This past Sunday, the Executive Committee National Conference of Insurance Legislators (“NCOIL”) adopted model legislation intended to stop the activities of “Silent PPOs”. A “Silent PPO” is an arrangement where one organization buys or uses a discounted rate for services from a health provider or practitioner without the provider’s knowing authorization.[1]
Largely unregulated, Silent PPOs gather information about provider negotiated discounts and sell access to these discounts, typically for a percentage of the savings. Silent PPOs typically do not make referrals, but provide access to the discount only after services are provided and do not bind the payor to the terms of the original agreement, including prompt pay. So the provider receives no benefit in exchange for his discount. As one physician stated, “Many of these [secondary discount and claim repricing] entities provide no value whatsoever to the physician, but exist for the sole purpose of trafficking in provider discounts.”[2]
The model law regulates “Contracting Entities” defined as “any person or entity that enters into direct contracts with providers for the delivery of health care services in the ordinary course of business.” “Providers” in turn, are defined as physicians, a physician organization or physician hospital organization acting exclusively as an administrator for the provider.
The model law requires Contracting Entities to register with the state. This registration requires providing state authorities with valid contact information.
In addition, the model law restricts the activities of “Contracting Entities, allowing them to grant access to the discounts only if:
- The 3rd Party accessing the discount
is a payer[3]
or TPA accessing the network on behalf of a TPA, a PPO or an entity engaged in
electronic claims transport only between the Contracting Entity; and
- The contract with the provider specifically
allows leasing of the network. For more
information about the difference between Network Access Agreements and Silent
PPOs, click here; and
- The 3rd Party accessing the
provider’s services (and discount) is contractually bound to the terms of the
provider’s direct contract; and
- The Contracting Entity gives the Provider a list
of 3rd Parties accessing the Provider contract on request at the
time of the initial contract; and
- The Contracting Entity provides a quick means
for the Provider to get a list of 3rd Parties with access to its
Provider Contract at least every 90 days; and
- All 3rd Parties accessing
the Provider through the Contracting Entity identify the source of their
discount on their Remittance advice or EOP; and
- The Contracting Entity notifies the 3rd
Party of an upcoming termination of the Provider – Contracting Entity contract
and requires 3rd Parties to discontinue using the discount as of the
termination date (subject to applicable post-termination continuity of care
laws).
The model law does not prohibit 3rd Parties from re-disclosing the discount, but requires that they follow the provisions of the model law, including delivering a list of its contracted payors to the original Contracting Entity for disclosure to the Provider. I do not believe the model law requires 3rd parties to register with the state if they re-disclose the discount.
The definition of unfair insurance practices has been expanded to include knowing access or use of a provider’s discount without a contractual relationship with the provider.
Direct Effects on Providers
The model law also restricts the Provider from disclosing the list of
Contracting Entity contracted 3rd Parties and expressly authorizes a provider to refuse a discount if the EOP or
Remittance Advice does not disclose the contractual basis for the discount.
Link to NCOIL web site: Here
[1] A Silent PPO may also be referred to as a “Passive PPO”, “network broker”, “aggregator”, “repricer”, “stacked PPO” or the “secondary discount market”.
[2] Bringing Fairness and
Transparency to Health Plan Payer Contracting and Payment Processes, Testimony
of Dr. James Rohack to the National Conference of Insurance Legislators,
July 8, 2005; Found at www.ama-assn.org/ama1/pub/upload/mm/378/ncoil_testimony.pdf
[3] The model law does not define its use of the term “payer.”
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