AHA: Fixed Reimbursement Rates Not a Surprise Medical Bill Solution

June 17, 2019 - In a recent testimony in front of the subcommittee on health, the American Hospital Association (AHA) strongly opposed proposed surprise medical bill legislation that would establish fixed reimbursement rates for out-of-network care.

“Arbitrary reimbursement rates could disrupt local market forces in ways that could have significant negative unintended consequences. Chief among them is the disincentive this will create for health plans to maintain adequate networks and act as good business partners to their providers,” Tom Nickels, AHA’s executive vice president, told House Representatives on June 12.

Nickels’ testimony was in response to draft legislation from Senate Health, Education, Labor, and Pensions (HELP) committee. Released in May, the draft of the Lower Health Care Costs Act of 2019 contained major surprise medical bill reforms, including fixed reimbursement rates for out-of-network care, requirements for providers to be in network when working at a hospital, and an arbitration process for surprise medical bills over $750.

The Senators backing the draft legislation, health committee chairman Lamar Alexander (R-TN) and ranking member Patty Murray (D-WA), believe the three-pronged strategy will eliminate surprise medical bills, which impact at least one in five Americans every year.

However, the AHA disagreed with most of the proposed surprise medical bill solutions, arguing that the suggestions would harm network adequacy, and therefore, patient care.

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“Without sufficient network adequacy requirements that address specific critical specialties and subspecialties, insurers can simply default to a benchmark payment and decline to contract with many different types of physicians,” Nickels stated in the testimony. “This dissolution of networks could undermine patients’ ability to access care for services not protected through this draft legislation, as well as undermine efforts to enhance care coordination and improve quality through different types of value-based arrangements.”

The leading hospital association also opposed the draft legislation’s in-network guarantee, or network matching, suggestion.

“The AHA opposes this approach because it interferes with the fundamental relationship between hospitals and their physician partners and severely limits providers’ ability to negotiate contract terms with insurers,” Nickels stated. “In other words, this provision would essentially eliminate any ability of physicians to negotiate fair contract terms with health plans, including, but not limited to, their reimbursement level.”

Surprise medical bill solutions should preserve the hospital’s ability to negotiate rates with private health plans, Nickels stressed.

“The process of rate negotiation is a core function of managing a health plan,” he explained to policymakers. “The process takes into account a number of factors that could not be accounted for in a government rate or methodology. For example, health plans and providers often consider their entire lines of business, volume, quality, partnerships on special programs or initiatives, and other factors when setting rates. In addition, providers consider other elements besides reimbursement when negotiating contracts, such as a health plan’s history with respect to prior authorization and payment delays and denials, as well as other administrative burdens imposed by a particular plan.”

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“Setting a rate or methodology sufficiently simple for national use, even if geographically adjusted, would not be able to capture the many factors that specific health plans and providers consider,” he highlighted.

While the AHA opposed surprise medical bill solutions that would disrupt the negotiation process, the association did agree that an alternative dispute resolution process for physician claims, such as arbitration, could help.

“Baseball-style” arbitration – a binding arbitration model in which each party submits their best offer and an arbitrator selects the best offer without modification – is working for some states that have implemented an alternative dispute resolution process for surprise medical bills, Nickels explained.

“Baseball-style arbitration has some clear advantages in that it provides an incentive to the disputing parties to offer reasonable proposals to the arbitrator,” he said. “It also typically expedites resolution of the dispute and significantly reduces costs as compared to traditional arbitration or litigation.”

“The simple act of having an arbitration process incentivizes health plans and providers to resolve disputes in advance, including by coming to an agreement on in-network contract terms,” he continued. “In fact, in states with such processes, a very small percentage of out-of-network claims ever make it to arbitration.”

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For baseball-style arbitration to work within the context of a federal solution to surprise medical bills, the AHA recommended that the process:

• Place responsibility to initiate the request for arbitration with the provider or payer, never the patient
• Permit state government appointment of the arbitrator to ensure an understanding of local markets
• Split the cost of arbitration between the provider and payer to incentivize both parties to resolve the surprise medical bill before escalating the issue to arbitration
• Establish timelines to ensure the quick handling of the process
• Adhere to established procedures for documentation and claims recommended by the American Arbitration Association, such as batching of similar claims
• Require an arbitrator’s decision to remain confidential so it cannot influence future cases
• Apply arbitration to self-insured Employee Retirement Income Security Act of 1974 (ERISA) plans

Generally, providers have gravitated toward arbitration as a solution to surprise medical bills.

“The best resolution to surprise billing is federal policy that protects patients, only holding them responsible for their in-network cost sharing amount for unavoidable out-of-network events,” recently stated Chip Kahn, president and CEO of the Federation of American Hospitals (FAH). "With the patient protected, caregivers and insurers can negotiate an appropriate payment – with the law putting in place an arbitration process if necessary.

Patrice A. Harris, MD, president-elect of the American Medical Association (AMA) has also gone on record supporting legislation that would create “a fair process to resolve disputes between physicians and hospitals and insurers.”

While providers are on the same page when it comes to eliminating surprise medical bills, insurers are challenging their efforts to establish an arbitration system.

Specifically, America’s Health Insurance Plans (AHIP) urged Congress in March to “avoid the use of complex, costly and opaque arbitration processes that can keep consumers in the middle and lead to higher premiums.”

Surprise medical bills continue to be a challenge and policymakers have set their sights on eliminating unexpected patient charges. Policymakers have recently announced or introduced a handful of potential solutions but whether a proposal will become law before Congress’ upcoming break for July 4 is still up in the air.