Practice Management & Allied Staff
News & Materials
Silent and Rental Network PPOs: Identification and Prevention
January 5th, 2007
One important consideration a provider must address when negotiating a managed care contract is the possibility of silent PPO and rental network activity. Providers unknowingly involved with silent PPOs via rental networks often receive discounted reimbursement they never intentionally agreed to instead of typically higher in or out-of network fees they had expected.
What are silent PPOs and/or rental networks? According to the American Medical Association (AMA), rental networks are not traditional managed care products offered by payers to their clients. The AMA explains that these schemes exist to market a physician's discounted rates to third party payers such as insurance brokers, third party administrators, local or regional PPOs or self-insured employers. Essentially, silent PPOs are preferred provider organizations that lease their networks from other payers.
How do silent PPOs and/or rental networks operate? In a typical scenario, a physician submits a claim to a payer who then in turn submits the claim to a network broker. At that point the network broker runs the claim through its database assigning the highest discounted rate from all contractual arrangements to which the physician has agreed. The physician then receives an explanation of benefits (EOB) with a payment that does not reflect the rate contractually agreed upon with the particular payer.
How should a provider identify whether he or she is a victim of a silent PPO and/or rental network? An office might consider conducting audits on a monthly basis if not more frequently. To implement such a process it will first be necessary to have a comprehensive file of all contracts for which a physician has agreed. As discussed above, staff should review carefully rates that are lower than those contractually agreed upon by the physician. Staff should also scrutinize EOBs and patient insurance cards to determine which payers are legitimate parts of the network as defined by the contract. Checking company web sites for hints about which other companies it works with and may rent its network to serves as another way to stay on top of things.
How can a provider prevent the effects of a silent PPO and/or rental network? The AMA Model Managed Care Contract specifically addresses rental networks and silent PPOs by defining a "payer." The term is defined to make clear that a managed care organization (MCO) cannot rent or lease the terms of the agreement to other entities. The only exception is an employer offering a self-funded product that has contracted with the MCO to administer benefits. This is something providers should attempt to include in their managed care contracts during the negotiation process. At a minimum, physicians or their representatives should request information regarding a managed care organization's relationships with other PPOs and healthcare networks before signing a contract. Negotiating language into contracts requiring payers provide updated affiliate lists once per month or more frequently if and when payers are added or removed can too be helpful. Also beware of "all-payer" clauses which would similarly allow a PPO to rent or lease its physician network to non-contracted entities.
What if a provider has already been the victim of silent PPO and/or rental network activity? Providers should appeal payments received that appear to have been repriced and not the amount to which the physician contractually agreed.
Are there any state laws that can help a provider fight silent PPO and/or rental network activity? There are several states whose laws prohibit silent PPO and rental network activity. For instance, in the state of Oklahoma a PPO may not sell, lease or otherwise transfer data about reimbursement without the express and prior authorization of the provider. California law requires any MCO contracting with a physician to indicate whether the MCO's networks can be sold or rented, to provide a list of all payers eligible to access the physician's discount and to give the physician the opportunity to decline participating with any particular payer. In addition, it requires that all EOBs identify the plan with which the physician has a written contract. Other states that address this type of activity include Kentucky, Louisiana, North Carolina and Texas. Check with your state Department of Insurance to determine whether your state has enacted similar legislation.
In summation, it is vitally important that providers review and understand contracts before signing them. This protects the practice from the unauthorized use of discounts it has not expressly agreed to and other unintended negative consequences. For additional information, AMA members can access the AMA Model Managed Care Contract or visit the AMA Private Sector Advocacy web site.