Insurance Legislators (NCOIL) has developed model legislation tightly regulating PPOs, legislation that looks to be on the docket in at least two states next year, and likely others as well.
According to Bill Kidd in today’s WorkCompCentral, the model act “allows unlimited “downstream” rentals of PPO contracts and physician discounts, but requires that network access information be made available to providers.
The model establishes criteria for network and discount access and contract termination; sets out contracting entity rights and responsibilities, requires disclosure to providers and contracting entities of third-party access; provides for registration of unlicensed contracting entities; prohibits and penalizes under a state’s unfair trade practices act unauthorized access to provider network contracts and allows physicians to refuse a network discount without a contractual basis.”
The key is the notification requirement. The model act calls for PPOs to periodically inform providers of all the networks and ‘access brokers’ who can access the network contract. Providers have to be kept informed of changes to the list, and the list has to be emailed, mailed, and/or posted on a secure website.
While the issue of silent PPOs has been on a slow boil for years in many jurisdictions, It has been much more contentious in several states including Louisiana, Texas, California, and Oregon. Provider groups have complained that the managed care contracts they enter into have been sold and resold multiple times without their permission or agreement. That complaint is arguably minor; what is definitely not is providers’ belief that the payers accessing the contracts ‘downstream’ are not doing anything to direct patients, but are simply accessing contracts to get a discount.
This is the core issue – PPOs trade volume for discounts. For far too long, big, yellow-pages PPOs have done little to actually increase a provider’s patient volume. Many claim they have contracts with and/or access to hundreds of thousands of providers. If that’s the case, and I have no reason to doubt that it is, there is no way the PPO can claim it is actually directing care to a selected group of providers.
If everyone’s a member of the PPO, then it isn’t a ‘Preferred’ Provider Organization.
The bill under consideration in Texas provides a window into what other states may see on their legislative agendas.

3 thoughts on “The taming of the wild west – PPO regulation is getting serious”

  1. This is a step in the right direction. Story: I had a particular carrier (I won’t mention any names) who would “access” one of our PPO contracts with a network we participated in and then proceed to process our claims out of network. Not only would they take a network discount but they would hit the patient for a 50% benefit penalty for going out of network. Simply outrageous! I hardly doubt this carrier was “driving” patients to our facility because they were concerned with the “volume” trade off.
    Many of these carriers “network stack” so if the doc drops out of one network, he’s likely in another network that has been stacked and that can be tapped for a discount. It’s impossible to drive any type of patient volume in an environment like that. Further, in my experience many of these networks have outdated participating provider lists. The doc might have termed in 1997, but hey his name still pops up on our list. Then when you (the provider) try to correct the problem, it turns into a blame game; the carrier blames the network and the network blames the carrier. Then if you (the provider) refuse to participate, they (the carriers) try an strong arm you by using tactics like not accepting assignment (even though it’s checked on the claim form) and paying the patient directly or not speaking with you because of “HIPPA”…..really, I thought the medical provider is a covered entity.

  2. As step in the right directon this is not! The average physician participates with approximately 10 insurance plans (but for many, much more) – it is hard enough to manage the rules, policies, claims etc with the payers that a doc may be directly contracted with, now imagine attempting to manage those PLUS a bunch of other entities ‘accessing’ you. Physicians should have the right to opt out of being ‘sold’ downstream altogether – you par with the payer you signed a contract with, not all the other entities it then goes and signs contracts with. There is no control over revenues for providers that way. If you are managing your payer mix and projecting revenues based on those decisions, then find 10% of your services are now being paid at a discounted rate you hadn’t counted on, your business could be in real trouble very quickly. This does nothing to help physicians, it only further complicates the mess and puts additional expense on, and less revenue in the pockets of. physicians.

  3. so on one hand providers don’t think they are getting the volume they should from PPOs then turn around and fight for any willing provider laws. You can’t have both.
    Majority of the time you don’t par with a payor, unless your a rural provider, you par with a network. And the vast majority of networks have ID identification requirments that make it clear to any provider that trains their staff if the person is entitled to a discount. The problem is most proiders belong to dozens of networks and most staff aren’t trained.
    This is all a mess of the physicians creation. Cancel all network contracts and charge all patients the same price. Fair and less administrativly burdensome. Before you get any ideas about bilking plans like you did in 80s and early 90s us payors will go back to paying a % of RBRVS.
    The way I look at it, it is none of my business what you charge for your services just as it is none of yours what I pay for services. You be upfront with the consumer about your fees and I’ll be upfront about my reimbursements. Let the consumer decide.

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Joe Paduda is the principal of Health Strategy Associates




A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.



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