"Silent PPOs"

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"Silent PPOs"

Like a thief in the night, third-party administrators are practicing a new method of creatively discounting your reimbursements. Here's what to watch for.

by Gil Weber, MBA
Contributing Editor

Reprinted with permission of the publisher.
Skin & Aging, Volume 10 - Issue 06
June 2002 - Pages: 82 - 86


An East Coast practice administrator recently showed me some fascinating documentation received from a third-party administrator in Texas. Along with an EOB (explanation of benefits) came a request for a signature acknowledging that the proposed remittance would be accepted as payment in full.

It stated in part:

My signature will confirm that the allowed charges for the above mentioned date(s) of service have been accepted and that the patient will not be balance billed for the remaining balance.

The practice had no contractual relationship or special fee schedule with the third-party administrator or the Texas insurance company it represented. And the proposed payment was for considerably less than the physician's billed charges.

Careful scrutiny of the EOB revealed that the payer was trying to extract a discount to which it was not entitled. Obviously, it hoped that the practice wouldn't realize there was mischief afoot and would simply accept the proposed payment without recognizing that the claim had been creatively discounted. This was a classic example of a deceptive insurance payment ploy known as the "Silent PPO."

Different Names, Same Scam

You might also hear of the Silent PPO scam under a variety of other names including non-directed PPO, voluntary PPO, wrap-around PPO or blind PPO. The American Medical Association describes a Silent PPO as the ". . . unauthorized and unconsented application of PPO discount rates to participating doctors by indemnity insurers and third-party bill review firms whose insureds are not participants in a PPO."

Now, it should be obvious that when you join a PPO and accept the scheduled discounts those discounts should only be applied to claims paid by participating payers -- those who direct their insureds into the network. Non-participants are not entitled to the special PPO rate.

Yet for some payers, non-participation is only a "technicality." And it doesn't stop them from trying to take what isn't theirs. If you're not vigilant and if you accept the check without realizing it's an underpayment, then the payer wins -- and you lose. And if you do bank the check, your chances of retroactively recovering the difference are probably slim and none.

Here, let's look a little deeper into the problem and discuss some ways to protect your interests and stop this audacious and common scam from adversely affecting your bottom line.

How Do They Get Away with Taking Unauthorized Discounts?

Perhaps it strikes you as just a bit incredible that any payer would be so bold as to claim such discounts. Further, how in the world would these scammers find out you're on the "XYZ" PPO plan and, further, its contracted rates?

Unfortunately, lists of PPO participants and contracted rates are available for a price from some insurance brokers. Essentially, they'll sell confidential data that are then appropriated by the purchasers as if they were legitimate PPO participants.

And in far too many instances the scam works because a lot of practices simply don't go over every EOB with a fine-toothed comb, and don't realize they're being scammed.

Identifying "Bad Actors"

There are a lot of bad actors on the claims adjudication/payment stage. Most often, they seem to work with or for indemnity insurers such as automobile liability carriers, personal injury insurers or workers compensation firms. But the bad actors can show up anywhere.

An auto insurance company, for example, typically doesn't have or participate in a managed care plan with financial incentives for patient care within a special network. Neither will it have ID cards or provider directories or other similar, common elements of true managed care plans. So when one of these insurers surreptitiously poses as if it is a participant, it's acting in bad faith and trying to steal the discount -- it's that simple.

How do you identify the bad actors? Look for these warning signs that might indicate mischief is afoot:

  • You have no copy of the patient's health plan ID card or confirmation that the patient is enrolled in the PPO or health plan referenced on the EOB.
  • The EOB does not identify the PPO or plan whose discount is applied to the claim.
  • The EOB does not specify the discount applied to the claim.
  • The EOB names a claim review (re-pricing) company or indicates that re-pricing software was used on the claim.
  • The EOB is from an unfamiliar insurance company or third party administrator, particularly one out of state.
  • You're asked to sign and return a collateral document accepting the payment as settlement in full (particularly on "big-ticket" surgeries).
Does Your State Law Offer any Protection Against Silent PPOs?

As with so much in managed care, it depends. More than a dozen states have some sort of legislation on their books dealing with Silent PPOs and the improper extraction of discounts. However, not all of those states have gone so far as to bar Silent PPO activity. An experienced attorney or your state medical society should be able to advise if your state's laws offer any protection and how meaningful they might be.

How to Fight Back Against Silent PPO Activity

If your state gives you specific remedy against Silent PPOs, then your response letter to the payer most certainly should reference that law and use it as the center point of any demand for full payment. But even if your state affords no specific protection against Silent PPO activity, your letter still should include some basic elements. Your attorney can advise you on the specifics and draft a letter with the appropriate "legalese," but here are some general guidelines.

1)  State your case and ask the payer to substantiate the discount. Tell the payer that you are unable to confirm the validity of the purported discount. Also, you can't confirm the claimed amount of the discount or any contractual relationship between you and the payer or any PPO (if one is named). Request that the payer prove it's entitled to the claimed discount.

2)  Request specific remedy. Tell the payer that you expect its answer -- either substantiation or payment in full -- by a certain date. Thirty days is probably a reasonable amount of time for the payer to reply. You should create a traceable timeline and establish proof that the payer got your letter by paying the small surcharge at the post office and getting a proof of delivery ("return receipt requested").

3)  Let the payer know that you're prepared to play "hardball," if necessary. As with most any other letter you'd write to a payer when contesting payment, you should state that you will take other, appropriate action to preserve your rights and protect your interests if the matter is not resolved by the deadline.

4)  Hold off immediately cashing any check that might come with the discounted settlement offer. Sometimes, those involved in Silent PPOs will include a check with an improperly discounted, but quickly processed, EOB. They're hoping you'll be happy to receive prompt payment and that you'll run to the bank without considering whether the payment amount was right or wrong. Unless you're willing to accept the inappropriate payment as payment in full, you don't want to act too quickly or in a manner that might prejudice any chance at further recovery. It's probably wiser to hold the check and to call or write the payer with your demands. Your attorney can advise you if it's better to ask for a supplemental payment or to return the check you have in exchange for another.

One Caveat

Despite what on the surface may appear to be a Silent PPO scam, it's possible that an unfamiliar payer is a participant in the referenced PPO and ordinarily would be entitled to the discount. However, you'll want to check your contract with the named PPO to see when and under what conditions payers become eligible for the discount.

For example, your PPO agreement might state that the plan will provide regular updates on payers added to the plan, and that upon notification these payers become eligible for the PPO discount. But if the PPO does not inform you per the terms of your provider agreement, you may not be obligated to extend the discount.

That becomes an issue for the payer and the PPO to hammer out -- why you were never sent the required notice. (Here again, you'll want to seek experienced legal counsel.)

A Last Thought

The quintessential, infamous watchwords of shady business dealings are attributed to P.T. Barnum: "There's a sucker born every minute." Well, Silent PPOs are scams designed to play you for the sucker. Be aware, be vigilant. Don't let them!


Gil Weber, a contributing editor to Skin & Aging, is a nationally recognized author, lecturer and practice management consultant to practitioners and the managed care industry, and has served as Director of Managed Care for the American Academy of Ophthalmology.

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