boxsolid
The De-Evolution of the PPO Model (continued from page 9)
are subverting the cost-containing a given market provider outlets, which Medicare and Medicaid Services
goals of the organization. This was higher than the HMOs, but the (CMS) represent the single largest
must include the ability and desire market demanded more unfettered payer of hospital and other healthcare
to remove abusers from the system.
5
access. As such, it is now not uncom- expenditures and they have instituted
mon for some PPOs to capture 75- safeguards against unbundling. CMS
Despite an initial acknowledgement 80% of a given market. In this situa- understood that they needed to estab-
that PPOs needed to add accountabil- tion, a provider is in a wide pool, lish what constitutes a payable serv-
ity to their contracts, the model has by which dilutes the value proposition of ice, and assign a fee for that service.
and large since regressed back to a being in-network, which ultimately Some providers will not recognize
“no strings attached” platform. weakens the discount. these standards as applicable for pri-
vate payers, but we have seen exam-
Can PPOs actually steer members? PPO contract language can compro- ples where the courts consider the
Traditionally, steerage has not been mise payer rights. Some contracts will Medicare platform or floor as a mar-
perceived by the provider community add provisions whereby pre-certification ket standard:
as an effective driver for profit. determines eligibility and/or medical
necessity of the treatment. Some con- … the reimbursement at 150% of
Relatively few providers increased their tracts may also impose limitations and the comparable single surgery rate is
patient base enough to justify the level of regulations regarding claim audits, like not arbitrary or capricious. The
discounts negotiated during the first requiring a payer must pay in full (or a 150% modifier for bilateral proce-
round of preferred provider contracting.
6
high percentage of the claim) in order to dures has been adopted by Medicare
perform an audit, and the payer must and state insurance law as an
One prestigious health system was par- also pay an audit fee. Some contracts acceptable floor on reimbursement
ticularly dismissive of PPO networks, even expressly forbid audits. Further, for multiple surgeries performed in
characterizing them as “nothing more many contracts require that the PPO the course of the same operation…
than just a guy with a rate sheet.” contract rate cannot be challenged if it While … not dispositive, they sup-
However, these responses also reveal exceeds Usual, Customary and port the defendant's argument that
that most PPO networks with the Reasonable charges. That is, if you are the application of a 150% modifier
exception of Blues-sponsored ones, being billed a $60 Tylenol, too bad; you is standard procedure in the insur-
generally have less leverage (and small- have signed away your right to protest. ance industry. I am not prepared to
er discounts) with providers than conclude that Medicare's floor is
HMOs do because they have weaker If the PPO contract removes all con- arbitrary and capricious.
11
steering mechanisms.
7
straints, a provider can, by mere
adjustment of its charge structure, Most PPOs, however, do not monitor
This lack of leverage due to weak increase and unbundle charges with- billing standards in their contracts.
steerage has resulted in poor dis- out providing value for the consumer. Also, billed charges can often be
counts for the PPO, and correspond- Providers feel their charges are fair adjusted (increased) without the
ingly, a broad spectrum of payers has because they are the same as other involvement or even knowledge of the
been impacted. Today, steerage does providers in their area, and they often PPO and its subscribers. Beyond any
not seem to have improved substan- do not recognize unbundling (“We statewide transparency initiatives, these
tially and the PPO concept does not understand that you think we unbun- rates are also confidential. The follow-
seem to be firmly anchored in the dled our charges, but if we bundled ing is a standard clause in most PPO
minds of Americans. According to the these charges in accordance with your agreements, “the rates in our provider
American Association of Preferred so-called 'standards,' we would still agreements supersede all other rate cal-
Provider Organizations (AAPPO), 158 charge the same amount”). culations for covered services and those
million Americans are enrolled in PPO rates are confidential.” In other words,
plans.
8
However, in a recent consumer A hospital's charge description master a PPO's undefined rates are authorita-
survey, 80% of respondents did not (a list of billable items) can range tive and final, and no other reviews and
even know what PPO stands for, let between 12,000 and 45,000 accord- adjustments are appropriate.
alone how to maximize their savings ing to Medpac.
10
As there is such a
within the plan (in fact, most respon- wide variance of what constitutes a However, the following is another stan-
dents had not even read their plan).
9
billable charge, the notion of dard clause in most PPO agreements,
“unbundling” seems to be a reality. “PPO does not make determinations
Too much access, results in mean- concerning benefits or eligibility.” PPO
ingless steerage. Initially, PPOs were Without standards for billing, any dis- calculations may supersede all calcula-
conservative in their contracting cam- cussion for fair and reasonable pricing tions for covered services, but the PPO
paigns, capturing between 30-35% of is superfluous. The Centers for has no role in making determinations
10 • The Self-Insurer
©
/ January 2010
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