We’ve told the story many times: a doctor signs a discount contract, hoping to bring in more patients. Almost immediately, revenue for treating injured workers is down across the entire practice — and the number of patients didn’t increase.

Sometimes, the entity responsible is a Preferred Provider Organization (PPO). Other times, it’s what we’ll call a “Network Payer.”

In this post, we explain the difference — and remind readers that neither Network Payers nor PPOs provide medical treatment to heal injured workers. Yet, these entities are handsomely paid by California workers’ comp (truly, money for nothing).

Discount Pilfering Explained

Both PPOs and Network Payers reduce doctors’ reimbursements to less than Official Medical Fee Schedule (OMFS) rates.  When a doctor receives a discounted reimbursement, the name on the check is the key to understanding which type of entity is taking a doctor’s revenue.

1. When a provider receives payment from the claims administrator at rates below the OMFS, a PPO is pilfering the revenue. The PPO and claims administrator (or its bill review) presumably entered into a contract that allows the PPO to take a portion of the doctor’s revenue even though the PPO furnished zero services for the injured worker.
   
2. When a provider receives payment from a Network Payer (rather than the claims administrator), these revenue reductions are the work of a Network Payer. The claims administrator directly paid the Network Payer for the services rendered by the doctor. Subsequently, the Network Payer reimburses the provider at a rate below the OMFS.

Essentially, the doctor’s inclusion in a PPO allows the claims administrator to pay the doctor less than the OMFS. But with a Network Payer, the claims administrator pays the network, and the network pays the doctor less than the OMFS.

Remember, neither Network Payers nor PPOs provide medical services to the injured worker. To paraphrase Dire Straits again, it’s literally money for nothing.

Broadspire Pays, MedRisk Takes

In California, workers’ comp regulations require payers to send providers an Explanation of Review (EOR) electronically when a provider submits an electronic bill. Further, California rules mandate that the electronic EOR includes required payment information.

When a network worms its way into the workers’ comp food chain, claims administrators send providers electronic EORs listing a NETWORK as the payee, instead of the doctor who submitted the bill. 

For example, Broadspire sent the provider the EOR below, which paid MedRisk, rather than the provider, $117.51. Obviously, this is an invalid EOR. (Not to worry, Broadspire. California doesn’t enforce its workers’ comp laws, regulations, or rules).

Subsequently, the provider received a second EOR from MedRisk that paid the provider significantly less than Broadspire paid MedRisk —  for the medical services furnished by the provider, NOT MedRisk.

The EOR the provider received from MedRisk paid the provider $80.00.

There are three facts established by this EOR:

1. Broadspire was willing to pay. We happen to have the (invalid) EOR exposing the fact that Broadspire paid MedRisk 85% of OMFS ($117.51) 
2. MedRisk paid the provider 57% of OMFS ($80).
3. The 57% reimbursement represents a rate that is approximately 73% of the amount allowed by Medicare for these medical services.

There is a single fact established by California workers’ comp: Treating injured workers is a great way to lose money.

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