Silent PPOs: Physicians need to know who holds their contracts

State legislators and regulators must ensure that physicians know if their contracts are being re-priced.

Posted Oct. 3, 2005.

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In many financial markets, there exists what's known as a secondary market -- a place where investors buy from other investors.

You might be familiar with this concept if the bank that financed your mortgage notified you that it had sold your loan to a entity specializing in buying, rather than issuing, mortgages. Trading stocks not issued in an initial public offering -- meaning, most every share of stock -- fits the definition of a secondary market, as well.

The reasons for taking part in a secondary market might vary. It could be a straight bid for a big return or a hedge against volatility, but the rules by which these markets run generally demand transparency. Everyone knows the buyer, the seller and, of course, exactly what's being sold.

Not so with one of the hottest secondary markets going these days -- physician contracts.

In the last few years, physicians are reporting a boom in what are called leased or rental networks, perhaps more familiar by their derogatory moniker, silent PPOs. Essentially, physicians are finding that their health plan contracts -- and, especially, reimbursement rates -- are being put out on the market. Insurers are trading those contracts with one another, based on obscure language in the deals requiring physicians to accept terms proffered by the plan and any of its "affiliates."

The physicians didn't sign onto these deals, but they're in them anyway and, as a result, are finding themselves paid as much as 40% or 50% less than they expected.

It's bad enough that so many contracts from health plans don't even spell out how much physicians will get paid for their services. Now, physicians are being shortchanged and might not even be able to figure out who's doing it.

A number of factors are responsible for this contractual horse-trading. As more patients sign up for PPOs, there is greater pressure from employers to have their third-party administrators hold down costs. As more big insurers consolidate, firms find the quickest and easiest way into the health market is compiling and selling doctor lists -- not offering actual insurance.

The large number of brokers participating in a secondary market for physician contracts is making it more difficult to trace claims and actions relating to them. By the AMA's count, physicians are losing as much as $3 billion a year. The cost of tracking down individual claims is generally not worth the money that could be recouped.

When other problems have come up in contracting, such as issues with prompt payment, it has required action by state legislators and regulators -- with help from organized medicine -- to set things right. It's time for state lawmakers and officials to step up again.

Fortunately, authorities are showing at least some interest to physicians' concerns. California and other states have seen legislation introduced that would give more transparency to the secondary market. One model for legislation is Texas, which a few years ago started requiring plans to put on the back of their members' insurance cards any secondary entity they use for the purposes of re-pricing contracts.

In other states, legislators and regulators have given local physicians an audience to speak about the issue. Looking beyond state testimony, J. James Rohack, MD, the AMA's immediate past chair, recently spoke before the National Assn. of Insurance Commissioners and the National Council of Insurance Legislators about the issue of silent PPOs and other contract issues.

The idea of getting paid based on a contract you didn't sign is mind-boggling. It may be too much to hope that the secondary market for physicians' contracts can ever be made to disappear. But physicians must have the right to know when they're in that market -- and a right to be able to take themselves out of it.

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External links

AMA Private Sector Advocacy on health plan contract and payment issues (link)

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