Will government payment benchmarks threaten access to care?

Opponents claim that surgeons would be forced to leave geographic areas with a mandated rate insufficient to cover healthcare costs...

When people in business study negotiation skills, the thing one learns is that your “costs” are your business, not the concern of the negotiation counterpart. Arguing that the rate is insufficient to cover costs is easily dismissed with a trite, face slap back to reality by a response from the counterpart as “Well then, lower your costs! That’s not our concern.”  At that point, what does one respond? That’s check-mate, game over. It’s time to leave the negotiation table because you’ve just ended the dialogue.

All this talk of transparency and the new HR 3630, No Surprises Act legislation prohibits balance billing for out-of-network emergency, ancillary and post-stabilization services, and sets a reference rate for out-of-network payments to providers.

photo of Maria K ToddThe No Surprises Act upends an ill-advised contracting strategy that many provider implemented several years back to remain “out-of-network”, according to our expert-in-chief, Dr Maria Todd of AskMariaTodd™.  The opponents who argue that it will bring about access problems where the Act will be hard-pressed to defend their position. 

Talk of setting rates appears on page 16, line 1.  The bill refers to a “recognized amount” and is defined as a state set rate that is required to be paid by a health plan regulated by such state in the case of a participant, beneficiary, or enrollee covered under such a plan and receiving such an item or service from a nonparticipating provider or facility. If there isn’t such a state law or a set amount, the amount that is at least the median contracted rate will apply.  Maryland has had a similar rule of law for hospital rates, so we’ll probably be studying Maryland as a use case. There are plenty of specialists, including orthopedic surgeons in Maryland, and they have been attracting patients to that state and its Johns Hopkins health system since 1974 with state-set rates in place.  

On January 1, 2014, the State of Maryland and the Centers for Medicare & Medicaid Services (CMS) entered into a new initiative to modernize Maryland’s unique all-payer rate-setting system for hospital services. The Center for Medicare and Medicaid Innovation (CMMI) oversees the Model under the authority of CMS. This initiative, replacing Maryland’s 36-year-old Medicare waiver, allows Maryland to adopt new and innovative policies aimed at reducing per capita hospital expenditures and improving patient health outcomes. Success of the New All-Payer Model will reduce cost to purchasers of care—businesses, patients, insurers, Medicare, and Medicaid—and improve the quality of the care that patients receive both inside and outside of the hospital. In a sense, they are already doing much of what the No Surprises Act focuses on.

Critics Cry Wolf

Opponents of the Act include the American Association of Orthopaedic Surgeons, who assert that the legislation that would impose government-set payment benchmarks to address surprise medical bill disputes, saying it would threaten “the independent practice of medicine.”  Dr Todd says that’s tantamount to crying “Wolf!” She explains that as a matter or practicality, orthopaedic surgeons, especially those with private surgery centers and established practices with leases and free-standing buildings aren’t going to leave the marketplace over this. Todd also asks, “If they were such strong advocates of the independent practice of medicine, why haven’t they been more supporting of bundled-price, transparent surgical case rates where the rubber meets the road for real competition in healthcare? 

Todd strongly disagrees with the position published by Kristy L Weber, MD who states that, “The CPI-U can’t keep up with new technology or the dynamic medical costs of innovation. Like any benchmark, it would threaten not only the independent practice of medicine but also patient access during a time when choice and competition are increasingly limited.” 

“AAOS should have long ago embraced bundled-price, transparent, relevant prices for surgical procedures and care so that the legislation would never have been necessary to wrangle the devastation of surprise medical bills.  Their preference for arbitration is just “words for press statements,” Todd states.

Arbitration is not the answer – here’s why:

The average patient cannot and will not initiate arbitration for a medical bill. The costs of initiating the arbitration are too high.  For example, the administration fee to initiate an arbitration case set by the American Arbitration Association can cost thousands of dollars. Then, there are attorney costs and in some cases, each side picks an arbiter and the two arbiters pick a tie-breaker arbiter so five legal bills (fees AND costs) are incurred in addition to the arbitration administration fee paid to the AAA. “Who will do that on a bill that costs less than a few hundred dollars? That’s impractical. That’s why I say that “it’s just words for press statements.”” Furthermore, there must be an agreement to arbitrate in place. Most patients have never signed an agreement to arbitrate and a surprise medical bill would have no such agreement in place. If one was executed, it wouldn’t be a surprise, now, would it?

Todd also disagrees that competition is increasingly limited.  “As in the popular Renée Mauborgne and W. Chan Kim book, Blue Ocean Strategy, it’s time for AAOS to get up to speed with how competition occurs in the marketplace.  The book was published in 2004.” Todd has been negotiating bundled, transparent surgical case rates for orthopaedic surgery since 1995, nine years before the Blue Ocean Strategy book was published.  

“There are blue ocean strategies where orthopaedic surgeons can leverage their brand (assuming they’ve developed one for themselves) of differentiation and transparent, bundled price surgical case rates to access new market spaces and create new demand.  By creating and capturing uncontested market space such as bundled price surgery that is paid in full on or before the date of service, by self-funded payers and cash pay patients, they can render the problems of “narrow, inadequate” insurer networks and let the marketplace assign brand loyalty, trust and value and make narrow, inadequate networks irrelevant.” She added.

Dr. Todd says she’d be thrilled to present the topic at a future AAOS gathering to share some of the alternative options for contracting directly with employers who make up over 75% of the group health marketplace and who are also fed up and frustrated with the “narrow, inadequate” networks created by and sold to them by HMOs and PPOs.

Will government payment benchmarks threaten access to care?
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Will government payment benchmarks threaten access to care?
Opponents claim that surgeons would be forced to leave geographic areas with a mandated rate insufficient to cover healthcare costs... That's probably not true.
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