Practice Management Alert

Clauses in standard contracts may require physicians to honor patient discounts outside the PPO

If you don't properly interpret and change the language in the contract you sign with a managed-care organization, you could end up treating patients at substantial discounts who were never part of the MCO negotiated contact.

Healthcare Sold Like Discount Phone Cards

Virtually anyone is now able to purchase an insurance discount card for a nominal fee, which then gets the person access to the provider's PPO discount - a situation analogous to being able to buy a discount phone card off the street.

How does this happen? Answer: Through a situation known as a "silent PPO."

The problem: A silent PPO means an MCO sells or rents its PPO network to a third party. The third party - typically another PPO or an insurance broker - then offers the physician's services at the same discount to a much wider customer base.

The reason the MCO can do this and usually get away with it is that the physician has signed an MCO contract containing language such as an "all-payer" clause. And if you agree to an all-payer clause, you must accept as payment in full all discounted payments made by patients who bought insurance policies from the silent PPO.

The all-payer clause is just one of several ways that an MCO can force a physician into a silent-PPO situation. "Some things are not obvious on the face of the contract," says David Glaser, a healthcare law attorney with Fredrikson & Byron in Minneapolis. "A good example is a clause allowing the MCO to 'assign' the contract to anyone else. This would allow them to sell the right to any other company - whether they were part of the original contract or not - to offer discounts for the physician's services."

The solution: Faced with a thick stack of documents to review, many physicians will just sign the MCO agreement without having it properly reviewed. Others will assume that the terms of the contract are offered on a take-it-or-leave-it basis. The provider is making a big mistake under either scenario.

The first thing a provider should do is have the agreement reviewed by a healthcare lawyer who understands reimbursement. "The only way to protect yourself is to make sure the wording of the contract specifically prohibits a silent-PPO situation," says John Gilliland of the Indianapolis law firm Gilliland & Caudill. "Then, if the MCO tries to backdoor a silent PPO, this could possibly be a breach of its contract with the physician." Gilliland's advice: Don't assume that the standard contract offered by the MCO cannot be changed.

Ensuring compliance: How willing the MCO will be to change the contract depends on how much leverage the physician practice has in the geographic region it serves. For those without much leverage, compliance testing becomes especially important to ensure you are getting paid what you are billing.

"It's critical to test the contract negotiated with the MCO," says Carol Carden, senior manager with the consulting group Pershing Yoakley and Associates of Knoxville, Tenn. "If you don't test, there is usually no way to find out if the MCO is honoring the terms of its agreement."

Sampling payments will reveal whether there is a silent-PPO situation, which the physician can then query. Carden does admit, however, that even if you discover payments involving a silent-PPO situation, there may be nothing you can do about it if you agreed to the language allowing such a practice. That's why it's so important to get the PPO to state exactly who any other payers or PPOs party to the agreement are, and require them to notify the provider of any changes or additions.

The bottom line: Understand what you are really signing in your MCO agreements and speak up to have the terms changed, or you could end up silenced when you complain about the discounts taken by patients from other PPOs.