Reimbursement Shell Game



Physicians Should Beware of 'Rental Networks'

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Medical Economics Feature - August 2006  

By  Ken Ortolon
Senior Editor  

When physicians sign a PPO network contract, they assume they will be paid for services rendered based on the rates specified in that contract. But as Houston internist and oncologist Karen L. Cottingham, MD, has learned, that's not necessarily true.

Dr. Cottingham operates a boutique practice and sees only a handful of patients every day. Because she devotes extensive time to each patient and makes both house and office calls, she operates much of her practice on a fee-for-service basis and accepts few managed care plans - and then only contracts for small discounts off her normal fees.

Even so, Dr. Cottingham's practice manager and accountant, Albert Ramos, CPA, says health plans consistently attempt to apply steeply discounted fees for her services based on a long-since canceled contract she signed years ago.

That practice is called a "rental network" or "silent PPO," and physicians can lose substantial revenue if they do not pay close attention to the network contracts they sign.

Rental networks have been proliferating for years in the managed care market in Texas, and Texas Medical Association officials fear they will become rampant in networks developed under the new workers' compensation system as well. They advise physicians to keep a sharp eye out for any contract provisions allowing a PPO network to sell or rent its fee discounts to other entities. 

Getting Low-Balled  

Insurers use rental networks to shop for the lowest possible rates for physician services. Typically, physicians sign a PPO contract and agree to discount their fees in exchange for patients being steered into their practices, says Wichita Falls pathologist Susan Strate, MD, chair of TMA's Council on Socioeconomics. Such arrangements can be a good deal for both the physicians, who get increased patient volumes, and the payers, who save money on physician services.

TMA officials say rental networks can help bring patients into a physician's office if done appropriately. But most payers who access a discounted rate through a rental network get the discount without providing anything in return to the physician, says Dr. Strate.

Austin attorney Michael Stern, JD, says many PPO network contracts contain "assignment" provisions that essentially let the PPO network sell, rent, or otherwise transfer their rights to the discounted rates to virtually any entity they wish.

"Basically they are just assignment provisions allowing the company to assign to somebody else or delegate their rights and responsibilities," said Mr. Stern, who frequently advises physicians on managed care contracts. (See "Managed Care Contract Evaluation Services Available.")

"Usually it's down in the boilerplate that says the company can assign or transfer or delegate its interest in the contract," he said.

Once a physician signs a contract containing the assignment provision, an unlimited number of health plans, third-party administrators, and self-insured employers can access the discounted rates contained in that contract. Michael Reed, director of TMA's Managed Care Delivery Systems Department, says an industry of brokers and "repricers" is taking advantage of these contracts.

Here's how it works: A physician bills a patient's health plan for his or her contracted rate or an out-of-network rate, depending on whether the physician is in that plan's network. The insurer then shops for a lower rate with a broker or repricer, who uses the doctor's tax identification number to search all of his or her network contracts for the lowest rate. Once a lower fee is located, the health plan pays the rental network a fee to access that rate and sends the physician an explanation of benefits saying the rental network rates have been used.

Teresa Devine, director of TMA's Health Care Financing Department, says a health plan can use a rental network discount even if the physician has a contract for a higher rate with that plan.

While there is little a physician can do about the discounted fees if he or she has a contract with the rental network, discounted fees frequently are based on contracts signed years ago that are no longer in effect.

That's the case with Dr. Cottingham's practice. Mr. Ramos says some health plans still attempt to pay her based on rates from a contract she signed with MultiPlan Inc. It was canceled in 2003.

That, he says, threatens the practice's revenues and interferes with Dr. Cottingham's relationships with her patients.

Doctors aren't the only ones who lose money under rental networks, adds Dr. Strate. "The patients may have to pay a higher percentage of the physician's billed charges, so it works against both the physician and the patients." 

Where's the Enforcement?  

PPOs are not regulated under state law, and Dr. Strate says a 1999 statute requiring networks to notify physicians and get "express authority" before transferring their discount to other entities has gone largely unenforced by the Texas Department of Insurance (TDI).

Even if that statute were being enforced, Mr. Stern says the assignment clauses in many of these contracts essentially amount to the physician waiving his or her right to notification and consent.

"The law says the managed care companies can do this as long as they give the doctors notice, and by the wording of the contract, it's viewed pretty clearly that the doctors agree to it," he said. "It doesn't really specify what is going to be transferred or assigned or what notice is going to be given. It's just a very broad, general blanket assignment right."

TDI spokesman Jerry Hagins says the agency receives few complaints about rental networks, but added that one payer recently agreed to reverse discounts paid to one physician after TDI began an investigation based on the physician's complaint.

Dr. Strate says TMA is urging TDI to adopt regulations to enforce the 1999 law.

"Basically we've asked them to adopt regulations to define the term 'express authority' and to require a separate, signed contract to authorize any kind of rent or lease of the physician's discount each time the discount is brokered," Dr. Strate said. TMA believes that was the legislature's intent when the law was enacted.

If TDI fails to address the issue, TMA may seek additional legislation, Dr. Strate says.

She says physicians thinking of signing network contracts under workers' compensation also need to be aware of rental networks. Managed care networks are new to workers' compensation. Only two networks currently have been certified for the new system and both are owned by Concentra, a major player in the rental network market.

Bruce Landes, MD, president of Southwest Physician Associates in Dallas, a 1,300-physician independent practice association, says his group has advised their physicians' billing offices to watch for rental network discounts.

"A lot of the billing people didn't even know that this was going on," Dr. Landes said. "They would get an EOB that said this is the discounted rate. Well, they don't have the time to go back and check everything that comes in, so they wind up accepting the discounted rates and writing off the rest."

Mr. Stern says the only way physicians can avoid the rental networks is to "negotiate out that assignment right before they sign the contract." Whether that provision is negotiable may depend on how badly the plan wants a particular physician in its network. High-demand specialists might find it quite easy to get rid of, while family physicians or internists might find themselves in a "take it or die" situation, Mr. Stern says.

Once you've signed a rental network contract, the only way to keep other payers from using those discounted rates is to cancel the contract. But Mr. Stern warns that once payers are aware of a discount, getting rid of it is hard.

"It's like double-sided tape that gets stuck to everything," he said. "Once you get these plans keying doctors into the system under these new rates, it's going to be a burden to undo it."

Ken Ortolon can be reached by telephone at (800) 880-1300, ext. 1392, or (512) 370-1392; by fax at (512) 370-1629; or by email at  Ken Ortolon.  

SIDEBAR  

Managed Care Contract Evaluation Services Available

Physicians who want to avoid getting embroiled in rental networks or silent PPOs or who just have questions or concerns about their managed care contracts can seek help from the Physician's Contract Evaluation Service.

Created by TMA's Special Committee on Health System Reform, the service provides legal assessments of managed care contracts and can be used to review an existing contract or one a physician may be considering.

For a $150 fee, Michael Stern, JD, will analyze TMA members' managed care contracts for legal pitfalls such as assignment clauses that allow a physician's discounted fees to be rented to other payers, hold harmless provisions, or language that may alter your medical practice and referral patterns.

To access the service, send the fee and a copy of the managed care contract to Michael Stern with the Law Offices of Hubert Bell Jr., at 1907 N. Lamar Blvd., Ste. 300, Austin, TX 78705. You may contact him by telephone at (512) 469-9006, by fax at 469-9008, or by email at m_stern[at]sbcglobal[dot]net .

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