Large national payers, with deep-discounted proprietary PPOs, pose a clear and present threat to TPAs. To remain competitive, TPAs must optimize in-network discounts and utilization and also get control of out-of-network expenses – without engaging in questionable provider discount abuse practices. Recognizing this, the number and use of “PPO aggregators” or “claim re-pricers” has swelled.  Providing payers with access to multiple PPOs, they exist by capitalizing on the broad and vague provider contract language that enables them to take “discounts” through “silent PPOs. Most of these firms do not have a direct contract, or even a business relationship, with either the PPO or the provider and, as a result, the deceptively extract discounts from providers who are unaware of it.

Labeled “provider discount abuse”, these practices are not only unethical and unfair; but, they may violate state and federal statutes (including ERISA) and carry civil penalties. As a result, insurance and managed care regulators, along with industry trade groups and provider lobbies, have been demonstrating unprecedented cooperation in support of legislation to end these practices. Provider discount abuse lawsuits are litigated as contract disputes, unfair trade practice violations and fraud.  Equipped with bulletproof arguments, courts typically rule in the favor of providers, as these suits are very difficult for payers to defend against. As such, experts believe that these practices will soon be extinct.

This paper focuses on how and why provider discount abuse occurs; why the discounts obtained from re-pricers are illegitimate; and how providers, payers, legislatures, regulators, and the courts are dealing with these practices.  It is based on a review and analysis of current law, recent court cases, and legislative and regulatory activity, as well as discussions with the full spectrum of involved parties.

Concluding that the claims re-pricing practices that are commonly employed are suspect at best and short lived, the author believes that payers must act quickly to find new means by which to manage their out-of-network claims while staying within the law and the parameters of fair business practice.
This may only be accomplished if the policies, processes, and techniques employed meet these 5 criteria.

1. A legitimate contractual relationship between the provider and the payer must exist, premised on a bargain for exchange upon which there is a meeting of the minds between parties.
2. There should be no material misrepresentations to the physicians as to how a discount is taken.
3. The method must preserve the integrity of the underlying PPO plan design.
4. Provider reimbursements should be arrived at fairly, and not through contentious methods.
5. The mitigation of plan sponsor, plan participant and re-insurer associated with discount reversals/denials, litigation and the potential to lose access to providers must be accomplished.

Most re-pricing schemes fail this test.  Few have a legal contractual relationship with the provider and , as a result, any discount taken may be illegal.  Most create issues re: logo display, patient steerage, deceptive EOB codes, plan document support, stop loss conditions, plan design integrity, etc, that are insurmountable thereby making access based re-pricing unfeasible.  Fee negotiation however, based on bargaining rather than access, is a legitimate but labor intensive method. As such, it may not be cost effective for low dollar claims, and a lot of claim dollars may go unmanaged if it used exclusively.

Based on bargaining and prompt-pay-induced discounts rather than access, a legitimate and practical solution may exist with financial mediators or factors that actually purchase non-network claims, settle them, and pay them in advance of payer funding.  An overt, voluntary process that is endorsed by many PPOs, it preserves the integrity of the PPO plan design, and supports compliance with ERISA, the plan document, and stop loss requirements.  Moreover, this method mitigates the risks associated with the discount reversals, denials, and provider litigation for the plan sponsor, plan participant and re-insurer.