Contract shock: PPO merger cuts physician pay

MultiPlan and Private Healthcare Services are reconciling contracts for the merged entity. Doctors say this means fee cuts.

By Jonathan G. Bethely — Posted May 21, 2007

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The AMA and numerous state medical societies are hearing complaints from physicians about what they say is a sudden reduction in rates by a large, independent PPO.

Some physicians who have received letters from the merged MultiPlan and Private Healthcare Systems say they are being forced to accept reduced reimbursement rates beginning in April and May as the merged company moves toward aligning the contracts of both companies into single agreements. New York-based MultiPlan, which describes itself as the nation's oldest and largest independent PPO, bought Waltham, Mass.-based PHCS last summer.

Teresa Devine, director of health care finance for the Texas Medical Assn., said she has fielded some of those complaints. She said physicians need to carefully weigh the impact that accepting the company's new fee schedule would have on their practices.

Devine and other medical society representatives said they are working to determine if, in fact, a percentage-based fee schedule that MultiPlan sent to doctors represents a ratio based on the current Medicare fee schedule or a commercially applied conversion factor.

MultiPlan said 40 million people have access to its medical networks with the addition of PHCS, which will continue to operate under the PHCS network brand name. James Burke, senior vice president for network development for MultiPlan, said the company followed all necessary procedures to change the fee schedule. He said it is willing to work with physicians and medical societies to address concerns about company philosophy.

Burke said some physicians are getting higher rates per procedure, while the reimbursement for "thousands of physicians did not change." Burke said physicians whose reimbursement schedule was cut can expect a larger volume of PHCS-affiliated patients. "I don't consider that adverse," he said.

If physicians drop PHCS because of reimbursement cuts, they might not be free of MultiPlan completely, Devine said. That's because the company has two ways to get to physicians.

PHCS negotiates directly with physicians and, as part of that business, is now handling contracts once negotiated under the MultiPlan brand name. But MultiPlan still uses its own name as an insurance re-pricer -- a business often derided by physicians as "silent PPOs."

MultiPlan rents PPO networks from other insurers and then offers those networks to employers and others with the goal of finding the least-expensive network available. Physicians often don't know they have become part of a rental network until they see a claim from an unfamiliar insurer.

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