“Silent network,” “blind PPO,” “secondary-network,””non-directed PPO,” “non-disclosed discounting,” or “soft channeling” – regardless of how professional sounding the term, this is the unauthorized and undisclosed selling of PPO provider network access and associated discounts for that network.  It is the sale by PPO aggregators to access to negotiated provider discounts to parties who are not included in the providers’ negotiated contract after services are provided to individuals covered by the non-related parties’ plan.  In more clear terms, without the explicit or implicit knowledge or approval of the provider, the legitimate PPO network, with which the provider contracted, makes its provider list available for a fee to other payers and PPO aggregators who have entered into no agreement with the provider entitling them to a discount.  In such an arrangement, the payer is not a party to the PPO contract, does not provide incentives for its plan participants to choose the provider, and fails to alert the provider at the point of care that the PPO contract is applicable due to the lack of PPO logo identification on the plan participant’s ID card.  The payer simply takes the discount as if it was entitled to it.  A more apt characterization of this practice is “extra-contractual discount heist.”

The following example demonstrates the mechanics of how a silent PPO works.

· Step 1 – The Office Visit.  A plan participant elects to obtain treatment from a provider who is not in his plan’s primary PPO network.  He is neither referred nor steered to the provider by the payer.  He expects to be charged a non-discounted fee and to pay a higher percentage of the bill.

· Step 2 – The Insurance Claim.  The provider renders care and bills the payer a fee of $10,000, which is based on his usual, reasonable and customary charge for fee-for-service patients.

· Step 3 – The “Re-pricing” of the Bill.  The payer gets the bill and tries to re-price it with the primary PPO.  If it is out-of-network, it runs the provider tax ID number that appears on the bill through a leased PPO discount database, or provides the bill to a PPO aggregator for “re-pricing.”  The PPO aggregator searches for a PPO “hit” by running the TIN through its database of PPO discounts and, after a successful hit, it re-prices the bill based on the PPO discount available…say 30% to $7000.

· Step 4 – The Deceptive EOB.  After taking the discount, the payer issues an EOB that deceptively states that the bill has been reduced based on the provider’s PPO contract.  This is false as the PPO contract states/implies that only payers with legitimate PPO arrangements may take a discount.  The provider is paid $3500 by the payer (e.g., 50% non-network coinsurance) and $3500 by the patient.

· Step 5 – The Write Off.  The provider unwittingly accepts the payer’s statement on the EOB and writes the $3000 discount off – never knowing that the discount taken was invalid.

· Step 6 – The Pay Off.  The payer pays the entire PPO aggregator fee of $750 (i.e., 25% of the $3000 savings).  The net savings to the payer is $750 (i.e., $5000 - $3500 + $750) representing a 15% savings from the payer’s true liability, $5000 (i.e., 50% of $10,000).

While the plan participant saved money as well, the real loser in all of this is the provider.