Tuesday, October 05, 2021

Wonder of wonders: National balance billing protection for consumers that (probably) won't increase healthcare costs

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The federal government* delivered some rare good news on the healthcare cost control front with release last week of the second part of interim final rule governing implementation of the No Surprises Act, which will protect Americans from the most egregious forms of balance billing (excepting ground ambulances!) beginning on January 1, 2022. The No Surprises Act was part of the broad-based bipartisan budget deal signed into law by Trump in late December 2020.

The good news concerns the ground rules for arbitration of out-of-network bills, which either the provider or the insurer can initiate if they can't agree on a price within 30 days. As in New York, New Jersey and other states that have passed laws protecting patients from balance billing, it's "baseball arbitration," in which the arbitrator must rule in favor of one party's proposed price, rather than splitting the difference. What matters is the standard by which the arbitrator must judge the competing bids. A summary published by CMS provides the upshot:

When making a payment determination, certified independent dispute resolution entities must begin with the presumption that the QPA is the appropriate OON amount. If a party submits additional information that is allowed under the statute, then the certified independent dispute resolution entity must consider this information if it is credible. For the independent dispute resolution entity to deviate from the offer closest to the QPA, any information submitted must clearly demonstrate that the value of the item or service is materially different from the QPA. Without this additional information, the certified independent dispute resolution entity must select the offer closest to the QPA (emphasis in original).

The QPA is the "qualifying payment amount," which is the median contracted rate that insurers within a given geographic area pay to in-network providers. All bids must be presented as a percentage of the QPA. While arbitrators can consider other factors submitted by the provider, such as the complexity of the particular care episode, the patient's acuity, or the training/expertise and outcomes measurements of the provider, the QPA is the benchmark or presumed norm:

Anchoring the determination of the out-of-network rate to the QPA will increase the predictability of IDR outcomes, which may encourage parties to reach an agreement outside the federal IDR process to avoid the administrative costs, and will aid reducing prices that may have been inflated due to the practice of surprise billing prior to the No Surprises Act (rule, p. 54)

That "anchor" is the missing link that has, according to a 2021 study by Benjamin Chartock, Loren Adler et al., made baseball arbitration a vehicle for major price inflation in New Jersey:

Arbitration awards were considerably higher than typical in-network payment amounts  Compared with the HCCI data, we found that the mean and median arbitration awards were 9.0 and 5.7 times higher, respectively, than the median in-network price for the same set of services, with 31 percent of cases decided for amounts more than ten times the median in network price (exhibit 1). Because commercial insurers tend to pay more than Medicare, the contrast is even starker with Medicare rates. The mean and median arbitration awards were 12.8 and 8.5 times Medicare prices, respectively, with 45 percent of cases awarded at amounts more than 10 times what Medicare would have paid (exhibit 2). In both comparisons, the large divergence between the relative mean and median awards primarily stemmed from the skewness of arbitrated payment amounts  

The No Surprises Act statute bans arbitrators from considering Medicare or other pubic programs' provider payment rates. But it also rules out consideration of providers' "usual and customary charges, the amount that would have been billed by such provider or facility with respect to such items and services" -- that is, the amount providers bill when not constrained by in-network contracts. In the PARE specialties most notorious for balance billing (pathology, anesthesiology, radiology and emergency room), those "billed rates" range from 3.5 to 5.5 times Medicare rates at the median, according to  a 2019 Brookings Institute study. At the 80th percentile of billed rates -- the de facto norm in New Jersey arbitration, according to Brookings -- billed rates in these specialties range from 5 times Medicare in pathology to 11 times Medicare in anesthesiology. A Brookings brief summarizing these findings includes the table below:

The QPA benchmark in the proposed rule for arbitration under the No Surprises Act should forestall that kind of runaway price inflation -- if the rule is finalized as is after a 60-day comment period.

While the rule discusses in some detail factors that might lead an arbitrator to rule in favor of the bid further from the QPA, it also emphasizes potential offsetting factors -- for example, the likelihood that a high level of patient acuity is built into the billing code. Repeatedly it's emphasized that only truly compelling evidence should trigger a ruling in favor of the bid further from the QPA:

 If a certified IDR entity does not choose the offer closest to the QPA, the written decision’s rationale must include a detailed explanation of the additional considerations relied upon, whether the information about those considerations submitted by the parties was credible, and the basis upon which the certified IDR entity determined that the credible information demonstrated that the QPA is materially different from the appropriate out-of-network rate (p. 66).

Arbitrators are to start with "a rebuttable presumption that the QPA is the appropriate payment" (p. 257). And lest we lose sight of the purpose and expected (though acknowledged to be uncertain) outcome:

These interim final rules set standards requiring certified IDR entities to consider the QPA (typically the median in-network rate) when making payment determinations; the Departments expect this approach to have a downward impact on health care costs, potentially resulting in transfers from providers and facilities to individuals with health coverage (p. 256). 

Ever since Elisabeth Rosenthal started exposing predatory balance billing in her epic Paying Till it Hurts series in the New York Times (e.g., an assisting surgeon's $117,000 bill to a patient in a procedure performed by an in-network surgeon)  -- followed by KHN's Bill of the Month series under Rosenthal's editorship, and Sarah Kliff's extraordinary exposures first at Vox and then at the NYT -- I've said that balance billing is the one healthcare abuse so egregious that even Americans wouldn't stand for it forever. States governed by both parties have passed balance billing protections -- always limited by ERISA's jurisdiction over employer's self-funded health plans. What was truly surprising was not so much that a federal law protecting consumers from most avenues of balance billing finally was enacted at the end of 2020, but that the law appears to significantly constrain providers' scope for imposing their bill-at-will rates on insurers for out-of-network services. Physicians' friends in Congress --very much including Democrats, e.g., Ways and Means Chair Richard Neal -- managed to torpedo earlier legislative attempts that neared the finish line. We can thank the journalists and researchers who exposed the extent of balance-billing abuse -- including its centrality to the business model of private equity-owned practices -- for the minor miracle of legislation and rulemaking that appear poised to provide consumer protection without inflating healthcare costs and insurance premiums.


* This rule is a joint production of HHS, DOL, the Treasury, and OPM, the federal Office of Personnel Management, which focused on implementation with respect to the Federal Employees Health Benefits program.

Updated 10/6/21, with more detail from the rule text.

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1 comment:

  1. Thanks for another valuable summary on a very important issue. They don't pay you enough for your work.

    The current New York and New Jersey procedures sound awful. See if I understand this correctly:

    1. The in-network fee for a procedure is $1,000.

    2. The patient normally has no choice about seeing an out-of-network doctor while hospitalized.

    3. The out-of-network doctor submits a bill for $10,000.

    4. The arbitrators have been ruling for the doctor???

    Are these arbitrators on the take, or what? The whole process is an unfair trade practice, and I think Connecticut law defines it thusly.