Want to bring down a hospital's patient-satisfaction scores in a hurry? Let the physician practices operating inside that hospital slap patients with surprise charges after they've unwittingly been seen by an out-of-network physician.
Patient outrage over these so-called balance billing charges, once limited to enrollees in managed-care organizations that restricted physician and facility choices, has been growing alongside the explosion in narrow network health plans. While some hospitals and insurers are taking steps to address the issue, as Modern Healthcare's Bob Herman reported last week, the problem is far from resolved.
Balance billing occurs when a physician practice operating inside a hospital isn't part of an insurer's network. The practices argue they've been excluded because the insurers use their economic clout to offer below-market rates. The insurers charge that the practices are refusing to sign in-network contracts so they can tack on extra charges.
Hospitals claim they are caught in the middle of these contract disputes. But they are hardly blameless.
Entire emergency, radiology, anesthesiology, pathology and hospitalist departments have been outsourced to firms whose ranks include large publicly traded companies such as EmCare, TeamHealth and IPC Healthcare. Their presence compounds the problem insurers have in maintaining up-to-date provider networks for their customers.
These twin dynamics—the growth of narrow network plans and increased outsourcing—have opened up a whole new area for billing abuse. They also threaten to undermine the growing movement toward price transparency, which can be rendered meaningless when a significant portion of a patient's bill isn't included in the posting.
Physician groups such as the American College of Emergency Physicians and the Society of Hospital Medicine have joined consumer groups in calling for better consumer protection laws. A small number of states have responded.
The most stringent new regulations went into effect in April in New York. The legislation allows patients receiving surprise bills to fill out an “assignment of benefits” form that sends the bill directly to their main provider. Patients gets immediate relief from additional charges beyond their regular in-network copays and deductibles.
If the provider and insurer can't reach an accord, the bill is referred to a dispute resolution board where the provider and the plan present their case to an independent reviewer, whose binding ruling determines how much the provider will get paid by the insurer. The system applies only to private insurance companies, although self-insured employers can make use of the dispute resolution system.
We're likely to see more states following New York's lead. But it's important to remember the root cause of the problem—a fee-for-service system in the private insurance market that mimics Medicare by separating out physician charges from hospital charges.
The ultimate cure is bundling all payments together, then putting one provider in charge of parceling them out. Medicare's new bundled payments program, which covers 48 possible episodes of care, represents a major move in that direction.
While participation is voluntary, more than 2,100 providers have opted into the program. It is the single biggest engagement to date in alternative payment schemes created by the CMS Innovation Center.
The Bundled Payments for Care Initiative puts the provider in charge of the bundle. When a patient shows up, the hospital, physician practice or post-acute care organization that initiated the bundled payment episode goes 100% at risk should the total cost go beyond the designated price of the bundle.
More than 400 physician practices are participating in the program, including a number affiliated with major physician outsourcing firms. They understand that as payment moves away from fee-for-service, providers will pay a lot more attention to the prices charged by everyone else in the network, including outside physician groups operating inside the hospital.
More regulation is a poor solution to the problem of balance billing. There's a better way to put an end to this collateral damage from the fee-for-service system: move more rapidly toward bundled payments and other forms of value-based reimbursement.