PPO’s were set up ostensibly to help with the escalating price of health care, the idea being that if you include only the highest quality physicians and facilities in “a network,” effectively eliminating the unethical or incompetent players, you could theoretically curtail complications and minimize unecessary surgeries/care.  Physicians and facilites would then theoretically provide discounts in return for an increase in the number of  patients they would see.

  The PPO’s have become precisely what the insurance and big hospital industry wanted:  cartels.  They have been extremely effective in shutting out competitors for the big players.  They have done nothing, as we all know, to eliminate unscrupulous physicians or hospitals from “the network.”   In fact, as the pay rates drop for physicians and the PPO’s become increasingly abusive, it is the doctor who is already busy and doesn’t have to mess with this crap who is likely to drop out of “the network.”  The PPO’s tend to run off the best in the crowd over time. And they have actually been one of the primary factors in the escalating costs of health care in the U.S., eclipsed only by Uncle Sam.   Once again, if you’ve been following this blog, none of this is new to you.

 Now imagine a cigar smoke filled room full of insurance executives laughing uncontrollably.  Pouring the scotch are the big hospital administrators when they aren’t dancing around the room high-fiving one another.  This is why they are laughing: .  many PPO’s are actually incentivized to seek out the highest priced facilities.  What?!  Oh yeah!  Nobody talks about this one:  PPO repricing.  You see, some PPO’s (actually all of them I think) charge PPO repricing fees. This means that if the PPO pays $10,000 to a facility for a surgery or hospitalization that the facility charged $20,000 for, the PPO, by virtue of having “repriced” this procedure or hospital stay, gets a percentage of the money they” saved” whoever was paying the bill…usually no more than 25%.

“Wait a minute,” you say!  “You mean the PPO collects the premiums, then maximizes their profit by ratcheting down the payment to the physician and facility but also makes a percentage on the difference between the beginning and ending bill amounts?   So the higher the bill is to start with, the more they make?” 

“So if a better doctor at a better price is across town, that is the last place this PPO wants to go?”  ”So the PPO’s get  giant bills from the hospitals and the hospitals get exclusivity from the PPO’s?” Maybe I’m not anticipating all of your questions here.

What do you think those in the repricing business think of transparent, fixed and direct pricing like that on our website? 

Tranparent pricing spells the end of this game.  Hopefully the consumers of care in this country will be laughing and dancing soon, celebrating the high quality and low pricing in health care that is inevitable when the government and the corporate schemes like this are eliminated and the free market is allowed to work its magic.

G. Keith Smith, M.D.