Ch. 8 - The New Regulated Utility: Physicians
Saumya Singh, MD; Ashley Tarchione, MD; Jasmeet S. Dhaliwal, MD, MPH, MBA
While a hospital may be considered in-network for insurance, certain providers or services within that hospital may still be considered out-of-network (OON). Balance billing is the discrepancy between these entities. If a patient’s care involves an out-of-network provider or service, insurance will not cover the entire cost of care. The patient may then be billed for the remaining balance, hence the term “balance bill,” often referred to in the media as “surprise billing.” Even in the event that a patient has met their deductible by paying for in-network services, they may still be held financially responsible for an OON bill, as it is charged under an out-of-network deductible.
The health care landscape is experiencing a shift in payment models, with insurers tying reimbursement to quality measures and value-based purchasing.
Why It Matters to EM and ME
If an individual is taken to an emergency department at an in-network hospital but receives care from an emergency physician who is contracted with an OON group, the patient may be at risk for a balance bill to account for the difference the insurance will not cover. While a patient may accrue a balance bill by intentionally seeking care OON, balance billing is typically a term used when a patient anticipates their care will be covered by their insurance only to later receive a balance bill from an OON physician or facility. Most prominently, this issue arises when a patient seeks emergency care at an in-network hospital, but the treating physician, who is contracted by a different entity, may not accept the patient’s insurance.1 Approximately two-thirds of hospitals in the United States now outsource to emergency physician staffing companies.2 As the number of emergency physicians employed by outsourced staffing companies or private physician groups grows, it is increasingly common to experience discrepancies between the specific types of insurance accepted by the physician staffing group and the hospital, thus increasing the prevalence of balance billing. This problem is also commonly seen amongst other hospital-based medical specialties – radiology, pathology, and anesthesiology – whose services are often outsourced and not directly hired by the affiliated hospital system.
However, as opposed to scheduled care provided by anesthesiologists and radiologists, emergency physicians are required by the Emergency Medical Treatment and Labor Act (EMTALA) to provide emergency care to resuscitate and stabilize any patient who comes to the emergency department regardless of their insurance coverage, in order to be eligible for Medicare reimbursement.3 This requirement, along with outsourced staffing, leaves emergency departments and physicians with EMTALA obligations particularly susceptible to being caught in the cross hairs of balance billing.
The cost of medical bills can be debilitating for patients. Over a quarter of Americans 18 to 64 years old admit difficulty paying medical bills experienced by either themselves or someone in their household, and this difficulty is ubiquitous regardless of income class or insurance status.4 The type of insurance a patient carries does not necessarily offer any protection, as the incidence of OON billing in privately insured patients increased from 32.3% in 2010 to 42.8% in 2016.5 A 2022 report from the Department of Health and Human Services estimated that the average surprise medical bill ranged from $750 to $2,600, however extreme cases can place patients in hundreds of thousands of dollars of debt.6,7
How We Got to This Point
In 2010, as the Affordable Care Act was implemented, the Department of Health and Human Services (HHS), Justice Department, and the Department of Labor created federal regulations requiring that a reasonable amount of OON care be paid by insurance companies before the responsibility fell to the patient. Prior to this, there was no requirement for any coverage of OON billing. The method the “greatest of three (GoT)” for OON insurance coverage was created, whereby insurers must pay the hospital or physician the highest amount between:
- Their usual in-network rate (ie, the insurer’s allowed amount)
- The usual, customary, or reasonable (UCR) rate (eg, the charge)
- The Medicare rate
Medical professionals expressed concern at the GoT regulation. The first concern was that in-network physicians often accept lower rates due to certain incentives provided by the insurer, such as increased patient volumes or expedited payment. Accepting these lower rates as an OON provider without the added benefits may lead to financial burden. The second concern was the lack of objective standard for UCR rates, leaving it to be defined by insurance companies. Lastly, Medicare reimbursement rates for hospital services were, at that time, significantly lower than private insurance rates. For physician services specifically, private insurance paid an average of 143% of Medicare rates.8 Trends show that reimbursing at Medicare rates does not correlate with inflation. Between 2001 and 2021, reimbursement rates only increased 11%, while the cost of running a medical practice rose 39%.9 Because of the GoT rule, insurance companies became disincentivized from contracting with emergency groups, putting patients at increased risk for accruing a balance bill.10
Since 2010, multiple pieces of legislation have been drafted on how to best reimburse hospitals and physicians for care provided. While the specific mechanisms of how to best reimburse for OON care are up for debate, most proposals have shared the common goal of eliminating patient responsibility for balance bills.
Current State of the Issue
At the end of 2020, Congress passed “The No Surprises Act (NSA),’’ which took effect Jan. 1, 2022. Patients receiving emergency care, post-stabilization care, or other forms of scheduled care, such as radiology and anesthesia services, had been subject to financial burden due to receiving OON care, often without consent. The NSA attempted to free patients from being held accountable from these balance bills. After stabilization, patients should have the option to either transfer care to a facility or provider that is in network with their insurance or remain under their current OON care with responsibility for the balance. The NSA also bans insurance companies from charging OON deductibles without patient consent.11
The NSA established an Independent Dispute Resolution (IDR) as the means to a fair reimbursement for medical services without prior contracted agreement between a patient’s insurer and the physician or health care facility. This assumed no preexisting state All-Payer Model or OON billing law. If a state already had existing legislation, the NSA became secondary. Under the NSA, if a physician or group believed they were underpaid by an insurance provider, both groups have 30 days to determine an appropriate reimbursement independently. If they are unable to settle in that time frame, they move to IDR, in which a neutral third party, the independent reviewer, arbitrates the appropriate payment amount. To proceed with IDR, both groups are required to pay a $200-500 administrative dispute fee. The prevailing side receives the amount they billed for and a refund of their IDR dispute fee.12
While the law, as written, was seen as a win for medical professionals, during the final stages of its review, new regulations specified that the independent reviewers settling IDR claims “must begin with the presumption that the Qualified Payment Amount (QPA) is the appropriate OON rate.”13 The NSA outlined specific criteria detailing the QPA, or how much the insurance companies pay the OON entity. The QPA for a given item or service is generally the median contracted (“in-network”) rate on Jan. 31, 2019, for the same or similar item or service in a given market area, increased for inflation. As discussed previously in this chapter, the median in-network rate is often significantly lower due to other benefits provided to in-network physicians, and as such QPAs were resultantly lower as well.
These new regulations essentially required the IDR process to consider a median in-network rate as appropriate reimbursement, thus giving insurance companies significant leverage over physicians in the final reimbursement outcomes. Since this final regulatory language was implemented, insurers have begun to cut contracts with physicians who refuse to lower rates. For many insurance companies, it is now favorable to not contract with physicians, given the relative autonomy in price setting afforded to insurers by the regulatory scheme.14,15
As renewal contracts are lost or face steep cuts in reimbursement rates, it is theorized that the amount of OON physicians will begin to skyrocket. In an increasingly consolidated insurance market, there may not be other options for physicians to contract with, forcing them to either accept these lower rates or lose their contract, limiting patient’s choices in physicians and potentially delaying care.16 The financial strain of these changes may also lead to increased physician consolidation. While there may be benefits in negotiation during the IDR process amongst large provider groups and hospitals, multiple studies have demonstrated that this consolidation is a detriment to quality of care.17 Additionally, consolidation markedly increases health care costs given the lack of competition.18
Because of these concerns, in 2021, ACEP, the American College of Radiology, and the American Society of Anesthesiologists filed a lawsuit against the federal government, stating that the regulations established by HHS to include QPA as a starting point for IDR discredit the original congressional intent of the No Surprises Act.19 As of this writing, this legal battle is ongoing.
As the federal government has sought to create a solution to balance billing, so have states. Since states are mandated to keep balanced budgets, an increase in health care spending, specifically for Medicaid and state employees, may lead to decreased spending for other state needs. Currently, 33 states have some form of policy against balance billing; however, less than half offer comprehensive protection against it.20
New York was the first state to enact legislation regarding balance billing, and it utilizes an arbitration process similar to the IDR process of the NSA. This has reduced its OON billing by 88%.21,22 Connecticut, New York, California, Georgia, New Mexico, and Texas all use FAIR Health data to create a benchmark for OON reimbursement rates. FAIR Health collects private insurance and Medicare claims from all 50 states and compiles them into a data repository.23 Maryland utilizes payment formulas and ultimately caps charges at 125% of contracted prices.24 Other states, such as Arizona and Missouri, have more limited protection against balance billing. For example, in Arizona, the dispute resolution process only applies to claims over $1000 and must be initiated by the consumer.25
While some states have seen success with their own legislation, they are somewhat limited by the Employee Retirement Income Security Act of 1974 (ERISA). With a fully insured employer-sponsored plan, the power is with the insurer to set the benefits while also assuming the financial risk. In a self-funded approach, on the other hand, employers take on this risk, while having the flexibility to choose their benefits. States are able to regulate the former, while ERISA preempts them from regulating the latter.26 As such, the federal government is responsible for regulating insurance covered under ERISA. Currently, approximately 50% of all job-based coverage is managed through ERISA, as it is self-funded, thus limiting the scope of state legislation alone.27
While physicians, insurance companies, and legislators may disagree on the best way to address the issue of out-of-network surprise billing, ultimately they must agree on a solution that prioritizes patient care without simultaneously increasing health care costs or sacrificing access to care. As the No Surprises Act is implemented in the coming years, it will be critical to monitor its effects on the cost of health care, as many are concerned that the independent dispute resolution process could prove to be unwieldy and expensive, causing insurance premiums to rise and shifting the costs back to the patient.28 It will also be crucial to observe its effects on emergency departments, as reimbursement rates that are too low could result in the underfunding of our nation’s health care safety net. Given the high number of uninsured patients in emergency departments and the unfunded mandate of EMTALA, appropriate reimbursement by private insurers is crucial to the survival of the acute, unscheduled care. While federal solutions are helpful in some instances, it will be critical for states to develop and revise their legislation to address balance billing for insurance plans within their regulatory jurisdiction. Emergency physicians should look into their own state legislatures and model legislation to determine the best solution to balance billing for their own community.
- Balance billing occurs when a patient receives care from an out-of-network provider or facility and is held responsible for paying the remaining balance not covered by their insurance reimbursement.
- Because of EMTALA, emergency physicians are required to care for patients regardless of their ability to pay or their insurance coverage, putting emergency departments at high risk for providing care that will not be reimbursed.
- As an increasing number of emergency physicians are not directly employed by hospitals, emergency departments are particularly susceptible to surprise balance billing.
- The No Surprises Act established an Independent Dispute Resolution process to help settle out-of-network billing disputes between health plans and physicians, however the effect of this legislation and its subsequent regulations remain to be seen.
- While more than half of state legislatures have also created policies addressing balance billing, they are preempted by the Employee Retirement Income Security Act of 1974, and as such the federal government is still responsible for roughly half of insurance plans.
- Moving forward, we must continue to advocate for changes that prioritize reducing the cost of health care to patients while ensuring compensation is adequate for the care provided.
- HealthInsurance.org. What is balance billing? https://www.healthinsurance.org/glossary/balance-billing/. Accessed June 06, 2022.
- Cooper Z, Scott Morton F, Shekita N. Surprise! out-of-network billing for emergency care in the United States. J Polit Economy. 2020;128(9):3626-3677.
- Centers for Medicare & Medicaid Services. Emergency Medical Treatment & Labor Act (EMTALA). CMS.gov. https://www.cms.gov/Regulations-and-Guidance/Legislation/EMTALA. Updated Dec. 1, 2021. Accessed June 06, 2022.
- Hamel L, Norton M, Pollitz K, Levitt L, Claxton G, Brodie Mollyann. Kaiser Family Foundation. The Burden of Medical Debt: Results from the Kaiser Family Foundation/New York Times Medical Bills Survey. Kff.org. https://www.kff.org/report-section/the-burden-of-medical-debt-introduction/. Published Jan 06, 2016. Accessed June 06, 2022.
- Sun EC, Mello MM, Moshfegh J, Baker LC. Assessment of Out-of-Network Billing for Privately Insured Patients Receiving Care in In-Network Hospitals. JAMA Intern Med. 2019;179(11):1543-1550.
- HHS Kicks Off New Year with New Protections from Surprise Medical Bills. January 2022. Accessed June 4, 2022.
- Rosenthal, Elisabeth. 2014a. “After Surgery, $117,000 Bill for Doctor He Didn’t Know.” New York Times, September 20. https://www.nytimes.com/2014/09/21/us/drive-by-doctoring-surprise-medical-bills.html.
- Lopez E, Neuman T, Jacobson G, Levitt L. Kaiser Family Foundation. How Much More Than Medicare Do Private Insurers Pay? A Review of the Literature. Kff.org. https://www.kff.org/medicare/issue-brief/how-much-more-than-medicare-do-private-insurers-pay-a-review-of-the-literature/. Published April 15, 2020. Accessed June 06, 2022.
- Current Medicare payment system on an unsustainable path. American Medical Association. https://www.ama-assn.org/practice-management/medicare-medicaid/current-medicare-payment-system-unsustainable-path. Accessed June 4, 2022.
- Letter to Sen. Bill Cassidy. March 2018. Accessed at https://docs.google.com/viewer?url=https%3A%2F%2Fwww.acep.org%2Fglobalassets%2Fnew-pdfs%2Fadvocacy%2Facep-response-to-sen-cassidy-price-transparency-letter----03232018.pdf.
- No Surprises Act, H.R.3630, 116th Congress (2019-2020).
- The No Surprises Act. Accessed June 06, 2022.
- Office of Personnel Management; IRS; Department of the Treasury, et al. Requirements Related to Surprise Billing; Part II. Federal Register. Oct. 7, 2021.
- USC Schaeffer Center. No Surprises Act Will Likely Reduce Payments to Most Emergency Medicine Providers, According to New USC Analysis. Published September 16, 2022. Accessed 25 Nov, 2022.
- Letter re: necessity to amend rate agreement, response needed before November 21, 2021. Accessed via ACR.
- Scheffler RM, Arnold DR. Insurer Market Power Lowers Prices In Numerous Concentrated Provider Markets. Health Aff. 2017; 36(9).
- Schwartz K, Lopez E, Rae M, Neuman T. Kaiser Family Foundation. What We Know About Provider Consolidation. https://www.kff.org/health-costs/issue-brief/what-we-know-about-provider-consolidation/. Published Sep 02, 2020. Accessed June 06, 2022.
- Gaynor M. ‘Examining the Impact of Health Care Consolidation' Statement before the Committee on Energy and Commerce, Oversight and Investigations Subcommittee, U.S. House of Representatives. Feb 14, 2018. Available at SSRN: https://ssrn.com/abstract=3287848 or http://dx.doi.org/10.2139/ssrn.3287848
- American College of Emergency Physicians, American College of Radiology, and American Society of Anesthesiologists, File Lawsuit Against the Federal Government’s Implementation Rules for ‘No Surprises Act’. Accessed June 06, 2022.
- Hoadley J, Lucia K, & Kona M. State Efforts to Protect Consumers from Balance Billing. Commonwealthfund.org. https://www.commonwealthfund.org/blog/2019/state-efforts-protect-consumers-balance-billing. Posted Jan 18, 2019. Accessed June 06, 2022.
- Cooper Z, Morton FS, Shekita N. Surprise! Out-of-Network Billing for Emergency Care in the United States. J Polit Economy. 2020; 128(9).