THE CHALLENGE OF SELECTING THE RIGHT PPO(S) FOR YOUR ORGANIZATION
ATLANTA, Ga. - March 1, 2003

By Corte Iarossi - Director Strategic Business Development - Coalition America

As most of us have seen over the past 10-15 years, PPOs have experienced significant growth in popularity. The reasons for this growth are pretty simple;

• Pricing pressures relaxed in late 1980 -1990s
• Patients focused on access to providers/ less willing to accept restrictions
• PPO costs dropped in part due to reduction in overall utilization - Providers practiced "managed care" regardless of plan type (HMO, PPO, POS)
• PPOs began offering HMO-like benefits including co pays and preventive care
• Employee satisfaction became a priority for HR vs. focus on managing costs
• Negative HMO press causes migration back to PPOs

Choosing your PPOs- "one size fits all" or "best of breed"?

If PPOs are a key element to most company’s benefit offerings how do you insure you are getting the best value for your company and your employees? For example, employers with single locations have different issues than multi-state employers.

For single employer locations one PPO typically suffices. However, the real challenge is to determine the best option out of multiple PPO offerings that may be available in your market. There are a number of tools that can be used to identify the best solution for access and savings.

• Geo Access: an industry standard software used to match employee residences with provider locations. It is good for insuring there is coverage, but does not address if the providers covered are the ones used by the employee population.
• CPT/Revenue code analysis: Often used in conjunction with a Geo analysis- allows the client to understand what the contracted physician and hospital fees are that would be paid for specific or highly utilized services- allows the client to gain some understanding of the possible cost savings.
• Detailed savings analysis: This is a much more sophisticated approach of analyzing your specific utilization needs. It allows you to identify where the care is being provided and determine if the PPO has access to those key providers as well as the savings they can generate through their contracts.
• Quality indicators: The reality is that most PPOs in the same geographic area have access to the same providers. Other than providing credentialing they are not really measuring the quality of care offered through their providers.
• Who provides UM/CM: This can have as big an impact on overall costs as the discounts provided by the PPO. The ability to effectively manage utilization can materially increase or decrease a plan’s costs.

Multi-state employers have additional considerations when making PPO network decisions. Certainly there is an advantage to working with one network for all employee locations. And goodness knows any self-respecting PPO with multi-state access will attempt to "up-sell" you on using their network not only where they are strong but where they are not as strong (of course they won’t tell you this). The reality however is that one network may not provide access to the key providers for your employee population in each market and may not provide the best discounts to those providers in each market. Because of this we suggest you consider more of a "best of breed" approach to PPO network access.

• The "best of breed" approach has several advantages:
  • Allows you to choose the best network for access in each market that you have employees
  • Enables you to gain deeper discounts in-network
  • Reduces out-of-network claims
  • Enhances employee satisfaction
    
    
• Challenges:
  • Getting information for the purpose of doing a fair and thorough analysis of the network options
  • Successfully analyzing all PPO data to make reasonable comparisons
  • Requires multiple contracts and points of contact
  • Varying rates for PPO access

The good news is that there are a number of different resources from which to choose. I have listed several below along with some of the benefits or issues with which you should be aware.

• Engage a consultant:
  
  • Will do detailed, unbiased analysis of your network options and make recommendations based on your goals
  • Manage the relationships with the PPOs at cost or turn over to you for contracting and management
  • Charge on fee basis
    
    
• Work with a broker:
  
  • Paid by networks so there is no cost to you
  • May remain involved as resource as part of commission
  • May not have systems to do effectively analysis all the data
    
    
• Contract with a repricing organization;
  
  • Many can provide detailed, unbiased analysis at no cost
  • Some have ability to manage interface with PPOs & providers
  • May provide access to all PPOs at one rate
  • May charge a transaction fee
  • Many can add networks to meet growth
  • Some can provide options for discounting out-of-network claims

Discounting those Pesky OON claims!

No matter how effective a job you do in your analysis process there WILL BE OUT-OF-NETWORK (OON) claims. Sorry! Even the best network configuration can leave 10-30% OON. The result is that significant dollars are left undiscounted and paid at retail or UCR is applied resulting in balance billing.

• EXAMPLE: 5,000 employee company with 80% in-network utilization can experience over $6,000,000 in OON claims/year

However, there is good news! There are options that can assist you in significantly reducing your costs associated with OON claims:

• See if your TPA or insurer offers OON claim repricing solutions
• If not there are companies that specialize in gaining discounts on OON claims. Savings on $6,000,000 in billed charges can be as high as $500,000 to $1,000,000

• What to look for:
  
  • Companies with multiple avenues for gaining discounts including supplemental PPOs, negotiations and bill audit/recovery
  • Look at the percentage of OON claims they are able to discount AS WELL AS average discount per claim - High savings but a low success rate will not generate the savings available in the market.
  • Do they offer access to multiple supplemental PPOs for repricing - If one is good isn’t 5 or 10 even better?
  • Where are they successful - If they are great in the north east but all your employees are in the midwest - is the company your best solution?
  • Check for thresholds on negotiations - many companies only negotiate on bills over a certain amount (e.g. over $1,000 for physicians) - you will be losing savings opportunities!
  • How does the vendor leverage discounts when negotiating - do they create a negative perception in the provider’s mind of your organization through scare tactics?
  • Do they interface with PPOs and providers on your behalf - or are you put in the middle between the provider, the PPO and your employee?
  • Confirm the vendor has access to supplemental discounts by contract - no "silent" PPOs
  • Average savings per discounted claim can be 20% or higher
  • Pricing is typically on percentage of savings (no savings, no cost)

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