Recently, a DaisyBill provider contacted us to discuss a disturbing network contract, one that expands its net well beyond what this provider initially believed they were agreeing to.

In this post, we explain how this network agreement shamelessly takes referral fees from providers’ reimbursements — in the absence of actual referrals. Read on to learn more about how you can prevent similar revenue theft from affecting your practice.

How This Network Contract Cheats Providers

Note: for reasons of contract confidentiality, we cannot name the network whose contract so incensed us. To protect the provider, we will simply refer to “The Network.”

The hope that networks refer patients is the reason providers sign network contracts. As a fee, the networks take a portion of the provider’s reimbursements. In theory, such agreements work as follows:

1. In exchange for patient referral by the network,
2. The provider sends the bill for treatment to the network,
3. The network sends the provider’s bill to the payer,
4. The payer reimburses the network,
5. The network reimburses the provider a lower reduced reimbursement, below the Official Medical Fee Schedule (OMFS).

In reality, the reimbursement discounts can be sold, leased, or otherwise shared with various payers, regardless of referrals (or lack thereof). Without a clear understanding of the terms, a single discount agreement can infest a provider’s practice like a colony of termites, eating away at revenue one discount at a time.

Referral Fees Sans Referrals

Our provider assumed that the terms of the contract with The Network were such that the provider owed The Network a referral fee only for injured workers The Network referred to the practice. Yet The Network took a referral fee (in the form of reduced reimbursement) even when The Network did not refer the injured worker to the practice.

The provider forwarded the contract to our legal team for review. A close reading reveals The Network’s contract allows it to extract referral fees with no referrals whatsoever. 

To understand how The Network ensnared our provider, look to the language of this agreement. The contract designates the provider as a “Specialist Provider” who delivers “Covered Services” (treatment) to “Covered Persons” (injured workers):

Whereas, the parties desire that Specialist Provider provide certain Covered Services to Covered Persons.

[X.X.] Covered Person. An individual using medical or rehabilitative services delivered by a [Network] provider and who is eligible under applicable workers' compensation laws or other applicable insurance laws to receive benefits under a Payer's policy or a self-insured plan administered by a Payer.

[X.X.] Covered Services. All medical and rehabilitative services performed by a [Network] Specialist Provider on a Covered Person, excluding [xxxx] services, which are within the individual health care provider's scope of practice as authorized by applicable state law and which are payable under the applicable state medical fee schedule or reimbursement regulations... [emphasis added]

According to the contract language, The Network takes a referral fee each time the provider treats any injured worker covered by a payer with which The Network is contracted. In other words, as long as the payer has a contract with The Network, the provider receives less than OMFS reimbursement rates — regardless of whether The Network refers the patient.

Most importantly, this contract does not obligate The Network to refer a single patient to the provider. It only obligates the provider to pay, even when there is no discernible benefit to the practice.

Don’t Sign Without Modifying

We would argue that the structure of The Network contract is misleading. Intentionally or not, it buries the all-encompassing nature of the referral fee arrangement under layers of definitions and slippery wording. Arguably, the referral fees are at the core of the agreement.

We can’t stress this enough: Nowhere in The Network contract can we find a requirement for The Network to actually refer patients to the provider. 

To stop a given network from claiming provider revenue in the absence of a referral, providers need to carefully read their contracts. Where necessary, providers must strike certain language, like the language we reference above. Providers should never agree to any arrangement in which a network can so freely apply discounts without any benefit to the provider.

When considering a network contract, providers should insist on clear answers to the following questions:

• What does the network do to earn referral fees?
• What value does the network provide to the provider?
• What does the provider get in return for giving up part of their reimbursement? Is it worth it?

Referral fees are all but banished in the rest of the healthcare world. However, these fees thrive in workers’ comp, apparently even in the absence of actual referrals.

It’s practices like The Network’s that deter providers from treating injured workers. Even providers willing to tackle the administrative headaches of workers’ comp must endure further pitfalls, dug by organizations like The Network to strip them of proper reimbursement.

For providers to assume the burdens of workers’ comp only to be reimbursed at sub-OMFS rates is an insult, as well as a poor investment.

California should not subject providers to these unfair, unethical, and arguably deceptive arrangements that are so rampant in the industry. Even when there are laws to protect providers from the worst of these practices, we have seen little enforcement, and even less political will to protect those who restore workers’ health and return these injured employees to work.

Protect your revenue with DaisyBill’s expertise, technology, and data. Our mission is to ensure proper reimbursement to providers in the workers’ comp system.

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