Supported by powerful lobbies and professional associations, the provider community has waged war against payers who they see as acting illegally and unethically for all of the reasons described above.

In recent years, the amount of legislative activity aimed at eliminating provider abuse has increased at an exponential rate.  In particular, the practice of silent PPO use and PPO network stacking has drawn the attention of state legislatures, insurance commissioners and managed care regulators.  The following is a brief description of the various laws that have been passed, legislative process is a dynamic one and that the accuracy of the information furnished below is subject to change.

·To combat silent or stacked PPOs, California enacted legislation effective July 1, 2000, to prevent the improper selling, leasing or transfer of a healthcare provider’s contract.  The law placed disclosure and other requirements on entities engaging in silent PPO practices, essentially stopping the marketing and sale of lists of provider panels that offer discounted rates.

·North Carolina enacted legislation that determines it to be “an unfair trade practice” for insurers to make a material misrepresentation to a physician to the effect that the insurer or service company is entitled to a certain preferred physician or other discount off the fees charges for medical services, procedures, or supplies provided by the physician, when the insurer or service corporation is not entitled to any discount or is entitled to a lesser discount from the physician on those fees.

·Texas has enacted laws that prohibit silent PPOs and place disclosure requirements on payers.

·A very comprehensive and unusually specific bill is before the New Jersey legislature that seeks to outlaw silent PPOs.  It includes language that speaks to the exact placement on the plan’s ID card of the logo of the PPO network to used to obtain the discount or 30-days prior written notice of a payer’s attempt to access a provider discount arrangement if no ID card is presented.  Failure to meet the proposed law’s requirements could result in damages payable to the provider of double the fair market value of the services provided up to $2000 per incidence plus attorney’s fees.

·Based upon a Florida 5tth District Court of Appeal’s ruling that silent PPOs are illegal, the Florida Hospital Association is seeking legislation to prohibit silent PPOs and PPO network stacking.  Silent PPOs are defined as entities that do not use financial or educational mechanisms to steer patient volume to preferred providers; allow a payer access to PPO discounts after services are provided; and allow a payer access to PPO discounts even though the patient is not identified as having access to the particular contractual arrangement (e.g. no PPO logo on the subscriber ID card).

·In North Dakota, and many other states, silent PPO practices are violations of prohibitions against unfair claims settlement practices (and, potentially, insurance fraud statutes).

·Legislation has been passed, or is in the process of being introduced, to ban or regulate a variety of provider discount abuses (e.g., silent PPOs, PPO network stacking and/or all-product clauses*) in many states, including but not limited to, Connecticut, Illinois, Kentucky, Louisiana, Maryland, Massachusetts, Minnesota, Nevada, New York, North Dakota, Pennsylvania and Virginia.

The author’s discussions with representatives of several state insurance commissioners and other healthcare regulatory agencies indicate that a major initiative against provider discount abuse is well underway.

*An “all products clause” refers to a common contracting ploy in which a payer or PPO network (often an HMO) asks a provider to sign a contract agreeing to a significant discount for its enrollees and its affiliates for all of the organization’s products.  These clauses often have language providing for silent PPO use in them.