At first glance, recent updates to California’s Official Medical Fee Schedule (OMFS) for workers’ comp may seem like a raise for doctors. By establishing OMFS rates at roughly 140% of Medicare rates, California affirms that treating injured workers is more administratively expensive than treating Medicare patients (about 40% more expensive).

But for many, many doctors, this OMFS “raise” is entirely negated by contracts with Preferred Provider Organizations (PPOs) like Anthem Blue Cross.  For example, Anthem contract terms can include:

1. Reimbursement rates significantly lower than OMFS rates,
2. No guarantee that the insurer or employer will add the contracted provider to its MPN, despite the provider’s accepting lower rates, and
3. The right to transfer reduced reimbursement rates to any and all “Other Payors.”

Below, we explore the terms of an Anthem discount contract for workers’ comp, and how claims administrators use Medical Provider Networks (MPNs) to bully doctors into accepting these financially unsustainable “pay-to-treat” contracts.The good news: we also share example contracts in which providers negotiated much more favorable terms with Anthem. For California legislators pondering the genuine problems of workers’ compensation: Consider questioning whether providers who agree to treat injured workers should be held hostage by Anthem’s (or any other) PPO contracts.

More importantly, should employers’ comp premiums enrich Anthem or any other PPO entity (which provides zero services to the injured worker)?

What is the point of a workers’ comp fee schedule if PPOs can easily circumvent the established rates? For provider advocates, it appears the end goal of allowing these predatory PPO agreements is to make it financially untenable for independent doctors to treat injured workers.

Anthem’s Bad, Ugly, No Good PPO Payment Terms

Below is language from an Anthem discount reimbursement contract for workers’ comp services. In this contract, for treating injured workers the provider agrees to accept the LESSER of

1. The “Prudent Buyer Fee Schedule”: This is the Anthem proprietary fee schedule
2. Billed Charges: The amounts charged by the practice
3. 85% of OMFS rates

In the worst-case scenario, when a doctor treats an injured worker, the doctor will be paid the “Prudent Buyer Fee Schedule” rates, i.e., rates dictated by Anthem.

In the best-case scenario, a provider who signs this contract will get 85% of OMFS rates — which would equal just 119% of Medicare rates.

In defense of these PPO discount reimbursements, claims administrators argue that providers signing contracts like the above proves California regulators are wrong to establish OMFS rates at approximately 140% of Medicare rates. In other words, if the doctor is willing to accept less, the doctor should be paid less. Here we debunk that argument, and explore why doctors really subject themselves to these contracts.

Anthem Sells and Leases PPO Terms

When signing the Anthem PPO contract, most providers do not understand that the contract allows Anthem to sell, lease, or otherwise transfer contractual discounts to “Other Payors.”

Yes, by simply signing this agreement, providers forfeit their right to receive the rates guaranteed by the OMFS, regardless of the entity paying for the services. As a result, the Anthem reimbursement discounts can spread like wildfire and apply to any (and all) “Workers’ Compensation employers, Carriers, insurers, or Administrators” “without limitation.”

PPO contracting entities like Anthem can lease these reimbursement discounts to bill review services, other discount networks, and claims administrators. Some companies (like Mitchell/Enlyte) even specialize in “PPO stacking,” a system that uses software to find the lowest rate to which a given provider has agreed and enables other payers to apply that low rate.

Theoretically, California has regulations in place to require that providers consent to every contract transfer and that reimbursement discounts are allowed only in exchange for demonstrable efforts by the payer to send the provider more patients. Unfortunately for providers, California regulators fail to furnish any tools for providers to report PPO contract non-compliance.

Yet we are meant to believe that if the doctor is willing to accept less, the doctor should be paid less…

Anthem PPO Pay-to-Treat

Given terms like those in the contract above, WHY do providers even consider PPO contracts? Many do so because they feel like they have to — usually under threat of exclusion from the insurer or employer’s MPN. Doctors believe these “pay-to-treat” PPO contracts are unavoidable.

Often, doctors are not wrong, as evidenced by the two messages from claims administrators to doctors below.

First, in an email, California’s State Compensation Insurance Fund (SCIF) reminds a doctor that inclusion in SCIF’s MPN is conditional on signing an Anthem contract. In other words, failure to sign the Anthem PPO agreement means the provider cannot treat SCIF injured workers.

Similarly, below insurer The Zenith drops the hammer on a provider who lost significant revenue due to an Anthem contractual PPO discount that was leased to nearly a dozen payers. Using the Anthem PPO rate, the “Other Payors” were simply slicing the doctor’s reimbursements to rates substantially lower than OMFS rates.

The provider insisted that it was not financially viable to treat injured workers at the Anthem Prudent Buyer Fee Schedule. Anthem subsequently removed the provider from its network.

Zenith responded by unceremoniously booting the provider from its MPN.

Providers, Insist on Better Terms (Example Contracts!)

The pressure to enter into PPO contracts is real and significant. For that reason, we cannot recommend strongly enough that if a provider intends to enter a PPO contract with Anthem or any other PPO, they negotiate better terms than in the example Anthem contract above.

Instead of the “lesser of” language that includes claims administrator proprietary rates, providers can simply negotiate a set, more sustainable percentage of OMFS rates. Multiple daisyBill providers have successfully secured agreements of up to 95% OMFS rates, which equals roughly 133% of Medicare rates — demonstrating that it is possible for providers to push back.

Providers can (and should) also demand that Anthem strike contract terms allowing the sale or lease of discounted reimbursement rates to “Other Payors.” In other words, if the provider agrees to reduced reimbursement in exchange for being listed in the employer’s MPN, then the discount should also be contingent on being listed in the employer’s MPN.

Below are several examples of Anthem contract terms, none of which pay the provider less than 90% OMFS rates (the contracts state the provider receives the contractual percentage of OMFS rates, or “Bill Review Allowed (BRA)” rates. BRA rates typically represent 100% OMFS).

California Legislators Should Protect Providers

The expectation that providers negotiate and manage these PPO contracts makes a farce of the OMFS, and drives independent providers from treating injured workers.

When the DWC increases OMFS rates, this is not a “raise” for many providers; it simply means PPOs can profit even more wildly by reducing practice revenue. For as long as California allows PPOs to use the MPN system as a cudgel to force providers into discount contracts, the OMFS will have limited value.

In the meantime, providers signing these PPO contracts must stand firm and insist on the best possible terms. Any contract that requires the provider to accept “the lesser of” multiple rates — where one of the rates is dictated by the “Prudent Buyer Fee Schedule” — is a bright red flag.

Disclaimer: the information in this post is strictly for informational purposes. It is not legal advice; use at your own risk and discretion.

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