For decades, independent TPAs have been effective in competing in the marketplace on the basis of service, innovation, culture, flexibility, and price.  Today however, one of the most daunting challenges facing TPAs is their ability to compete effectively against large national health insurers and HMOs that own and operate proprietary PPO networks and other payers who engage in questionable provider discount practices.  And, although most TPAs work with leading PPOs with expansive networks, virtually none of these PPOs offer discounts as deep as those available from the large payers or as broad as the payers who take unjustified discounts.  As a result, these competitors have been venturing into the TPA market and gaining market shares.

Recognizing that provider discounts are foremost on all buyers’ minds, in and effort to fight back, most forward-thinking TPAs are employing a strategy that focuses more on the breadth of their network discounting capability rather than the depth of their discounts.  Understanding that it is difficult to compete vertically on a straight discount basis with common providers, many TPAs have sought to expand the number and dollar volume of both in- and out-of-network claims able to be discounted.  Aware that some 25% of payment dollars are for services obtained out-of-network, many TPAs use silent PPOs and bill negotiation programs to achieve some level of discount on 95% or more of eligible claims and 90% or more of covered charges.  In recent years however, several tactics have been developed and employed by payers that threaten the viability of PPOs as a means by which to affect provider discounts.  These are discussed herein.