How to Identify PPO Reductions (Part I)

How to Identify PPO Reductions (Part I)

Daily, we hear from workers’ comp providers requesting help with identifying whether Pilfering Provider Organizations (aka: PPOs) are hijacking the funds intended to pay for treating injured workers.

Below, we provide the step-by-step guide to helping providers and administrative staff understand the following:

  1. If a PPO took a portion of your practice revenue (highly likely)
  2. The amount of revenue taken via PPO reduction (sometimes tricky)
  3. The PPO entity that took the revenue (sometimes missing and often suspect)

If you are a doctor who treats injured workers, ask your billing staff to set aside for your review all Explanations of Review (EORs) that list a PPO Reduction.

  • If you do not recognize the PPO entity that took the reduction, you will need to contest the improper theft of your revenue (watch for future articles with step-by-step guides).
  • If you are appalled that Pilfering Provider Organizations are skimming reimbursements meant to pay for treatment, you will need to cancel the PPO contract (watch for future articles with step-by-step guides).

State regulators and legislators ignore these PPOs, which feed off of employers’ workers’ comp dollars intended to cover treatment for their injured employees. Why? They claim that doctors can refuse to sign or cancel these contracts.

Doctors, it is past time to act.

Step 1. EOR -  Fee Schedule Reductions Explained

When reviewing a provider’s bill, the payer’s bill review entity first determines if the billed charges exceed the applicable state workers’ comp fee schedule rates.

  • If the charges exceed fee schedule rates, the EOR reflects reductions to the amounts allowed by the state fee schedule. Most EORs include a dedicated column that reflects these fee schedule reductions.

  • If the provider’s billed charges accurately reflect the state fee schedule rates (instead of Usual & Customary Rates), the EOR will reflect $0 for fee schedule reductions.

Crucially, these Fee Schedule reductions do not reflect PPO discounts. 

Below are two examples that illustrate the fee schedule reductions column, common to most EORs.

The EOR from Sedgwick shows “FS [Fee Schedule]/UCR Reductions” reducing the charges as billed by the provider to conform with state fee schedule rates (in this case, the California Official Medical Fee Schedule, aka the OMFS).

The EOR from California’s State Compensation Insurance Fund (SCIF) shows $0 under “Amount Reduced,” as the provider’s billed charges equal the state fee schedule rates (California OMFS).

Step 2. EOR - PPO Reductions Revealed

After billed charges are reduced (if necessary) to reflect state fee schedule rates, PPO entities may swoop in and take a percentage of the fee schedule amounts due to the provider. Recently we wrote a detailed article explaining the brutal details of how PPOs force providers to “pay-to-treat” injured workers. 

Most EORs label the column showing PPO discounts with some variation of “PPO Reduction” or “PPO Savings.” The amounts listed in this column show exactly how much the PPO pilfered by applying a discount contract that your practice (allegedly) signed.

For providers that are not daisyBillers, calculating the percentage of the fee schedule reimbursement amounts pilfered requires some math. For daisyBill clients, our workers’ comp billing technology does the math.  

The EOR below from Sedgwick demonstrates how Sedgwick subverted the state fee schedule via a ‘Network Reduction’ that took $50.20 from the provider. This PPO reduction means Sedgwick paid the provider only 76% of the amount allowed by the state fee schedule (OMFS).

The EOR below from SCIF demonstrates how SCIF made a mockery of the state fee schedule via PPO Savings that took $78.96 from the provider. This PPO reduction means SCIF paid the provider only 18% of the reimbursement due to this provider per the state fee schedule (the California OMFS).

Step 3. EOR - Identifying the PPO Discount Entity

When reducing bill payment below the rates allowed by the OMFS, claims administrators must specify the entity with which the provider has a written contract establishing the claim’s administrator's right to PPO discounts. California Labor Code Section 4609(c)(1) states:

a payor, as defined in subparagraph (B) of paragraph (3) of subdivision (d), shall do all of the following:

(1) Provide an explanation of benefits or explanation of review that identifies the name of the network with which the payor has an agreement that entitles them to pay a preferred rate for the services rendered. [emphasis added]

This crucial legal requirement enables the provider to see how the claims administrator justified the PPO reductions — and may reveal that the claims administrator applied PPO discounts improperly (as our reporting ultimately revealed about an ACPN PPO contract).

The Sedgwick EOR below asserts that Sedgwick is contracted with Prime Health Services, and that this contract entitles Sedgwick to reduce the provider’s reimbursement by $50.20. This PPO reduction means Sedgwick withheld 24% of the state fee schedule reimbursement (again, the California OMFS) owed to the doctor for treating this injured worker.

Below, another SCIF EOR asserts that SCIF is contracted with Anthem Blue Cross, and that this contract entitles SCIF to reduce the provider’s reimbursement by $78.96. This PPO reduction means SCIF withheld 82% of state fee schedule reimbursement owed to the doctor for treating an injured worker (a true mockery of California’s OMFS).

Identifying PPO discounts and establishing their (alleged) contractual basis is the first crucial step in challenging improper reimbursement reductions by Pilfering Provider Organizations.

In this space, we will soon publish further resources to help providers, including:

  • An explanation of how some claims administrators attempt to hide PPO discounts on their EORs
  • Instructions for providers to demand proof from the claims administrator that a PPO discount is actually valid

Providers are not powerless in the face of rampant PPO discount schemes. With the right information (and technology), providers can proactively protect practice revenue.

Protect your practice revenue. Harness the power of daisyBill software, data, and expertise for faster, better workers’ comp billing.


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