Over the last few months, congress has been working on legislation to address the issue of surprise billing. As most of you know, a “surprise bill” happens when a patient receives services at a hospital that is in their insurance network but receives a related bill from a doctor that isn’t in their network. Often times, especially with Emergency Medicine, Radiology, or Anesthesia, the patient doesn’t get to choose the doctor that cares for them. They have no way to avoid the surprise bill. When the doctor is not in the insurance company’s network the patient’s benefits are often less, and the physician can balance bill the patient up to billed charges if they chose to do so.
This situation has received a great deal of attention and may be one of the few things in D.C. that has bipartisan support right now. I mean who wouldn’t want to protect people from getting a surprise bill? The federal legislation being discussed would limit the payment the doctor can receive for the services he or she provided and would eliminate the doctor’s ability to balance bill the patient. Patient advocates applaud this approach as a measure to protect patients and insurance companies applaud the approach as a way to help control health care costs. Physicians and hospitals challenge the approach as a win for insurance companies and government rate setting. So, who is right? As we so often see in hotly contested issues, to some degree both sides are right.
I won’t argue that some hospital-based groups have taken advantage of their position. They have avoided negotiating with insurance companies because it was in their financial best interest to be out of network and they do aggressively bill patients who end up in their hospital. There are enough anecdotal horror stories about huge bills to show us this has happened. I, too, think something should be done to help those patients and address these truly egregious practices by a few bad actors. My issue with the proposed legislation is one of balance. Some of the proposed solutions are an overcorrection and will provide insurance companies with a huge stick that they will gladly use to punish hospital-based doctors. This overcorrection may produce side effects that are worse than the problem they’re trying to solve.
Consider this scenario: The government passes into law a bill that sets the maximum payment at the payer’s median contracted rate. Armed with this new federal law the payers could terminate the highest 50% of their contracts. This would reduce the median contracted rate and allow them to pay each of these now non-contract groups that used to be in-network at a significantly lower rate. This would give the insurance company a huge increase in profits at the expense of physician salaries. Furthermore, the insurance companies would have no reason to ever negotiate rates with hospital-based groups again. Before you scoff at the idea, understand that we’re starting to see this happen already. More on that later.
This reduction in physician compensation could have some very serious negative side effects. What if emergency medicine groups reduced staffing levels to compensate for the loss in income? Wouldn’t that produce longer wait times in the emergency department? What if radiology groups were forced to stop hiring sub-specialty trained radiologists because of the loss in revenue? Wouldn’t that reduce quality? What if anesthesia groups stopped staffing rural hospitals that were no longer financially viable? These are very real possibilities, and to be honest, are more likely probabilities. If this happens aren’t, we just trading one problem for another?
At this point some of you are saying; “That won’t actually happen. I mean, insurance companies won’t take advantage of a law this way.” Unfortunately, they will. A recent survey by the American Society of Anesthesiologists found that 42% of respondents had contracts terminated by insurance companies in the last six months. Additionally, 43% of respondents experienced dramatic payment cuts from insurers, in some cases by as much as 60%. This activity is going on before the law is passed. Can you imagine what it’s going to be like after one gets passed?
Right now I have 16 hospital-based groups among my clients. In the last four months half of them have received a termination letter from a payer. In each one of those situations the payer demanded a significant reduction in their reimbursement rates to avoid being thrown out of the payer’s network.
So what’s the answer? Balance! A balanced approach is almost always the best answer. Congress should make sure that any law that is passed to protect patients from a surprise bill should also protect doctors from draconian actions by insurance companies. Make sure the bill has an easy way for external review or arbitration. Make sure that process includes things like past contractual rates, differences in patient severity and hospital payer mix. Don’t give insurance companies a club with which to beat physicians and don’t reward this kind of heavy-handed behavior. Consider network adequacy requirements to make sure the payers still have an incentive to negotiate in good faith with doctors that staff and service our hospitals. Balance, that’s the answer.
If we don’t get this right, we could find ourselves with the problem of balance billing a thing of the past and the problem of understaffed hospitals and a reduction in clinical quality staring us in the face.
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