While PPOs are generally considered beneficial for providers due to the promise of a broader patient base, silent PPOs bring forth an array of hidden pitfalls and challenges they pose for healthcare providers.
Understanding Silent PPOs
We all know what a traditional PPO brings for both patients and providers.
However, silent PPOs operate differently. A silent PPO is an insurance company tactic to lower reimbursements by accessing the discounted rates of another third-party, typically without the provider’s knowledge. Here, the customer is not the patient or the provider, but the insurance company. Third party rental network agreements are essentially “middle-man” agreements signed with a third party that contracts with several payers.
They sound easy – with one contract you essentially have a contract with all the payers that are signed up on their network. But these are detrimental to your bottom line. Think about it - if they’re helping insurance companies SAVE money, who is LOSING that money?
Companies like Multiplan, Data isight, Zelis, and Navicure like to refer to themselves as patient advocates, while in reality, they are cost containment companies. These are not mom and pop organizations. These are high funded, tech driven, highly sophisticated enterprises all setup to reduce payments to you, for a commission from the insurance company.
Let’s review the 5 biggest issues that often arise in these agreements:
- Your reimbursements are capped at an unfavorable rate
- The payers are not required to use it, and they don’t when it won’t benefit them
- There is NO patient steerage, despite their sales pitch
- It is virtually impossible to cancel
- You are not the customer
Providers who unknowingly participate in silent PPOs relinquish control over their fee schedules and contractual negotiations. These arrangements can result in providers accepting reimbursement rates that are far below what they would have negotiated themselves, limiting their ability to set fair compensation for their services. Plus, the payers are not obligated to use the contract. They have multiple agreements and will choose the one with the best rate, without the provider’s knowledge. The AMA estimates that annual physician losses due to these "silent PPOs" are between $750 million and $3 billion.
Also, there may be types of claims, such as those with limited benefit policies, that they don’t use the agreement to price. In other words, if the reimbursement level would be lower than the contract rate, they won’t take the contract. If the reimbursement level would be higher than the contract rate, they will use the contract.
Sometimes, providers don’t realize that the reimbursement levels are based on a percentage of the allowed charges, not the billed charges. This means that payers take a cut to arrive at the allowed amount, THEN they apply the discount to that lowered amount.
So let’s say you have a case with $10,000 in billed charges, and the agreement says they’re reimbursing at 70% of allowed charges. The payer then determines the allowed charges.
In this example, assume the allowed charges are 60% of billed charges, or $6,000. THEN, the payer applies the discounted rate from the contract, 70%. Of course, 70% of $6,000 is $4,200.
Many providers would think they’re getting 70% of $10,000, or $7,000, when they’re actually getting 70% of $6,000, or $4,200.
Our advice if your healthcare facility is currently involved with a third-party contract? Get out of it as soon as possible!
Additionally, be clear that there is typically no patient steerage from rental agreement. In the traditional managed care contract situation, you are essentially agreeing to a volume discount in exchange for the insurance company steering patients to you. In contrast, with rental network agreements, you’re accepting a discount, but typically are not seeing any additional patients.
Silent PPOs represent a pervasive but often overlooked challenge in the healthcare industry. While they promise expanded patient reach, their hidden pitfalls can have significant financial, administrative, and ethical consequences for healthcare providers. By understanding these pitfalls and taking proactive measures to mitigate them, providers can better safeguard their practices and ensure that they continue to deliver high-quality care while maintaining control over their financial well-being.
To learn more about Wakefield and how we can help you recover from third-party contracts, click here: www.wakeassoc.com/