Say It Ain’t So: Silent PPOs Are Here to Stay
On May 5, 2021, the Massachusetts Appeals Court issued its long-awaited decision in the case of Metropolitan Property & Insurance Company v. Emerson Hospital. Unfortunately, the Appeals Court ruled in favor of Metropolitan and found that Preferred Provider Agreements did not run afoul of G.L. c. 90 §34M, the Massachusetts PIP statute. The Court held that while the PIP statute requires payment of a medical provider’s reasonable expenses, nothing in the statute prevents sophisticated parties, such as medical providers and auto insurers, from contracting for a different reasonable amount to reduce the cost of healthcare.
Preferred Provider Agreements, or PPOs, are multi-layered contracts between medical providers, various third parties, and insurers. In a traditional PPO, or other managed care contract, health insurers create “networks” of preferred medical providers where insured patients have access to medical treatment at reduced rates. When treating within a “network”, an insured is entitled to receive reduced rates for medical care, which is largely paid for by the insurer (insureds may be responsible for co-pays and deductibles). However, if the insured does not treat with an “in-network” provider, the health insurer typically is not obligated to pay for the treatment. Medical providers seek these arrangements because they obtain access to a pool of potential patients with health insurance, which is often referred to as “steerage”. In exchange for steerage and access to this network, medical providers accept lower reimbursement rates.
However, in the auto insurance context, these types of agreements are often one sided and detrimental to the medical provider. Auto insurers do not have the ability to steer patients toward a particular medical provider like health insurers do. Auto insurers are obligated to reimburse whichever medical provider an insured decides to treat with, so long as the treatment is reasonable and necessary. Some may argue that the PPO contract ensures prompt payment of medical bills, but this is illusory. The PIP statute already requires payment to be made within 10 days of receipt of the bill. More importantly, auto insurers maintain all their defenses to payment, such as record reviews and independent medical exams. Therefore, medical providers are not gaining any benefit in exchange for giving up their statutory right to payment of their reasonable rates.
You may be asking yourself why a medical provider would ever agree to this type of contract. In many instances, the medical provider does not realize PPOs allow auto insurers to access their contract. In most cases, the medical provider contracts with a third party, such as the Coventry Health Network Three Rivers Provider Network, or Corvel. The third party then turns around and sells its lists of medical providers to the auto insurers. Frequently, the medical provider does not even realize the auto insurer is part of the network until they receive an Explanation of Benefits showing a reduced payment.
Bottom Line: There is no significant benefit for a medical provider to enter into a silent PPO in the auto insurance context. At Alekman DiTusa, we will review all of your PPO agreements to make sure you are receiving a real benefit in exchange for reduced reimbursement rates. If you are not, we will work with you to end these reductions by auto insurers.