Contract disclosure: How PPOs can earn praise, not profanity

Like any other kind of health plan, preferred provider organizations must be open and honest in their contracting with physicians if they want to maintain good reputations.

Editorial. Aug. 4, 2003.

When it comes to public perception of what's wrong with health care coverage, PPOs have led a charmed life. HMOs were the only ones mentioned by name when Helen Hunt's character tore into managed care in her famously profane speech in the movie "As Good As It Gets." And an HMO executive was a target when Denzel Washington held a hospital staff hostage in "John Q."

So far as we know, neither movie has a sequel in the works giving characters a shot at complaining about preferred provider organizations. But in real life, many physicians are ready to give their own profanity-spiced speeches about PPOs. Doctors increasingly complain that PPOs are engaging in the same kind of contract abuses -- failing to state payment terms, changing contracts without physicians' knowledge, etc. -- attributed to HMOs.

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With PPOs in mind, the AMA House of Delegates in June passed a resolution expanding upon previous policy -- first enacted in 1995 -- to get insurers to make full disclosure of contract terms to physicians. The latest resolution calls for:

Payers to make a copy of the executed contract available to physicians within three business days of the request.
All health plan explanations of benefits to contain documentation regarding the precise contract used for determining the reimbursement rate.
All contracts to be made available once a year for physician review at no cost.
No contract to be changed without a physician's prior written authorization and when a contract is terminated pursuant to the terms of the contract, the contract may not be used by any other payer.

PPOs started as a simple, discounted fee-for-service type of arrangement -- usually 80% of the physician's stated fee got paid. But over the years, PPOs have grown to be more like HMOs, in terms of the mystery and complications in contracts and in payment. Plus, PPOs could provide the unwanted thrill of discovering that the physician has signed up for unintended obligations such as honoring other PPOs and discount card networks. PPOs may work as third-party administrators on behalf of self-insured companies or others, meaning that if there's a question on payment, the doctor never really knows whom to call to get an answer.

These annoyances have grown far more irksome as PPOs have grown in the marketplace. PPOs' straightforward networks -- if the doctor is in the book, you can go to him or her, with no gatekeeper required -- have grown more attractive to consumers, and even to more physicians as well. As a result, PPO enrollment, depending on which survey is cited, represents about 50% of insured Americans and rising. Meanwhile, HMOs are at anywhere from 29% to 43% of insured Americans and falling. With those numbers, not signing a contract is a difficult choice for physicians now more reliant than ever on PPOs as a source of patient traffic.

PPOs' growth has dovetailed with complaints that come into the AMA's Private Sector Advocacy Center as well as state medical association offices. For example, physicians complain that PPOs tell them that with so many plans and their proprietary nature, it's too complicated to tell physicians what they will be paid for each procedure. Yet somehow it's not too complicated for a PPO to figure out what to pay a claim after it's been submitted.

What the AMA asks from PPOs is merely the same common-sense proposals it has made to every other insurer. Tell physicians what you'll pay them. Let doctors review their contracts before and after signing them. Be open and fair.

For now, PPOs largely have kept their reputations intact. But if their questionable conduct keeps up, rants about PPOs won't just stay in the doctor's office. Who knows -- they may soon come to a theater near you.