Nearly one in five hospital visits results in patients getting the unwelcome surprise of an unexpectedly large bill because doctors or other providers weren't part of their insurer's network.
To protect consumers, Congress passed the bipartisan No Surprises Act last December. But doctors and hospital groups are attempting to delay its Jan. 1 rollout over a narrow but critical portion that they contend unfairly favors insurers.
On Thursday, the American Medical Association, American Hospital Association and individual hospitals and doctors sued the federal government to halt federal regulators’ proposed arbitration rules that would effectively end the most common forms of surprise billing.
The proposed rule unveiled by the U.S. Department of Health and Human Services and other federal agencies would give providers and insurers 30 days to hash out disagreements over payments or submit to binding arbitration to settle disputes. The lawsuit said regulators misinterpreted the law and proposed an “unfair and unlawful" arbitration system that starts with benchmark rates already negotiated by health insurers – the median, in-network rate for similar medical services.
The lawsuit contends insurers will rely on the arbitration rules to get an "unfairly low rate" and will have little incentive to include higher-cost providers in their network, "all to the detriment of patients."
"Our legal challenge urges regulators to ensure there is a fair and meaningful process to resolve disputes between health care providers and insurance companies," said AMA President Gerald E. Harmon.
More:'Really astonishing': Average cost of hospital ER visit surges 176% in a decade, report says
The lawsuit follows a flurry of public comments submitted by this week's deadline from both proponents and detractors of the proposed rules.
Also this week, a jury in Nevada decided UnitedHealthcare must pay affiliates of the emergency medicine staffing company TeamHealth $60 million in damages over the insurer’s payment practices.
CEO Leif Murphy said the jury’s decision "helped stop the bleeding in the middle of a pandemic" for TeamHealth, which supplies physicians for 12% of the nation’s hospital emergency rooms.
Murphy said his company filed several lawsuits against insurers across the country for payment disputes before Congress passed the surprise billing legislation. He said the cost of staffing doctors to take care of patients when they are in the emergency room or admitted to hospitals is becoming increasingly difficult to cover due to insurers' attempts to lower reimbursement. He worries the new federal law could "shift the balance of power" to large insurers and embolden them to terminate higher-priced contracts in order to reduce the median price for services – which is the proposed starting point for arbitration.
“We're dealing with extremely high stress levels, lots of uncertainty on the front line, anticipation of COVID surge at any point," Murphy said. "And then you say we are not going to acknowledge the value of the service provided and we're going to cut pay? It's not a good situation.”
A UnitedHealthcare spokesperson said the insurer will appeal the Nevada case "in order to protect our customers and members from private equity-backed physician staffing companies who demand egregious and anticompetitive rates for their services and drive up the cost of care for everyone.”
'No one should have to worry about going bankrupt'
In November, a U.S. Department of Health and Human Services report found 18% of emergency room visits by Americans with employer health insurance resulted in out-of-network charges. Patients undergoing operations or giving birth at in-network hospitals had similar rates of out-of-network charges.
These unexpected charges averaged more than $1,200 from anesthesiologists and $2,600 from surgical assistants, according to the report.
“No one should have to worry about going bankrupt after falling ill or seeking critical care,” HHS Secretary Xavier Becerra said of the report.
The federal legislation has gained broad support among consumers, employers and insurers seeking to slow the growing cost of health care.
America’s Health Insurance Plans, the trade association for private insurers, said millions of consumers each year face financial hardship after getting medical bills from out-of-network providers.
The Biden administration's rules to implement the law "are a critical step toward ensuring that ... surprise medial bills are a relic of our past,” AHIP said in a statement.
The Congressional Budget Office estimated cost savings from lower medical bills would cut private insurance premiums 0.5 to 1% and would reduce federal deficits from savings for both employer plans and taxpayer-subsidized Affordable Care Act plans.
"Surprise billing has been a problem for decades," said Loren Adler, associate director of the USC-Brookings Schaeffer Initiative for Health Policy. "It has become more of a problem and more pronounced in the last decade or so."
The problem has worsened, Adler said, as private equity firms have acquired medical specialties such as anesthesiologists or emergency medicine staffing companies.
Hospitals often need coverage from these specialists whether or not they sign contracts with major private insurers. In cases where these specialists refuse to sign contract with insurers, they set their own rates. In some cases, consumers get billed for balances the insurer does not cover.
Even if a consumer takes the extra step of verifying a hospital or other medical facility is an in-network provider for their insurance plan, they often have no control over whether doctors and other providers at in-network hospitals are part of their insurer's network.
"The negotiating scales have been tilted in favor of doctors in this subset of specialties like emergency medicine and anesthesiology," Adler said.
Others say the federal law will bring long overdue protections to patients.
“We have seen firsthand the devastating financial and emotional impact that happens to patients when they receive surprise medical bills,” said Nancy Brown, CEO of the American Heart Association.
Brown said consumers are especially vulnerable to such billing excesses during emergencies.
“They have a heart attack. They have a stroke. They have a sudden cardiac arrest,” Brown said. “At a moment like that (when) there's often no one around you, and if there is, the first thing on peoples’ minds isn't to say, ‘Are all of these providers in this patient's health insurance network?”
But critics of the arbitration rules say insurers will have the upper hand and will force doctors to accept lower rates. The American Society of Anesthesiologists said the rules are a "powerful mechanism for large health insurance companies to avoid negotiating on contracts and, ultimately, to extract financial concessions from local community physician practices."
The American Medical Association lawsuit said a North Carolina insurer already sent letters to some doctors demanding payment cuts, citing the new federal rules. If those doctors don't cut their rates, the insurer will terminate their contracts and leave patients with fewer options, the lawsuit states.
Staffing companies such as TeamHealth believe insurers will only accelerate contract terminations if the arbitration rules take effect Jan. 1.
"The outcome of that shifts the balance and does start to threaten our ability to staff," Murphy said.
Ken Alltucker is on Twitter at @kalltucker, or can be emailed at [email protected]
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