Preferred provider schemes (PPS), often synonymous with increased patient referrals and streamlined administrative processes, have become a cornerstone of modern healthcare delivery. 

From enhanced credibility to marketing support, practitioners within these networks reap a range of benefits that contribute to practice growth and sustainability. 

However, beneath the surface lies a complex web of contractual obligations, potential limitations on treatment autonomy and the ever-present challenge of balancing financial considerations with the pursuit of optimal patient care.

As practitioners grapple with the decision to join or maintain affiliation with a PPS, it becomes crucial to explore the multifaceted nature of these arrangements. 

It is important to understand the advantages practitioners stand to gain, the potential drawbacks they may encounter and the nuanced considerations that come with being an integral part of these networks.

What is a PPS?

A PPS is a healthcare arrangement where an insurance company designates a select group of healthcare providers, such as physiotherapists, doctors, hospitals and clinics, as ‘preferred’ or ‘in-network’
providers. 

Members of the insurance plan are encouraged to use these preferred providers because the insurance company has negotiated specific agreements with them.

In a PPS, the providers agree to accept discounted fees for their services in exchange for the increased patient volume they receive from the insurance company’s members. 

This can result in cost savings for both the insurance company and the insured individuals.

Health fund members who choose to receive healthcare services from preferred providers typically enjoy lower out-of-pocket costs, including lower co-payments and deductibles, compared to using out-of-network providers. 

However, individuals usually have the flexibility to seek care from non-preferred providers, though they may incur higher costs in doing so.

The primary goal of a PPS is to create a network of healthcare providers that offer and cost-effective quality care to the insurance plan’s members.

What are the benefits of a PPS? 

A PPS offers various benefits for practitioners in the healthcare industry. 

Here are some of the key advantages.

Increased patient referrals Practitioners within a PPS often receive a higher volume of patient referrals. 

Patients are more likely to choose providers who are part of their insurance network due to reduced out-of-pocket costs.

Steady patient flow

Being a preferred provider can result in a more consistent and steady flow of patients. 

This is beneficial for maintaining a stable and predictable practice.

Enhanced credibility

Being part of a preferred provider network can enhance a practitioner’s credibility. 

It signifies that the provider meets certain quality standards and has been selected as a preferred choice by the insurance company or healthcare organisation.

Streamlined administrative processes PPS often involve streamlined administrative processes for billing and reimbursement.

This can reduce the administrative burden on practitioners, allowing them to focus more on patient care.

Timely payments

Practitioners in a PPS typically receive payments more promptly because the billing and reimbursement processes are standardised and efficient.

Access to a larger patient base Participating in a PPS expands a practitioner’s potential patient base. 

This can be especially valuable for new practitioners or those looking to grow their practice.

Marketing support

Some preferred provider organisations offer marketing support to their network providers. 

This may involve inclusion in provider directories, advertising and promotional efforts to increase visibility and attract more patients.

Negotiated fee schedules 

Practitioners within a PPS often have negotiated fee schedules with insurance companies. 

While this may involve accepting lower fees per service, it can result in increased patient volume and overall revenue.

Competitive advantage

Being part of a preferred provider network can give practitioners a competitive advantage over those who are not in the network. 

Patients often consider the cost savings associated with using in-network providers.

Professional networking opportunities 

PPS may offer opportunities for practitioners to network with peers. 

This can lead to collaborations, referrals and a sense of community within the healthcare industry.

It’s important to note that the specific benefits can vary depending on the structure of the PPS and the terms negotiated between the practitioners and the healthcare organisations or insurance companies involved. 

Additionally, there may be challenges or trade-offs associated with participating in such networks, such as potential restrictions on treatment options or referral patterns.

What are the challenges of a PPS?

While there are several advantages to being part of a PPS, there are also potential disadvantages that practitioners should consider, including the following.

Difficulty in opting out

Some preferred provider contracts may have strict terms for opting out of the network. 

Practitioners might face challenges if they wish to leave the network due to dissatisfaction or changes in their practice.

The potential for unfavourable contract terms

Depending on negotiation skills and market dynamics, practitioners might end up with less favourable contract terms including reimbursement rates and conditions.

Understanding the terms and negotiating effectively is crucial.

Reduced reimbursement rates 

Participating in a preferred provider network may mean accepting lower reimbursement rates for services. 

While this can lead to increased patient volume, it may also affect overall revenue, especially if the negotiated rates are significantly lower than the practitioner’s standard fees.

Administrative requirements

PPS often come with specific administrative requirements such as pre-authorisations, documentation standards and reporting.

These requirements can add to the administrative workload for practitioners.

Limited treatment autonomy

Some PPS may impose restrictions on certain treatments or referral patterns. 

Practitioners might face limitations on the tests, procedures or specialists they can recommend or work with, potentially affecting the quality of patient care.

Increased patient load

While an increased patient volume is generally positive, it can lead to a heavier workload and potentially have an impact on the quality of patient care. 

Practitioners may need to manage time efficiently to maintain the standard of care.

Dependence on insurance companies 

Practitioners in a PPS may become heavily dependent on the policies and decisions of insurance companies.

Changes in reimbursement policies or network structures can affect a practitioner’s financial stability.

Market saturation

In areas where many practitioners are part of the same PPS, competition among network providers may increase, potentially diluting the advantages of being in the network.

Contractual obligations 

Practitioners are bound by contracts when they join PPS. 

These contracts may have specific terms and conditions including exclusivity clauses or restrictions on participating in competing networks. 

Violating these contractual obligations can have consequences.

Perceived quality issues

Some patients may perceive that the quality of care is compromised when providers are part of a network with lower reimbursement rates. 

This perception could affect a practitioner’s reputation.

It’s important for practitioners to carefully review and negotiate the terms of participation in a PPS, considering both the advantages and the potential drawbacks. 

Staying informed about changes in the healthcare landscape and regularly reassessing participation in networks is essential for practitioners to make informed decisions about their practice.

Ben Corso’s story 

I was first introduced to the world of preferred provider schemes in my own
private practice by a client. 

‘My health fund has a scheme where they can sign you up as a preferred physio and they will refer all their members in the area to you.’

That sounded good to me as a young and naive business owner. 

So I dutifully contacted the health fund and signed up and then subsequently contacted several other funds, with whom I also signed up.

It seemed to work well in the early days of growing a practice and generating new leads. 

Increasingly, the response to ‘How did you find out about us?’ was ‘My health fund recommended you’, which I thought was great.

However, as time went on I started to consider issues such as fee increases on a more strategic and regular basis, the length of appointment times, specialist services, postgraduate physiotherapist recruitment and tiered fee structures.

It became clear that these schemes would not offer me the flexibility to take my business in the direction that I wanted it to go.

I met with some of the health funds to discuss this reasoning and then made the difficult decision to exit all the schemes at the same time as well as change my fees.

The timing was underlined by the fact that I was about to expand into a new space and needed to look at other marketing opportunities. 

To give us time to recover and reboot, I wanted to exit the schemes prior to relocation rather than during.

I distributed letters to everyone in my database explaining the change and the reasons for it and I armed my administration and clinical teams with scripts and Q&As that would assist them to navigate conversations with clients and, potentially, referrers. 

A significant percentage of our client base were members of referring preferred provider funds and would be affected by this looming change. 

The idea of contacting them all to advise them of the impending contract exit was financially intimidating, to say the least.

In the beginning, it was difficult on a number of fronts, from negative health fund correspondence to client feedback and confusion. 

We experienced a downturn in business for a three-month period, after which business bounced back as we continued to deliver high-quality care and great outcomes for our clients.

This change in direction enabled me to make independent decisions about fees, to create clinical pathways for team members who were more experienced and to offer flexibility in appointment times and services. 

Since then, my business has not looked back.