Bay Area Messenger Model Assists Physicians With PPO Contracting

By Catherine Roth, BAPP Executive Director

In 2002 seven Bay Area county medical associations came together to address a pressing need: Their members were at a disadvantage in PPO contracting. Physicians, especially those in solo and small-group practices, did not have ready and inexpensive access to legal analysis of the terms and conditions they were agreeing to when they signed PPO contracts. Further, physicians did not have the time or staff to evaluate the fees they were being offered. As a result, many physicians were signing every PPO contract that arrived in their offices, whether they understood the legal and financial implications or not.

These founding medical associations—including San Mateo, Santa Clara, San Francisco, Alameda-Contra Costa, Sonoma, Solano, and Napa (later joined by Santa Cruz)—began investigating whether the messenger model had the potential to give their members the analytical resources they needed to “get smarter” about their PPO contracting.

These associations studied how a messenger model works and the steps necessary to establish such an organization. They sought a company to provide back-office functions and hired an attorney to work with the Federal Trade Commission to obtain an opinion that the organization would not run afoul of regulations against collusion and price-fixing. After estimating the number of physicians expected to become members, they crunched the numbers to determine where dues should be set to cover administrative costs. 

The associations were adamant that the messenger model operate as a not-for-profit organization supported by member dues and unambiguously working in the interests of its members. Over the summer of 2003 the Bay Area Preferred Physicians (BAPP) was founded, and a board of directors was formed, with two physicians from each sponsoring medical association. The board hired an executive director.

The FTC

During most of the year of groundwork, the BAPP attorney engaged in a series of submissions and explanations to the FTC regarding what BAPP wanted to do, how it would work with physicians, and the parameters it would follow to ensure no anticompetitive behavior was contemplated. The FTC is concerned that unfair competition can arise when the sellers in a market—in health care, the sellers are the providers—are able to work cooperatively to control prices. Thus there are many regulations that determine the extent to which physicians, as sellers of services, can come together for purposes of contracting. BAPP was determined to make sure in advance that the business plan and operating procedures were fair, legal, and efficacious for physicians. After almost a year of discussions with the FTC, BAPP received a positive review of its intentions, and BAPP could finally begin active marketing to physicians. In December 2003 BAPP scheduled its first physician meeting, and by May the board decided with 150 physicians having submitted written statements of intent to join, it was time to go live.

BAPP Is Operational

Since starting live operations in June, BAPP has been growing steadily toward its goal of providing services to 1,000+ physicians in the nine-county Bay Area. By the BAPP October board meeting at the latest, BAPP will begin its financial analysis of PPO offers. In the meantime members are encouraged to submit any PPO contracts they are currently parties to, or new PPO contract offers they receive, to BAPP. BAPP will analyze those contracts and provide physicians with a written analysis of the legal terms and conditions. This legal analysis of nonfinancial terms is a service to all BAPP members, regardless of whether the contract is administered through BAPP.

BAPP collects from each member his or her top 10 CPT codes—tops in terms of frequency in the practice or contribution to total revenue—and for each procedure that physician’s lowest acceptable fee. BAPP keeps this information in a confidential database—no physician can see another physician’s fees, and staff access to these fees is on a need-to-know basis. When BAPP receives a PPO offer, the fees in the offer are compared with the BAPP member database of acceptable fees, and the PPO is given a high-level report of how its offer meets the fee requirements of the BAPP membership—number of physicians who would accept the offer because it meets or exceeds at least five of his or her acceptable fees, the geographic distribution of those physicians, and a rough specialty breakdown. This lets the PPO understand whether its offer is appropriate to the market and whether a sufficient number of physicians will participate. 

Each physician member in turn is notified of how that offer did or did not meet his or her fees. If the offer does not meet or exceed at least five of the 10 on file, the physician would not be included in the contract unless he or she opts in. If the offer does meet at least five of the fees, he or she would be included unless he or she decided to opt out. In this way the physician can participate more or less automatically in some contracts and not in others, while maintaining complete control via the opt-in/opt-out process. If you choose to participate in an agreement, BAPP executes that agreement for you under a limited power of attorney.

Why Join BAPP?

As a member of BAPP you need never again sign an agreement you don’t understand. You will be able to significantly reduce the administrative overhead of completing and submitting credential forms. BAPP credentials its members and provides that information to the PPOs whose contracts BAPP is administering. You must be a member of your county medical association to join BAPP. Annual dues, which are less than half the fees for comparable organizations in other California regions, are $850, plus a one-time application and credentialing fee of $250. 

The pitch is simple: Don’t you have enough to do managing your practice and your patients without taking on the work of an attorney or financial analyst or assuming more administrative costs? For more information, call Sue Malone at SMCMA (650-342-0262), or contact Catherine Roth, exec-utive director, (510-596-4901) or dcroth1@earthlink.net.