Provider Contracting
Issues Threatening the Effectiveness of Health Plans’ Provider Contracting:
MANDATED RECOGNITION OF ASSIGNMENT OF BENEFITS
Some healthcare providers choose not to contract with a health plan. The choice is, of course, a provider’s prerogative. From time to time, however, these providers want to require health plans to pay them directly for the “out-of-network” services they provide. The health benefits industry opposes this idea. One of the major incentives for a provider to contract is the opportunity to be reimbursed on a timely basis directly from a health plan. If the provider can obtain this reimbursement without contracting, fewer providers will contract, healthcare savings will be lost, and consumers and employers will pay higher premiums. Also, fewer providers will undergo health plan processes that ensure quality of care.
ANY-WILLING-PROVIDER LAWS
Any-willing-provider (AWP) laws increase costs and decrease competition. AWP mandates require health plans to contract with any health provider willing to meet patient needs. AWP mandates increase health-care costs and restrict health plans’ ability to promote high-quality care.
AWP mandates make it difficult for health plans to negotiate favorable payment rates with providers in exchange for guaranteed patient volume. AWP mandates create a presumed “right to employment or contract” – a right that does not exist in any other industry or even elsewhere within the healthcare sector. Just as schools are not required to hire “any willing teacher” and airlines are not required to hire “any willing pilot,” health plans should not be required to contract with “any willing doctor.”
HEALTH CARE PROVIDER COLLECTIVE BARGAINING
Some health care provider groups in Louisiana have attempted in the past to obtain legislative approval for collective bargaining, or joint negotiations, with health plans. The health benefits industry believes that allowing providers to engage in such activities would create an anti-competitive environment that would raise healthcare costs paid by health plans, employers, and consumers. Joint negotiation would allow such providers only to demand greater payment for their services. In fact, higher reimbursement has been the stated intent of such legislation. Consumers and employers would ultimately make these increased payments in the form of higher health insurance premiums.
The U.S. Federal Trade Commission has stated that it has determined that similar proposals in other states would be “likely to harm consumers by increasing costs without improving quality.” The Congressional Budget Office (CBO), in commenting on a proposal to exempt independent pharmacies from anti-trust law and to allow them to collectively negotiate with health plans, has estimated that federal spending would increase by $566 million over the next five years as a result. The CBO also noted that under the provisions of such a bill, “some state, local, and tribal governments would incur higher expenses as purchasers of health care for their employees and as providers of health care under Medicaid.”
During each of its Regular Sessions 2004-2008, the Louisiana Legislature has considered proposals to allow certain hospitals to be exempted from anti-trust laws and to conduct “joint negotations” with health plans. The stated intent of these proposals has been to increase the rates of reimbursement by health plans to these hospitals. Such increased rates would have been funded directly by increased premiums paid by consumers and employers. The legislature wisely rejected these proposals each time.
CHARGES BY NON-CONTRACTED HOSPITAL-BASED PHYSICIANS
Decisions by a relatively small percentage of hospital-based physician groups not to contract with health plans have created a consumer dilemma not only in Louisiana, but throughout the nation. Here is the situation: A healthcare consumer is scheduled for hospital care or goes to a hospital on an emergency basis. The consumer chooses a hospital that is part of his or her health plan’s provider network, assuming that all services received there will be considered “in-network.” However, following the hospital care, the consumer may receive bills from physician groups who have provided services but who are not contracted with the consumer’s health plan. This means that, according to the health plan member’s benefits for “out-of-network” services, the member may owe a higher amount than expected. In some cases the consumer may not have any out-of-network benefits at all and may owe the entire physician’s charge. Moreover, the member may not have expected to receive a bill at all, since he or she was not aware that the services were being provided. The latter example is especially true in the case of charges for radiology and pathology interpretations.
The physicians involved in this issue may be anesthesiologists, pathologists, radiologists, emergency room physicians, neonatologists or other specialists. Such physicians are among the most highly compensated, and sometimes charge between 200% and 400% of the reimbursement considered by the Centers for Medicare & Medicaid (CMS) as the “Medicare-eligible charge.” Groups of these physicians usually contract on an exclusive basis with a hospital to provide their services, thus assuring that the group provides all services of its specialty that are performed at that facility. Making the situation even more perplexing for the typical consumer is that the nature of the services provided are such that the consumer may not have seen or even heard of the physician from whom a bill is received.
In Louisiana, consumers are protected by “The Health Care Consumer Billing and Disclosure Protection Act (sometimes known as the “balance billing act”). The Louisiana Association of Health Plans originated this legislation in 2003, and it was enacted through an agreement with other healthcare groups and mediated by then Representative Troy Hebert. In addition to other provisions, this law protects a consumer from healthcare provider charges that exceed amounts the provider has agreed in a contract with a health plan to accept as payment in full. The problem, however, is that most provisions in the law apply only to contracted providers. The law does contain certain provisions that require both hospitals and health plans to disclose when not all physicians who practice at a facility are part of a plan’s network.
No state has yet arrived at a satisfactory resolution of this issue, one that would help consumers and would be fair to all parties. Most hospital-based physician groups are currently contracted with major health plans operating in Louisiana. Health plans are constantly striving to add the remaining physicians. While this effort continues, one direction that would probably help is to impose greater disclosure requirements on health plans, hospitals and physicians. Such requirements in many cases would enable consumers to choose hospitals and physicians in advance of hospitalization, on the basis of whether services would be considered “in-network.”
Another approach would be to establish a fair level of reimbursement to be made by a health plan to a non-contracted physician. Understandably, physicians who have decided not to contract have serious concerns about this idea.
Others have suggested that health plans should be required to pay the full billed charges to non-contracted physicians who provide services at network hospitals. This approach would provide a significant (and questionable) financial benefit to physicians who decide not to contract and would leave the door open for such non-contracted physicians to charge any amount they should choose for their services. The result would be higher premiums for consumers and employers and increased consumers cost shares. An even more significant worry is that the prospect of physicians’ receiving far greater revenue by not contracting could jeopardize the entire provider network concept. Physicians would be discouraged from entering into new agreements. Even more troublesome is the fact that, rather than continuing to accept negotiated reimbursement rates, existing network physicians would be provided an incentive to cancel their arrangements with insurers. These network disruptions could create large increases in cost and premiums.
The Louisiana Legislature, during its Regular Session of 2010, enacted requirements for health plans, licensed producers, hospitals and physicians to disclose certain types of information to prospective and enrolled health plan members about the services and charges of non-contracted hospital-based physicians. These requirements are effective July 1, 2011. While this legislation does not resolve the issue, most observers, and many legislators, agree that the measure is a “step in the right direction.”
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