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Analysts, some legislators want regulation of contracts to stop surprise billing

27 Mar 2019 11:03 AM | AIMHI Admin (Administrator)

Modern Healthcare Source Article | Comments Courtesy of Matt Zavadsky

Very interesting discussions related to the balance billing issues…


Analysts, some legislators want regulation of contracts to stop surprise billing


March 23, 2019

As Congress eyes legislation to end surprise medical bills, policy experts are lining up behind an idea to regulate hospital contracts with emergency physicians. The idea is that emergency physicians could no longer bill on top of the hospital charges, and it has already raised red flags for hospitals since it would essentially force them to include emergency physicians’ pay in the facility fee they charge patients.

Sens. Lamar Alexander (R-Tenn.) and Patty Murray (D-Wash.), the leaders of the Senate health committee, have sent a model of the idea, among others, to the Congressional Budget Office for financial analysis, The Hill newspaper reported. A Senate aide told Modern Healthcare that the committee is still reviewing “a number of different options” and lawmakers are “still in the preliminary stages.”

Hospitals and insurers already have been publicly tangling over two different ideas: using rate-setting or binding arbitration to resolve pay disputes between the two types of stakeholders. But advocates for the contract-reform approach argue it’s a far less invasive way for lawmakers to deal with a political linchpin problem.

“What makes the most sense is to look at the root cause of the problem, which is the group of physicians you don’t choose and can’t avoid, as part of a wider package of services,” said Zach Cooper, associate professor of public health and economics at Yale University. “The simplest and easiest solution is for the groups of physicians that aren’t chosen by patients to be part of a package of care that a hospital sells.”

Policy analysts have been discussing the idea on Capitol Hill, and it was included in a recent paper from the Brookings Institution.

Furthermore, a new white paper by Benedic Ippolito of the American Enterprise Institute and David Hyman, professor of law at Georgetown University Law Center, contended this approach would “prevent surprise bills in the first place.”

Still it’s far from clear which policy Congress, under pressure from the White House, will ultimately opt for in the legislation expected to come up this year amid intense industry lobbying. Molly Smith, vice president for coverage and state issues at the American Hospital Association, has urged lawmakers simply to ban balance billing and let insurers and hospitals work out the rest.

Some people working on policy are wary about contract reform, however. 

Jane Bayer, senior health policy adviser to the Washington state insurance commissioner, warned an audience at the Brookings Institution on Friday that the model could shift costs, particularly in concentrated health systems. 

“I would respectfully say that I don’t think having a hospital bundle all the rates is separate from the market dynamics that we have around market concentration in hospital systems,” she said. “I think it’s the example of, if you squeeze the balloon in one place it pops up in another.”

While both the Senate health committee and the House Energy and Commerce Committee are still in the early stages of legislating, Sen. Bill Cassidy (R-La.) has led a bipartisan effort in the Senate. Cassidy sits on the health committee and is consulting with Alexander, but he plans soon to release his own new bill, co-led with Sen. Michael Bennet (D-Colo.). Sen. Maggie Hassan (D-N.H.), who dropped a proposal last fall to require insurers and providers to settle balance billing issues through binding arbitration, is also part of the effort.

The insurance and hospital industries have publicly focused on the policy ideas offered by Cassidy and his group, who have solicited industry data and feedback.

In a letter last week to congressional leaders, a coalition including America’s Health Insurance Plans urged lawmakers to steer clear of the arbitration approach and instead advocated for rate-setting—which hospitals adamantly oppose. The coalition advocated that lawmakers protect consumers by passing legislation that would include “setting reimbursement rates that will not increase premiums or impact access for consumers by basing amounts on market rates determined by reasonable, contracted amounts paid by health insurance providers to similar doctors in a geographic area or a percentage of Medicare.”

Hospitals immediately responded in a joint statement from American Hospital Association CEO Rick Pollack and the Federation of American Hospitals CEO Chip Kahn. “Not only is it a dangerous precedent for the government to start setting rates in the private sector, but it could also create unintended consequences for patients by disrupting incentives for health plans to create comprehensive networks,” Pollack and Kahn said. 

This month, Cassidy said in an interview that he was leaning toward the arbitration approach although he hadn’t decided yet. He cited New York as a reason to opt for that model. The state was an early adopter of its own curbs to balance billing within its individual market. “If the states are laboratories of democracy, we can see a laboratory experiment which seems to be worked,” Cassidy said. 

But the model of using a national system of arbitration is drawing a range of skepticism from the consulting policy world. Ippolito and Loren Adler of the USC-Brookings Schaeffer Initiative for Health Policy contend New York’s system could lead to general inflation of healthcare costs since the benchmark for the state arbitration is tied to a percentile of regional charges.

Benjamin Chartock, associate fellow at the Leonard Davis Institute of Health Economics at the Wharton School, has found in his ongoing research on New York’s system that the state’s final arbitration agreements have so far tracked with that benchmark. This has stayed consistent even though people have the perception that arbitration is fairly flexible, Chartock said. “Arbitration doesn’t loosen it up completely,” he added. “There’s only a narrow window in which the arbitrator can wiggle around.”

Cooper, whose research found that in-network rates in New York have declined since the state adopted its arbitration law, doesn’t believe the benchmark rate inflates cost. Still, he is wary about whether the arbitration method could work if it’s rolled out nationwide.

“Arbitration is tough to do on a national level—for one thing, who are the arbitrators?” he said. “Do you have mass lines of people lining up to seek remediation?”

He also noted that since New York already had fairly low out-of-network rates, it doesn’t necessarily serve as a model for other states, and warned physicians could lobby regulators or arbitrators on the state level and eke out higher rates.

Contract reform, however, has already sparked sharp hospital industry criticism.

Kahn, of the Federation of American Hospitals, said in an interview last month that he finds it a “terrible idea” that undermines the way hospitals currently staff physicians. “You can’t own your medical staff in that way,” he said. “I think it’s a very problematic.”

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