Avoid Overlooking Silent PPO Risks, and Other Hidden Contract Issues to be Tuned in to when Negotiating a Health Plan Contract.
Health Care Providers (Providers) occasionally find themselves billing a health insurer (Payor), expecting full reimbursement, only to receive a significantly discounted payment predicated on discounts which the Payor claims have been negotiated with the Provider. This may arise from “Silent PPOs” or “rental networks”. In the current environment of large payors pressing Providers for discounts so the Provider can participate in their networks, be wary of Silent PPO’s. Managing a Provider’s operations is complex, and the varying array of health plans/payors used by their patients opens the door to confusion as to which Payors’ covered patients are eligible for specific negotiated rates. This confusion can result in a Provider erroneously accepting lower reimbursement than it is entitled to receive for some patients.
What is a Silent PPO? In a standard agreement between a Provider and a Payor, the Provider signs a contract giving a discount to entities within the Payor’s organization. The Provider receives “consideration” (something of value) in exchange for the discounts – such as a limited number of in network Providers (or alternatively a Tier 1 designation in their network), which acts to direct patients to the Provider; prompt payment terms; and streamlined claims processing. Silent PPOs are those situations where an entity (the Silent PPO) piggybacks on to a bona fide negotiated discount rate between a Provider and a Payor where the Provider hasn’t knowingly authorized third parties (the Silent PPOs) to access those negotiated rates. Essentially, the Payor leases the discount agreement it has with the Provider to Silent PPOs, granting access to the Provider’s discounts to the out of network Silent PPOs. In 2008 the American Medical Association estimated that Silent PPOs cost Providers up to $3 billion/year.
How to Protect Yourself from Low Reimbursement by Silent PPOs
The Provider/Payor Contract The terms of agreements with Payors should (i) limit the entities who can access your negotiated rates and (ii) require the Payors to keep your negotiated rates confidential. If they don’t, a Payor can seek to lease your negotiated rates to Silent PPOs. If your negotiated rates with a Payor are generally accessible to third parties, the Silent PPO can scour contracting sources to find the lowest charge you accept for specific services, and in many cases access the rates of the valid agreement between the Payor and Provider. This could occur if the Payor you negotiated the agreement with allows those rates to be accessed by other entities, essentially renting out your rates.
The first step is to include language in the Payor agreement which limits the entities who are eligible to receive the discounted rate. This is done by:
- clearly defining the parties who fall within the definition of the Payor under the agreement, and indicating that the negotiated discount is being provided in exchange for the Payor steering its patients to you as an in-network provider
- not allowing the Payor to lease, assign or in any other manner contract its rights under the agreement to other parties, absent an express written amendment to the agreement, signed by the Provider and the Payor
- clearly indicating that the discounted rates are limited to the Payor, as that term is defined in the agreement. Be wary of vague references to Payor “affiliates” in the agreement. Clearly defined Payor entities are a key to your getting the bargain that has been negotiated with the Payor.
- requiring that patients be provided with an ID card from the Payor, which includes a contact number at the Payor for you to use to address any questions you may have
- avoiding language that allows the Payor to routinely update its list of eligible entities to access the negotiated rates without providing adequate proof that any new entities fit within the contractually defined scope of eligible entities covered within the Payor definition
- requiring the Payor to provide clear and appropriate Explanation of Payments (EOPs) in conjunction with their reimbursing your office.
The Patient Visit When patients arrive at the office, require that they show their insurance card, even if they have been to the office recently. As a patient I’m not thrilled with this concept, but as an advocate for health care providers being appropriately compensated for their professional efforts, it’s important.
- In whatever manner you deem appropriate (and yes, there are client relationship issues with making these requests), it’s helpful to make patients aware that the reason you routinely ask for insurance information is because insurance arrangements are frequently changing and in some cases there is inaccurate information out there related to what plans have negotiated discounts with your practice.
- Staff members reviewing the card should confirm the Payor’s name on the card, and run it against the list of Payors you have negotiated rates with.
- If the Payor identified is not part of any of the networks you have negotiated reduced in-network rates with you should not accept a discount payment from that Payor as payment in full.
Review Explanations of Payments (EOPs) The EOPs you receive along with payments from Payors should clearly reconcile the difference between your billed charges and the amount the Payor is reimbursing you. Having adequately trained staff to validate that you are receiving proper reimbursement is important. To the extent you have done the up-front work in negotiating contract terms and receiving patient ID cards, a review of EOPs can capture attempts to under reimburse you.
- A clear EOP (if there is such a thing), besides including appropriate patient identifying information, should include the Dates of Service, Billed Amount, Allowed Amount, Disallowed Amount, Patient’s Responsibility for Co-Insurance or Co-Pay Amounts, and Coordination of Benefits allocations (to the extent a patient has more than one health insurance plan).
- Some flags found in an EOP reflecting Silent PPOs seeking to access your negotiated rates include where the EOP doesn’t name the PPO whose discount is being used to access the rate, the discounted rate is being accessed by a workers comp or auto insurer, or the company on the EOP is not one you are familiar with.
- If the information on the EOP does not support the discounted rate they are seeking to pay for the services contact the Payor to get more information and make a determination whether the payment is appropriate.
It should be noted that some states have passed laws to level the playing field for Providers. There is a “Rental Network Contract Arrangement Model Act”, and variations on it, which have been adopted in some states. These laws limit the ability of a Payor to allow third parties to receive the benefits of the Payors agreements with Providers. New Jersey is not one of those states.
Negotiation Preparation To arrive at a contract with favorable terms the Provider’s representatives need to be prepared and have clear objectives. Agreements which are negotiated based on thoughtful planning by knowledgeable legal and business representatives are foundations a Provider can use to obtain the best bargain and avoid traps.
Other Hidden Issues to Be Aware of in Managed Care/Health Plan Contracting
- Exhibits Have you received and reviewed all of the exhibits referenced?
- Master Agreement Are the terms of the agreement with the health plan subject to terms of a master agreement it has with another larger Payor organization? If so, you need to see the master.
- Definitions Understand them all. For instance, avoid being denied payment due to your misunderstanding of what a “clean claim” is.
- Regulations Incorporated Into The Agreement Are you familiar with them, do you understand them, and can you comply with the regulations?
- Agreement Term Extensions, Renewals & Terminations How long is the agreement’s duration, and what are the termination and extension rights and obligations. In particular, if you want the ability to make changes to the compensation terms for any extension of the agreement, make sure the Payor doesn’t have the right to have the agreement renew at the existing reimbursement rates. Be wary of evergreen clauses, where an agreement will automatically renew under the existing terms unless notice of non-renewal by one of the parties is provided in a given time frame (such as no later than 60 days prior to the expiration of the term of the agreement).
This isn’t a comprehensive list of everything to address in health plan contract negotiations, but are some points that I believe can be easily overlooked, even by experienced business people.
NOTICE: This article is provided for informational purposes only and does not constitute a solicitation for legal services or the provision of legal advice. This article should not be used as a substitute for obtaining legal advice from a licensed attorney.
David Meinhard, Esq. is a transactional and regulatory lawyer, with a practice concentration in health care and data privacy law, at Harwood Lloyd, LLC, located in Hackensack, NJ. David can be contacted at email@example.com or 201-359-3593.