Perhaps the most significant development in recent years affecting the financial well-being of the medical community is the advent of surprise medical bill laws (SBL’s) at the state level and the No Surprises Act (NSA) at the federal level. The principal aim of these laws is to protect patients from unexpected charges that can occur when they receive medical treatment from healthcare providers that are not within the insurance carrier’s network. This occurs most often in the context of emergency medical treatment. Why should a patient be responsible for an out-of-network (OON) bill when the patient never made the decision to go outside of its carrier’s network for treatment? The obvious answer is “They shouldn’t.” Patients must be protected from these emergency and “inadvertent” OON “Surprise Medical Bills.”
Just as important, though, is the notion that the medical community must be reimbursed fairly under these legislative and regulatory regimes to ensure that quality medical care—emergency medical care in particular—will not be undermined. If surgeons, for example, are not reimbursed properly for taking ER call, where they are summoned to the hospital at 3 AM to perform emergency surgery, they will simply stop taking ER call. Who then will be performing these emergency surgeries? The same is true of hospital ER facilities, which cannot refuse treatment regardless of ability to pay and so need to be reimbursed properly by those who can afford to pay, that is, commercial carriers.
It is true hospitals are largely in-network (INN) with commercial insurance carriers, and therefore, might regard this area of revenue recovery as miniscule, but the difference between the initial reimbursement and the results of these arbitration processes is very significant. Here is why?
To keep things simple, let’s talk about the federal process, the Federal Independent Dispute Resolution (IDR) arbitration process under the NSA. If a hospital is not INN with Amerihealth, for example, and a patient with Amerihealth as its carrier comes through the ER and is admitted with very serious emergent conditions, the hospital and the carrier under the NSA are obligated to treat the patient as if the entire encounter iss INN. Well, how does that happen if there is no network agreement between the carrier and the hospital? Each carrier must maintain a database of its INN rates for each code, and they will pay the hospital in the first instance the median INN rate it has for each code. This is the so-called QPA or Qualified Payment Amount. This is necessary in order to determine the patient’s INN cost-share or coinsurance. The patient is thus treated as if the encounter was, in all respects, INN. The OON medical provider can then arbitrate against the carrier for greater reimbursement.
Accordingly, these laws do three things that the American healthcare industry desperately needs:
- Patients will be removed from the payment dispute between commercial insurance carriers and medical providers, a place in which the patient does not belong to begin with.
- There will exist a convenient forum for the medical industry to address a reimbursement dispute with an insurance carrier, which today is sorely lacking in the area of commercial insurance.
- Control over the reimbursement dispute moves into the hands of a neutral third-party arbitrator, rather than staying within the control of the insurance carrier through the appeal process.
The NSA and the State SBL’s thus provide a tremendous threefold service to American healthcare.
In addition, at least at the moment, the IDR process is working quite well and achieving these three objectives beautifully, much to the chagrin of the insurance industry, and, because of that, the NSA has implications beyond merely OON reimbursement.
A typical case that proceeds to arbitration will likely have an initial QPA payment of between 5% and 10% of the charges. This is not surprising because the data base generating the QPA—the medial INN rate—is prepared and maintained by the carrier. It is hardly a stretch to suggest that the carriers will skew that median as far downward as they can. They certainly will not be skewing it upward in any way. In fact, there are instances where the carriers were removing from their networks medical providers who were at the high end of their INN reimbursements. This, of course, would have the effect of moving the median downward. A federal district court in Texas, in the so-called TMA III decision, also found issues with numerous inputs into the QPA determination permitted by CMS that were unfairly skewing the median in favor of the carrier. That decision is currently pending on appeal before the full panel of the 5th Circuit Court of Appeals. Moreover, the QPA is not even the high end of the INN scale. It is the median. This seems particularly antithetical to what is desirable because we are talking about ER treatment, which needs to be incentivized, not disincentivized.
The results of arbitration typically are several times the QPA. So, what was a payment of 5% to 10% of the charges can become 8X, 10X, or 12X the original payment after the arbitrator considers specific factors related to the treatment, the history of payments between the parties, and the nature and reputation of the facility. As a result, even though there might not be a large volume of OON ER claims for a hospital, the difference between being in the arbitration process and not being in it is very significant on a claim basis. And it takes almost no expenditure of resources to obtain it.
The reality of the current situation regarding these claims is that carriers are paying so little initially and not bargaining in good faith after the process has commenced, they have made it easy for the medical community to prevail in arbitration. The IDR is baseball-style arbitration, meaning the arbitrator must choose either the final offer from the carrier or the amount demanded by the medical provider, with no compromising. Because the carriers are offering so little, the medical community is prevailing 80% to 90% of the time. At some point carriers will begin to offer more, which means providers will need to demand less in order to prevail, but that has not happened yet.
One of the challenges with being OON is the uncertainty. This uncertainty applies to reimbursement, the timelines under which you can expect payment, the processes for obtaining payment, and other things. The INN world brings lower reimbursement generally but provides a certain measure of predictability. The IDR process provides that certainty. The INN community now has a more appealing alternative to INN. At least with respect to ER claims, the OON space is suddenly a bit more appealing because of the certainty provided by the NSA and the IDR.
The medical community often faces a Hobson’s choice between being INN, and thereby agreeing to unreasonably low rates, or being OON and face greater uncertainties surrounding payment as well as frustration in the form of carrier unresponsiveness, bureaucratic inertia, purposeful obfuscation, and outright malfeasance. This is grossly unfair to the medical community and undermines the goal of quality patient care.
There has been no overarching remedy in this arena . . . until now. The NSA and the Federal IDR process instituted by the NSA provide the perfect platform for remedying these shortcomings. The OON community now has a convenient forum for dispute resolution of eligible claims, and the INN community has an alternative in the OON space that is much less uncertain than it previously was.
Do not let the small number of OON ER claims you might have deter you from getting involved in this process. I recall not too long ago when New Jersey hospitals largely ignored opportunities in NJ PIP arbitration and New Jersey Workers’ Compensation recovery that ultimately led to hundreds of millions of dollars in added revenue for the New Jersey hospital community.