At a speaking engagement in Portland recently I heard an orthopedic surgeon say, “The NSA has no impact on my practice because I am largely in-network and the law is relevant only to the out-of-network community.”
Wrong. Below I explain why.
It might come as a surprise to suggest that the most significant legislative development in the past 50 years affecting the financial well-being of the medical community is the No Surprises Act (NSA). Changes to Medicare and Medicaid, the Affordable Care Act, and other legislative measures fall short of the potential impact of the NSA. Many underestimate this impact or misinterpret its impact because there is a certain subtlety to the NSA’s ramifications. This article explores those subtleties and explains that the NSA can either sink the medical community financially or can save it from the insurance industry sinking reimbursements to the bottom of the sea.
Most in the medical industry understand by now that the NSA’s principal aim 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,” and this is achieved by requiring that the patient be treated as if the OON encounter was in-network.
How does the NSA achieve this laudable goal?
For the most part, carriers are required to maintain a database of their in-network (INN) rates. When they receive an OON claim falling under the auspices of the NSA, the carrier consults that database and determines the median INN rate, that is, the rate sitting in the middle of the range of rates in the database. This median rate becomes the QPA or Qualified Payment Amount. This initial determination is critical for protecting the patient. Under the NSA, the patient is to be treated as if the encounter were INN, not OON. So, the carrier must arrive somehow at an INN rate. The median INN rate provides the solution under the NSA. The QPA is paid in the first instance and that determines the patient’s INN cost-share. At that point the patient is left out of the payment dispute and the medical provider can begin the arbitration process to recover greater reimbursement.
This creates an interesting dynamic. On the one hand, carriers are incentivized to lower INN rates. Indeed, if carriers can lower INN rates, it saves them money not only with the INN community, but it lowers the median for the OON community as well through application of the QPA. The following very simple example shows how. Of the following five numbers—10, 8, 5, 3, and 2—5 is the median. If this was the carrier’s INN database, all the carrier would need to do to lower the median is kick off of its network 10 and 8. This would leave 5, 3, and 2, with a new median of 3. Carriers have kicked off their networks those on the high end of INN rates and will continue to do so. They have also been chastised by a federal court in the TMA III decision for skewing the median downward in other ways. (This decision is currently on appeal to the entire 5th Circuit Court of Appeals.)
The critical point is the INN community will not be seeing rate increases, even when long overdue, because the carriers will not want to raise rates and thereby raise the median.
On the other hand, the NSA arbitration process, at least for the time being, is extremely beneficial to the medical community, largely because the carriers are paying so little under the QPA, and not negotiating in any meaningful way, as required by the NSA during the pre-arbitration negotiation period. The result is that medical providers are prevailing an overwhelming majority of the time and for large reimbursements. The fact that the carrier community is losing so often and so much in the NSA arbitration process would lead them, one would think, to bargain in good faith. More importantly, though, this would incentivize carriers to treat well the INN community to discourage them from going OON and taking advantage of this medical-provider-friendly forum. Not so, primarily because there are still so many claims, sadly, that could be arbitrated but are not. Most estimates suggest that only 10% to 15% of eligible claims are being brought to the Federal IDR, the forum for dispute resolution under the NSA.
What does this all mean? Incentives and disincentives? Under-utilizing of arbitration? INN rate negotiation?
Clearly, carriers are incentivized to lower INN rates, given how the NSA operates. To prevent this from happening, both the OON medical community and the INN medical community must take action. The OON community must take advantage of the benefits of the IDR process because it removes the power over the payment dispute from the carrier to a neutral arbitrator and yield substantial financial benefits because of that. For its part, the INN community must leverage the availability of this arbitration process to discourage the insurance industry from its malfeasance toward, misfeasance toward, neglect of, and outright abuse of the medical industry with whom it contracts. In light of this newfound convenient forum for medical dispute resolution, the INN community does not have to take lying down carriers not raising INN rates for years or even decades, unfair payments in violation of network agreements, unilateral modifications of their internal policies, appeal processes where you are asking for redress from the very entity mistreating you in the first place.
The only way to prevent the race to the bottom in terms of carrier reimbursements is for the OON community to be arbitrating eligible claims, and the INN community demanding fair and just INN treatment with the real option to terminate the agreement. Use the NSA as a life preserver. Do not allow the carrier community to turn it into a sinker.