The No Surprises Act: Taking control of rate-setting
Payers must be prepared to pay objectively fair rates for services when the claims are first received, as well as present a defensible offer.
Editor’s note: This is the final installment of a three-part deep-dive dive into the nuances of this much-heralded piece of health care reform. Check out the first and second parts.
The last, and perhaps most relevant factor for mediator consideration under the No Surprises Act is past contracted rates, and median in-network rates. On the positive side, this will hopefully prevent the billed charges from being deemed the “starting point” or misrepresented as what is “usually paid” by benefit plans. Generally speaking, states that have implemented regulations limiting surprise balance bills that take such median rates into consideration generally see smaller amounts being paid than in States that do not take median rates into consideration.
High arbitration awards seen in states like New York and New Jersey seem to arise primarily because arbitrators base determinations on the 80th percentile of provider charges, a metric that is many times higher than the aforementioned median in-network prices. Notably, none of the existing state arbitration systems tied to median in-network rates (and with no reference to charges) appear to be plagued by the same inflationary outcomes.
Related: Balance-billing court cases force hospitals to justify charges
On the flip side, as discussed previously, will knowing this information may be used against them in the future cause providers to demand higher rates from their networks, to avoid creating a lower floor should they be forced to fight for OON payments at a later date? As for plans that do not even have a network, such as an RBP plan, how will these metrics apply to them?
So what’s ‘fair’?
This focus on networks, as well as in and out of network status, is a red herring. No payer should be forced to pay an abusive amount because they did or did not lock themselves into a contract at some earlier date, or with someone else. Each service provided by a provider should entitle that provider to fair compensation.
To illustrate, if four years prior I agreed to pay $100,000 for an automobile that had a sticker price of $30,000, that mistake should not doom me or others to a lifetime of overpayments. If I paid $100,000 for a car worth $30,000, my wife should not be forced to do the same when she is purchasing a car, nor should I be forced to make the same mistake when I buy another vehicle. We should be allowed to pay a fair price for the service we are purchasing – in a vacuum and based solely on the value of that service, and that service alone.
A final, but extremely important point worthy of note is that even though the arbitrator may not consider Medicare rates, the philosophy underpinning the use of Medicare and other RBP metrics remains alive and well. Payers must be prepared to pay objectively fair rates for OON services when the claims are first received, as well as present a defensible offer in IDR. This means implementing a sophisticated approach to pricing claims that leverages many lines of data. Gone are the days of blindly relying upon this index or that Medicare price.
Formula for success
Plans that will succeed in a post-NSA world must be able to reverse engineer the rates set by organizations such as the Centers for Medicare and Medicaid Services, so that – in IDR – they are not dependent upon an argument that consists of “We pay Medicare plus 40%.” When asked why they chose 40% instead of 30% or 50%, how will they answer? Further, if reference to Medicare is taboo in IDR to begin with, how else will the payer explain the amount they paid? Understanding why the payment is what it is, and how it was calculated, will be the key to success.
“As we have stated many times before, the AMA strongly supports protecting patients from the financial impact of unanticipated medical bills that arise when patients reasonably believe that the care they received would be covered by their health insurer, but it was not because their insurer did not have an adequate network of contracted physicians to meet their needs,” AMA Executive Vice President and CEO James L. Madara, MD, wrote in a letter to congressional leaders.
This statement from the American Medical Association’s leadership exposes two worrisome philosophies. First, that it is reasonable and appropriate to expect benefit plans to agree, via contract, to pay a provider whatever that provider wants – regardless of how excessive or abusive those prices may be.
Second, that benefit plans should be forced to create and expand networks until they have no bargaining power and thus cannot exercise any cost controls whatsoever. I would ask Mr. Madara what he believes constitutes an “adequate” network; 25% of providers? 50%? 100% of providers? As that network grows, in-network status loses its exclusivity, and steerage of plan participants is spread, thinning the number of patients visiting each provider and lessening the value of in-network status for the providers. This in turn justifies the providers demanding more payment, and lesser discounts.
This philosophy, shared by the AMA and providers alike, exposes a baseline assumption that has become prevalent in our nation, and serves as a foundation for a flawed system. No other type of insurance is “forced” to contract with providers. Whether it be homeowner’s insurance, auto insurance, or any other form of insurance – insurance pays the fair value of the loss, and the objectively reasonable cost of repair or replacement. Yet, here we see the American Medical Association’s leadership stating that benefit plans should be punished for not contracting with providers, before a service is even provided, and failing to agree to pay whatever the provider chooses to charge when the time comes.
Imagine if your auto insurance carrier was forced to contract with every auto manufacturer, agreeing to pay whatever the car maker charges at the time an insured needs a new car, without knowing what those prices will look like at the time the contract is signed. Imagine how automobile manufacturers could and would abuse that one-sided deal, and what that would subsequently do to your premiums.
Deal now or pay later
The bottom line? With this new rule, providers are not punished for failing to contract with payers. Payers are punished for not contracting with providers. This puts all of the negotiation power in the hands of the provider. They know they can leave the “networking table” without a deal and collect their lump of flesh later. The payer, however, now is desperate to get a contract signed – and will sign a deal, no matter how abusive – to avoid the punishments they will suffer when they dare to allow a provider to be OON.
Before this review can be concluded, it is important to recognize that this assessment has been mostly negative. Hopefully you will forgive the author his gloomy tone. Many people see that surprise balance billing is being identified as an issue – and that, in and of itself, is a good thing. Unfortunately, the approach presented by the NSA minimizes the importance of examining objective metrics, is over reliant upon networks, and ignores amounts providers accept as “payment in full” from other payers – including Medicare and Medicaid, as well as actual cost to charge ratios. Rather than drill down to the question of what constitutes “fair” compensation, the process will instead ask what constitutes the “most common” compensation. Looking at the current state of the health care industry, one would be justified in expressing concern over future dependence upon past “averages.”
Hopefully arbitration won’t take place in a vacuum, despite the analysis above. Furthermore, there are other reasons for optimism. Much of the proposal depends upon future rulemaking. There is an opportunity to further define how the rule will be applied through the regulatory process. Stakeholders are encouraged to analyze the rule, contemplate how it will impact them, and propose solutions to shift the end result to a more equitable conclusion. This is not the end, but rather a foot in the door.
Consider also the inclusion of air ambulance claims. For too long this subset of healthcare has been allowed to operate without limitation and gotten away with unfettered billing practices. By being included in this proposal, we are turning the corner and taking one step in the right direction.
Lastly, while the rule isn’t perfect, it does also require providers to exercise a new level of transparency – notifying patients when they may be treated by an out of network provider, and requiring the use of a waiver that is (hopefully) more robust than the traditional intake forms signed by patients today.
Thus, in closing, while the NSA is far from perfect, there exists an opportunity to adjust it through the regulatory process and it shines a light on some issues that have been hidden for too long.
Ron E. Peck, Esq., is executive vice president and general counsel with The Phia Group, LLC.
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