by James C. Sherlock
A lot happened right before the New Year to change the rules for healthcare billing and pricing.
In one of the events, new federal law buried in the end of year, 5,600-page $900 billion COVID-19 federal relief legislation bans balance billing to patients.
“Surprise” billing for the balance due after an insurance company pays its contracted providers occurs when patients are presented with unexpected bills from out-of-network providers who practice in in-network hospitals.
ER physicians in particular have been very active in forming practices that contract with hospitals, effectively reducing the supply of ER physicians available to work as hospital employees.
I personally don’t have any problem with ER doctors doing that as long as they do not violate anti-trust laws. They should receive what their labor is worth. A key problem is that anti-trust law enforcement in the business of healthcare is non-existent in Virginia.
In the absence of anti-trust violations by the physician practices, it is my view that the hospitals, not the insurance companies, need to bring them under contract. If a hospital is in-network, it is logically up to the hospital to ensure all of the services provided by the hospital are in-network and negotiate with insurers for the package of delivered care, not parts of it. Any other approach guarantees chaos.
The Kaiser Family Foundation has reported that more than one-sixth of in-network hospital stays result in surprise bills. Many patients cannot pay them and they go into collection.
The new law will prevent those bills from being presented to patients. It instead requires providers and insurers to negotiate a settlement in back room deals. The costs of the negotiations and settlements will be reflected in increased consumer insurance costs.
Industry lobbyists from both insurers and providers had inserted into the law a provision that prohibited arbitrators from considering Medicare reimbursement rates when determining a price compromise.
So, while that law will eliminate lump sum surprises for patients, it will do nothing to actually lower the cost of healthcare.
There is nothing in federal law that prevents Virginia passing legislation that requires hospitals to ensure all services provided in their facilities are in-network as a pre-condition for negotiating with insurers.
Such a law would eliminate balance billing entirely, eliminating the costs associated with the new balance billing negotiating regime.
It won’t happen, because the Attorney General will not enforce the Virginia Antitrust Act against either the physicians’ practices or the hospitals and most of the GA won’t cast a vote that goes against hospital wishes.
In the other end-of-year development, the United States Court of Appeals for the District of Columbia upheld on 30 December a District Court ruling that allowed implementation of major healthcare price transparency rules published by the Department of Health and Human Services. The judges ruled firmly against the hospital industry’s every argument in affirming the district court’s decision.
That ruling is a really big deal if adequately enforced.
The key provision of the regulation that was upheld requires all hospitals to publish their actual rates, not the “retail” prices they report to Medicare. They will be forced to reveal for each procedure the actual cash prices they received from cash payers and their reimbursements from each insurance company including Medicare and Medicaid.
This data will enable consumers to shop for the best price in their region or calculate how much they might save by traveling to another region of the state for an elective procedure. In its raw form, the data will be too extensive and complex for 95% + of consumers to use.
However, the regulation also requires hospitals to publish it in machine readable format, so that third party companies can aggregate it and present it to consumers the same way we can now price shop online for nearly anything.
It will also permit companies that are large enough to shop hospitals in locations they have significant numbers of employees (think Amazon in Northern Virginia) and cut cash deals for their employees for selected procedures for which the company will pay cash. Some of the largest companies including Walmart are doing this already.
There are also major implications for vertically integrated healthcare companies that own both hospitals and insurers, including my personal favorite, Sentara. Those companies will have to reveal what their insurance arms such as Sentara’s Optima Health are paying to their own hospitals as well as to competing hospitals for the same procedures. I can’t wait.
It will also show how much size matters in price negotiations.
The dominant hospital systems in a region get higher payments from commercial insurers than smaller competitors. The insurers with the largest patient populations in a region get lower prices from hospitals.
Makes sense, but it is the scale of those discounts or premiums that will amaze the regular citizen.
You will see in a real example that I will provide that those differences in prices paid can approach 100%. A small insurer can pay twice as much to a large hospital system as a large insurer for the same procedure. An independent hospital or small chain can get half the reimbursement as a large, regionally dominant hospital system from the same insurer.
Then there is clash of titans — the biggest regional hospital system negotiating rates with the biggest regional insurer. Finally, there is the question posed above of how hospitals and insurers under the same management share the money. All of that must now be revealed.
This too can be simplified by the General Assembly.
Virginia already collects all of the required price transparency information in its all-payer claims database (APCD). Virginia law currently restricts that information from being revealed by the state’s data manager, vhi.org. A change in the law would let the state collect and publish the data centrally with no additional effort by the hospitals other than a link to the state data on their websites.
The Department of Health could ask for a waiver from HHS to publish the data centrally, relieving each hospital of the responsibility and saving very large amounts of money in individual IT investments and ensuring coherence of the presentation of the data to the public and to aggregators.
I will lay out the provisions of that newly upheld price transparency regulation, a Virginia example of compliance and its implications for cost containment in my next column.There are currently no comments highlighted.