When a physician joins an insurer’s PPO network, they agree to accept discounted rates for their services in exchange for the insurer steering patients to the physician’s medical practice through a listing in the insurer’s provider directory. In other words, the physician receives a benefit from agreeing to accept discounted rates.
But, Silent PPOs (i.e, Silent networks) provide NO benefits to physicians, their medical practices or their patients. A Silent PPO is not an insurance company, not a health plan, and it does not contract with physicians. Instead, a Silent PPO is an organization that accesses discounted rates for physicians without the physician’s authorization or knowledge.
This is how it works:
A Silent PPO leases insurance company PPO networks, which then allows clients of the Silent PPO to access the discounted rates of the insurers. Those “clients” are typically third-party administrators, claims review and billing firms, and notably, even insurance companies themselves.
Because each insurer has a different set of discounted rates, the Silent PPO searches for the lowest discounted rate a physician has accepted with any insurance company and applies that discounted rate to all of the patients who are members of the “client.”
The patients are not members of the insurance plan the physician contracted with, but instead are insured through one of the Silent PPO “clients.”
Why do insurance companies use Silent PPOs? Three reasons: 1) not all physicians join every insurance company PPO, 2) discounted rates are different for each insurance company, and 3) and most importantly, because insurance companies want to pay the least amount of money possible.
Here is a typical scenario of how a Silent PPO is used:
Doctor Smith is not a participating provider with Insurer AB’s “direct” PPO network.
Because Dr. Smith is not in-network, when he submits a claim, Insurer AB cannot discount his rate of pay.
But, Insurer AB has joined a Silent PPO, which provides the insurer with access to a database of discounted rates that Dr. Smith has agreed to accept from other insurers.
Insurer AB then uses the Silent PPO’s lowest discounted rate to pay Dr. Smith.
Obviously this harms Dr. Smith, because his pay is significantly discounted without his authorization or knowledge, AND he receives no benefit in return. Silent networks also hurt patients, because when the discounted rate is applied to the insurer’s payment to their physician, the patient ends up paying more in either an unpaid balance or higher coinsurance.
California laws make it illegal for PPO networks to be leased without disclosing the arrangement to doctors in the network: Health & Safety Code §1395.6(a), Insurance Code §10178.3(a),(b), and Labor Code § 4609(a),(b). But, these laws are not always followed.
So, be on the lookout if you or your medical practice are receiving lower payments than what you contracted for and BEWARE of Silent PPOs.