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Discount Dangers: The Provider’s Bill of Rights (Rights III and IV)

March 6, 2018 by Catherine Montgomery

Discount Dangers is a DaisyBill series on the ways discount contracts incorrectly reduce providers’ reimbursements. With this series, we shine a light on the worst discount practices, and help providers fight back.

Providers should know what they’re getting into when signing a discount contract.

In fact, Labor Code § 4609 explicitly affirms providers’ legal right to know what they’re getting into, and the contracting agent’s legal obligation to make the details clear. Disclosure is crucial to the equitability of a discount contract, and § 4609 mandates that certain key information not be withheld.

Much of that information concerns which payors are entitled to apply discount rates, and how those payors are expected to make the discounts worthwhile for the provider.

In our last installment, we pointed out the contracting agent’s duty to identify the payors eligible to apply a given discount. We also highlighted the payors’ duty to actively direct employees to the providers who offer it. Now, we’d like to take both of those principles a step further.

By law, providers also possess the following rights:

3. All providers have the right to know, in advance of signing a discount contract, if the discount rates to which they’ve agreed can be sold, leased, or otherwise offered to insurers or employers other than those originally specified.
4. When providers sign on to a discount contract, those providers have the right to know exactly how patients will be actively encouraged to visit their office.

Let’s take a closer look at these rights individually.

Disclosing Unspecified Payors

§ 4609 (b)(1) requires the contracting agent to tell the provider about any possibility of other payors or contracting agents gaining access to the discounted reimbursement rates to which the provider agreed:

Disclose whether the list of contracted providers may be sold, leased, transferred, or conveyed to other payors or other contracting agents, and specify whether those payors or contracting agents include workers compensation insurers or automobile insurers.

The opening paragraph of § 4609 requires that the agent state exactly which insurers and employers are eligible to apply the discount. But that’s not the limit of the agent’s responsibility to the provider. As § 4609(b)(1) states, the agent has to go a step further.

He or she must also disclose the possibility— however hypothetical— of any other payors gaining access to the discount.

This rule is designed to prevent the kind of unpleasant surprise exemplified by “silent PPO” discounts. It’s not enough to simply identify which payors can use the discount; it’s a bare minimum.

To truly comply with the intent of the Labor Code, contracting agents have to let providers know what could happen regarding those discounts— especially if the agent’s intention is to start handing these valuable discounts out to every payor under the sun.

Patient Steering

The whole premise of a discount contract’s value to providers is based on one thing: the notion that the contract will bring patients to the provider’s door.

If the first fundamental requirement of a fair discount contract is a limit on the payors who can access it, the second is patient steering. We established in Provider’s Right #2 the requirement to actively encourage employees to visit the providers offering the discount. But again, that’s a minimum.

§ 4609 (b)(2) takes the rule a necessary step further:

(2) Disclose what specific practices, if any, payors utilize to actively encourage employees to use the list of contracted providers when obtaining medical care that entitles a payor to claim a contracted rate...

Payors have to declare how, exactly, they intend to deliver on their end of the bargain.

Whatever payors do to make the contract worthwhile to providers by way of patient steering, they have to specify. Providers are not expected to just take payors’ word for it. They are entitled by law to know the details.

As for what constitutes “active encouragement,” we’ll explore that in our next installment.


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