Power Points

Until recently, network PPOs operated fairly transparently. In return for a PPO steering patients your way, you agreed to discount your usual and customary charges, sometimes significantly. In principle, the more contracts you signed, the more access you had to prospective patients, who, over the years, have made PPOs their managed care arrangement of choice.

But as doctors have jumped enthusiastically onto the PPO bandwagon, agreeing to work for different rates in different contracts, they've helped to fuel another PPO market—often referred to as the "secondary discount market." Here, PPOs lease their provider lists and associated discounts to organizations that may not have networks of their own, like smaller health plans, workers' comp plans, or auto liability insurers. For some of these PPOs, the aim is no longer to steer patients to providers in return for certain financial concessions; it's to shop around their discounts, often without doctors' knowledge. Collectively, these are known as "silent PPOs."

These clients may have started off as entities without their own networks. But more and more, major health plans and others in the big leagues are also exercising their lease options, often through a middleman, in order to reduce their out-of-network bills.

The only loser in this arrangement is the doctor, who often ends up giving discounts to health plans he never signed up for, and which may not even steer any patients his way. The AMA estimates that annual physician losses due to these "silent PPOs" are between $750 million and $3 billion.

"This secondary discount market has now become so aggressive that doctors feel that they have no control over it," says Mark W. Rieger, CEO of Sacramento-based National Healthcare Exchange Services, which assists physicians in auditing and appealing health plan payments.

San Diego urologist James G. Knight agrees. "Tracking the silent PPO is like trying to track down ghosts," he says.

In the face of such stealthy behavior, what's a ghost-busting doctor to do? We took a closer look at how these PPOs operate to see how you can avoid falling into their grasp.

Out-of-network service—at in-network prices

To understand how silent PPOs operate in the real world, consider what happened recently to Eric Del Piero, an ophthalmologist and retinal specialist who practices in Monterey, CA.

In late 2004, a man whose eye had been injured several days before in a work-related accident walked into Del Piero's office to be treated. Del Piero examined the man; detected foreign bodies embedded in his cornea and orbit; and spent the next hour trying to remove them, which he eventually did. For the infection that had developed, he applied a topical antibiotic and prescribed an oral one, as well. At the end of the visit, he instructed his receptionist to schedule a series of follow-up visits over the next two weeks. To the patient's workers' comp plan, the office submitted a bill for $525—$275 for the initial visit, and $250 for the removal of the foreign bodies.