PPO "administration fee": Physicians pay to get paid

Doctors must pay 3% to 5% of their reimbursement check to a company that organizes health networks. And that company is growing.

By Robert Kazel, AMNews staff. Aug. 4, 2003.

When John Rollo, MD, looks at his payments from the HealthLink network, he feels angry because he knows he will have to pay back 5% of each reimbursement as an "administration fee."

"Frankly, to have to [pay] this is offensive," said Dr. Rollo, a St. Louis pathologist. "It's gouging. I see these administrative fees basically as a kickback. If a physician provided a consultation to another physician and asked for money, he would go to jail."

HealthLink, with no insurance assets of its own, is a "rental" network, a go-between that has signed mostly PPO contracts with at least 25,000 doctors on one side and more than 400 payers on the other. Middleman networks such as HealthLink make money by charging myriad payers -- unions, self-funded employers, third-party processors and others -- for assembling and maintaining health networks. In HealthLink's case, however, money is streaming in from both sides; every physician in the network must pay a fee ranging from 3% to 5% of each discounted reimbursement, depending on the doctor's contract.

Because of corporate growth and mergers, the specter of administration fees for doctors has grown far beyond HealthLink's roots. Many more physicians are seeing the fees, and more are likely to in the future. California-based WellPoint Health Networks Inc. purchased HealthLink in 2001, and the company already has roughly tripled the number of doctors in the network by expanding to markets in the mid-Atlantic states and the District of Columbia.