Escaping Dental PPO Contracts Part 3:
Like I said last time, things are about to get more complex.
This article by Srinivasan Varadarajan, Esq. does a fantastic job of explaining what lease networking is and how it works. I’ll summarize the basics here.
Network leasing is a way for PPOs to offer more care access points to their subscribers, thereby increasing their marketable value to employers or individuals looking for new benefits plans.
One PPO can “lease” their network of dental providers to another, so the dentists in-network with the first PPO must accept patients from the second as in-network, even though they might not have a direct contract with those patients’ plans.
So, patients have more options for dental providers, and providers have a much wider pool of potential patients who can see them in-network. What’s the downside?
There are several.
Providers don’t know how many networks they’re being leased to
First, many dentists actually participate with numerous leasing agreements without even realizing it. As Varadarajan says in his article, Insurance contracts often contain provisions with language like “From time to time, company X may lease (or share or rent or market) its network with other companies.” This prompts a question with a seemingly obvious answer. The company may rent its network of what? What are PPO networks made up of? Providers.
That’s the most straightforward explanation of network leasing. Insurance companies rent providers to other insurance companies, so that the patients of one can go to the providers of another without paying out-of-network fees, saving premiums (corporate profits) for the insurance companies.
Not only do almost all major dental benefits companies lease their networks to and from each other, but there are several organizations who exist solely to offer leasing connections without actually providing any benefits plans of their own. They simply operate as middle-men, pass throughs for other companies to access each other’s networks.
The web of interconnected PPOs is staggeringly dense. A dentist could inadvertently agree to participate with literally hundreds of PPOs around the country by signing a contract with a single major network. Provider networks have essentially become oversaturated by the seemingly endless third-party agreements insurance companies have created. If you were to start adding up all the in-network providers advertised by just the major insurance carriers, you would quickly arrive at a number far higher than the amount of dentists in the entire United States. That’s because providers are being double, or even triple counted due to various third-party agreements and leased networks.
Insurance companies use cherry picking to reimburse the lowest fees possible
The second risk network leasing poses to providers is commonly referred to as cherry picking. Not only do PPOs gain access to each other’s provider networks through leasing, they can also access lower contracted fee schedules providers have with different PPOs. In fact, insurance companies actually receive a financial advantage when another PPO uses their fee schedule to reimburse a provider. Remember, insurance companies are not in business to lose money.
When you submit a claim to a benefits plan, it goes through an electronic clearinghouse that analyzes possible reimbursement options that the company has given the various contracts and leasing agreements you’re participating with. Every insurance company does not participate with every other insurance company. Some have mutual agreements – they’ll each share networks and access to fee schedules with the other. Some only have one-way associations – one company may lease out its provider network to another, but not have access to providers and their fee schedules in the other direction. So what can actually happen is heavily dependent upon the specific contracts each provider has signed. Every office is in a unique situation.
However, like I said before, it’s a dense web. With so many possible relationships across the country, the end result is that insurance companies will usually be able to find some way to reimburse providers lower fees than they expect.
And since those contracts and leasing agreements also typically prevent balance billing patients, dentists are forced to just write off the difference as lost revenue, many times not even covering their overhead to see that particular patient.
How can dental practices control their exposure to leased networks?
So, hopefully you’re starting to understand the basics of how leased networks work, and how insurance companies can use them to reimburse dentists lower fees. But how do leased networks play into the process of escaping some of these upside down insurance contracts?
In order to make real, effective, lasting changes to your contract situation, you’ll need to have a clear understanding of your exposure to your patients and the market.
Do you know which of your contracts contain network leasing agreements? Or which of your networks are connected through leased access? Are those arrangements one-way or mutual?
Because there’s essentially a hierarchy created by different fee schedules, you have to remove contracts in a specific order that will be unique for every office. It all depends on how that contract exists in your practice and how your exact patient base funnels through those contracts. If you leave higher-paying contracts first, other PPOs will still be able to use the bottom fees to reimburse your claims.
As mentioned above, another unique and crucial variable that each office has to analyze is the specific plans their patients are bringing to their office. Last week, we explored the basic differences between two types of benefits plans; fully insured and self-funded. Next time, we’ll start to put the pieces together and take a look at how plan types determine how many patients can access you through which contracts, and how the network leasing agreements you’re in further determine what fee schedules may be used to reimburse claims for different patients with different plans.
Like I said, it’s just going to keep getting more complex. That’s why our clients love working with Solutions 101 – we make things simple for them. Is it really worth your time as a doctor, office manager, or administrative staff member to fully dissect each and every contract in your practice, along with every individual plan your patients are using? If you don’t think it is, we’d love to help solve that problem for you.