Reference no: EM13701621

Silent PPOs (Discounts from Charges)

Providers are urging the AHA and the AMA to file suit to halt illegal discounts taken by payors through so-called “silent PPOS.” According to the associations, millions of dollars in legitimate payments could be lost to hospitals and physicians in “billing schemes that create payment discounts for payors that are not entitled to them.”

An example of how a “silent PPO” works follows. A payor- an indemnity insurance company or a self-insured employer-receives a $10,000 bill based on charges from Oak Haven Hospital for treatment of a patient. The payor does not want to pay the full amount, so it contacts a PPO broker, which searches a database to find out which PPOS have contracts with Oak Haven as discounted rates. The broker informs the payor that Oak Haven has a contract with Friendly PPO that includes a 25 percent discount from charges.

The payor then remits $7,500 to Oak Haven, which indicates that the patient is covered by the PPO even though the patient has regular fee-for-service insurance of belongs to some other plan that does not have discounted contract with the provider. When Oak Haven receives the payment, it verifies that it has a contract with Friendly PPO that calls for a 25 percent discount. But unless the patient’s records are searched to determine whether or not the patient is actually a member of Friendly PPO, Oak Haven will probably grant the discount to the employer/insurer. Thus, the payor receives a discount that the provider is not legally obligated to give.

The AHA and the AMA refer to the practice as creating a “secondary market in contracted rates,” which they believe to be “big business.” According to the associations, some PPOS make their lists of preferred providers and rate discounts available to a wide range of providers and brokers for a fee. Several brokers who sell “silent PPO” discounts to payors operate nationally. Brokers may even supply payors with computer software containing the provider rosters of PPOS, which allows payors to automatically search for provider discounts and then to reprice provider bills with the discount taken. Brokers receive about 30 percent of the discounts saved and, often, will split their fees with the PPO that supplied the discounted rate information.

What do you think? Does this case present an ethical issue? If so, to which party (or parties)? If you could act as the ultimate authority on this situation, what would you do?