Tread Carefully Before Entering a PPO Agreement

If you are a provider under a Preferred Provider Organization plan, you may be losing tens of thousands of dollars to which you are entitled. There is a scam occurring throughout the country, called the “Silent PPO”, which is costing doctors a lot of money and creating a financial windfall for certain unscrupulous insurance companies and brokers. It works as follows:

Your patient, Mrs. Jones, who is covered by Shady Insurance Company, is treated by you. You bill Shady for 80 percent of the bill and collect the 20 percent co-pay from Mrs. Jones. Shady asks a discount broker to find out whether you are a party to any PPO contracts. The broker learns that you are a provider for Crooked PPO. The broker buys your discount fee information from Crooked and sells the information to Shady. Shady sends you a discounted payment with an Explanation of Benefits, explaining that Mrs. Jones is entitled to the PPO discount; or, in certain cases, Shady will contact Crooked and Crooked will submit a discounted payment to you, claiming Mrs. Jones as its own enrollee.

Your billing department accepts the discounted payment because, although it can verify whether Mrs. Jones is a member of the PPO, it cannot as easily verify whether Shady belongs to the PPO and is, therefore, entitled to the discount. You lose money, because you should have been paid the full 80 percent for Mrs. Jones’ bill, not the discounted amount.

The parties making money on your labor are Shady, because it pays less on the claim than it should; Crooked, because it gets paid either by the broker, for selling the discount information to the broker, or by Shady, for processing the claim on Shady’s behalf; and the broker, who gets paid for supplying Shady with your PPO information. One way to avoid this problem is by being very careful when you enter into a PPO agreement. Determine whether the PPO is reputable before you sign anything.

The following characteristics are generally indicative of a legitimate PPO:

1. The contract provides for the following in writing:
  a. Provider directories are current.
  b. Provider directories are made available to you before you sign the contract.
  c. The directories are updated quarterly.
  d. You receive a list of payers at contract signing.
  e. You receive a list of payers before you are required to give a discount.
  f. You receive an updated list of payers on a regular basis.
  g. You have permission to approve new payers—if you do not approve of the new payers you may opt out of the contract with no penalty.
  h. Members have ID cards which identify the member, the PPO and the PPO telephone number in order to verify eligibility.

2. The PPO has a large staff nationwide. A large staff indicates that the PPO is concerned about both provider and customer relations. It should have about:
 a. One customer service employee per 3000 covered lives,
 b. One claims administration employee for every 3500 covered lives,
 c. One provider relations employee for every 1200 providers.

3. The PPO should credential providers according to set standards and practices. The process should take 60 to 90 days and should require re-credentialing at least every two years.

4. The PPO should have its own internal Utilization Management/Quality Assurance Program.

5. The PPO should present its fee schedule as the basis for negotiation.

6. The PPO should offer training and educational programs.

The following characteristics are generally indicative of a problem PPO:

1. The PPO does not have a payer list or will not give you one.

2. Payors identify themselves as PPO members via the EOB only after you have seen their members.

3. The PPO does not issue ID cards, will not provide you with a specimen card (or refer to it in your agreement), and has no eligibility verification hotline.

4. The PPO has a small staff (This is almost an immediate give-away that the PPO has been set up to resell provider numbers).

5. The PPO does not credential its providers.

6. The PPO claims to have a national network, but contracts out all its Utilization Management and Quality Assistance functions.

7. The PPO does not have a fee schedule—it starts negotiations by asking how much of a discount you are willing to give.

8. The PPO is indifferent to the efficiency of your practice.

Reviewing the PPO contract for these items may be a bit time consuming initially, but will save you much money over the long run.

If you have any questions with regard to the above or with respect to any other legal heath care issues, you may FAX your questions to Deborah A. Green, Esq., at 954-971-3787 or call 954-971-7778 or e-mail [email protected]. In future issues, she will be answering those questions that are of interest to the broadest audience.

Ms. Green has been a practicing attorney since 1977. She is admitted to the practice of law in the State of New York and Florida and is a member of the American Health Lawyers Association, the New York State Bar Association Health Care System Design Committee, the New York State Bar Association Health Care Providers Committee, the American Bar Association Health Law Section and the Florida Bar Health Law Section. She has formed numerous multi-discipline practices throughout the country.


Because this column is being presented to you by an attorney, it would not be complete without a disclaimer. This column is provided subject to and governed expressly by the terms of this disclaimer. This column is provided for educational purposes only. The accuracy or timeliness of the information presented herein is not warranted. The information presented herein is not intended to be advice as to a specific fact pattern with which you may be presented.  Accordingly, please note that the information contained herein is not being presented as legal advice with respect to any matter and that no attorney-client relationship is hereby established.

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