Preferred provider organizations have engaged in some dubious practices, particularly “silent” discounts in which the providers who sign up to be part of the network have no idea what categories of patients may actually be covered by the discount. While providers bear some responsibility for signing contracts without checking into the details, the PPOs aren’t particularly forthcoming or straightforward in many cases. PPO issues abound not only in group health, but also in the workers’ compensation world. Coventry runs perhaps the largest national PPO network for workers’ comp. It just lost an appeal of a case in Louisiana which could cost it $262 million dollars.
Coventry apparently failed to comply with a Louisiana law requiring notice of intent to use a PPO rate instead of paying the state’s fee schedule for workers’ comp services. The court disregarded the contractual choice of law provision to find that Louisiana law applied as a matter of public policy. It construed the PPO statute to apply to workers’ compensation and to find that certain exceptions to the requirement that a patient either have an ID card stating that the PPO applied or that 30 days prior written notice of intent to take the discount be given to the provider, did not apply to Coventry. It affirmed the statutory damages award of $2000 per violation.
To a lawyer it is apparent that Coventry got railroaded here and that the damages are excessive and punitive. Be interesting to check the background of the appeals court panel, especially in Louisiana. Nonetheless, Coventry should have engaged in basic regulatory compliance on its product, anticipated any possible issues and discussed them with regulators ahead of time. One presumes Coventry will continue to appeal, particularly since this was a summary judgment, which seems patently inappropriate when the ruling itself refers to unclear factual issues. But the decision should be a reminder of the need to take regulatory compliance seriously.