 A tough decision to drop an insurer in 2003 came after financial reports revealed a decline in the insurere’s payment rate. Since then, the rates have climbed back. |
A hidden PPO is an insurance company that discounts your charges without your consent. This can happen when insurance companies with which you have signed contracts for a set fee schedule then pass these rates on to other insurance companies with which they have contractual relationships, but you do not. This dubious discounting technique has been used at an increasing rate in recent years.
Untangling Dubious Discounts
There are at least two ways to discover if you are the victim of hidden PPOs.
- Audit EOBs The simplest method is to audit the explanation of benefits forms that you receive from insurance companies — especially the EOBs of those companies that are paying charges or a percentage of charges rather than those remitting based on contractually set fees. You may find that you are not being paid the correct amount and that in many cases you are being paid significantly less. Upon contacting the insurance company (Company B), its representative may inform you that “we priced the bill at the rate you contracted with Company A, and according to your contract, we can apply that rate because of our contract with Company A.”
Your practice’s billers, particularly if they are rewarded on a days-in-receivable basis, may not have delved into the underlying problem; to move the account off the books, their interest may be in just posting the payment and writing off the remainder of the charge to a contractual adjustment. The solution may be either to hire someone to do EOB audits (a position that usually will pay for itself, especially in large practices), have a supervisor perform the audits, or contract a consultant.
- Analyze Financial Reports A second way to find hidden PPOs is to perform analysis that can help determine the possible extent of underpayment. First run reports that provide payments and adjustments for charge-based payers — auto insurers, for example. Run these reports for the last three to five years. For each year, add the payments and adjustments. Divide the payments for each year by the totals for each year calculated previously. You may be able to see trends of decreasing percentages of payment or absolute levels of payments.
| The deterioration was traced to one PPO that represented only 3.5 percent of our business. The insurance companies with which this PPO had contacts actually paid the PPO a percentage of the savings from our charges. |
For our practice, I run payer-mix reports on cash payments instead of just charges. This method found that the actual payment percentages for our auto insurance charge-based payers had dropped from about 85 percent of charges to about 55 percent over a five-year period. This deterioration was traced to one PPO that represented only 3.5 percent of our business. The insurance companies with which this PPO had contracts actually paid the PPO a percentage of the savings from our charges.
After a one-month failed negotiation process, our practice decided to drop this PPO effective Jan. 1, 2004. This was a very difficult decision to reach within our own group. Some physicians were extremely reluctant to say no to any business and also doubted whether we would really see any increased reimbursement. As shown in the chart, since that time we have seen our payment rates from auto insurers return nearly to the 85 percent level, increasing our practice’s annual reimbursement by more than $650,000.
This is not to say that your results will match this dramatic outcome. However, finding hidden PPOs may well be the easiest way to significantly improve practice net income available today.
Nick Green is past president of NERVES, www.nervesadmin.com, and practice administrator for Michigan Head and Spine Institute PC in Southfield, Mich.