Untangling the arguments from doctors on surprise billing
|Russell||Aug 7, 2019|
It takes a healthy mixture of audacity and confidence to get into a Twitter argument with emergency physicians about their bottom line - which is exactly what Brookings Institute researcher Loren Adler has been doing the past few days on the subject of surprise billing.
Adler has been arguing that the preferred doctor solution to surprise billing (independent dispute resolution, or IDR) would be too expensive and serve the interests of large, investor-owned physicians groups. Adler argues the insurance company preferred solution (benchmarking rates to the regional median) would do a better job at lowering overall costs.
[For background and an overview of the surprise billing debate including current proposed solutions, see the last post: The Surprise Billing Debate May Make You Uncomfortable]
Doctors are fighting back with a variety of arguments - not just on Twitter, but everywhere. Look for op-eds and letters to the editor in local and national media, ad campaigns on social media, and lobbying of Congress. What are those arguments exactly, and how do we untangle them? That’s the subject of this post.
The ideological argument: it’s price fixing
The easiest argument to tackle is the ideological one. Doctors argue that applying the median in-network rate to out-of-network (OON) bills in cases where negotiations have broken down amounts to “government price fixing.”
The question is: so what?
Here’s an emblematic post from Physicians Grassroots Network:
“Tell your legislators to oppose government price fixing” is an ideological argument, not a practical one. Another, less ideologically-tinged way to describe what’s going on is “rate setting,” and virtually every modern economy in the world uses some version of it to control health care costs, including Germany, Japan, the Netherlands, and Switzerland.
You know who also uses rate setting to control costs? The state of Maryland.
[Aside: one of my former employers, an emergency medicine physicians group called MEP Health, was based in Maryland and still managed to operate quite profitably]
Medicare and Medicaid are also forms of rate setting (or, “government price fixing,” if you prefer). The government essentially tells healthcare providers what it will reimburse. The hospitals, health systems, and doctors groups don’t have to take those patients, but most of them still do - and they accept the reimbursement rates that go with them.
The deeper fear among doctors in this case seems to be a general creep of rate setting into the rest of the healthcare economy. Rate setting has successfully controlled prices in modern economies around the world, and in Maryland. Which brings us to the second, what I see as the more honest argument.
It will reduce our reimbursement rates
Doctors argue that being forced to accept a median in-network rate in cases where their negotiations with insurance companies break down would throw more negotiating leverage to the insurance companies.
Yes, it would.
Here’s Dr. Damian Caraballo responding to Adler on Twitter:
[Full disclosure: Caraballo works as an emergency physician for USACS, my former employer. I’ve never met him]
Caraballo is arguing that insurance companies (the “Big 5” he mentions in the tweet) will use this new-found leverage to cancel contracts with physicians groups and renegotiate them at lower levels.
Maybe so. But is that a bad thing? The open secret of U.S. healthcare reform is that if costs go down, someone has to get paid less, or not at all. Doctors, understandably, don’t want it to be them.
If we get paid less, it will hurt our patients
A sub-set of the above argument is that if doctors get paid less, it will hurt their patients. But it’s not at all clear that’s the case. Nor have I seen any hard evidence offered that patients would suffer.
First, the obvious: doctors in other modern economies often get paid less than U.S. doctors and yet those systems get better outcomes overall. The various powerful healthcare constituencies in the U.S. always like to distract from that fact by arguing why this that or the other makes the U.S. a different case. But, the fact remains.
Secondly, imagine you’re a doctor whose hourly rate has just been cut. So instead of making somewhere in the ballpark of $300k/year you are making a bit less. The next day you go into work and care for patients. Are you suddenly providing them worse care?
But wait, doctors groups might argue, that’s an oversimplification. Less reimbursement overall will hurt our group’s ability to invest in quality programs, and those very much do help patients.
That may be true, yes. But it is also true that any healthcare provider organization’s business is made up of people and processes designed to, among other things: extract maximum reimbursement from insurance companies, collect as much money as possible from patients, avoid getting sued for physician mistakes (real or perceived), market their group to win more contracts and recruit more doctors, and, in short, do a whole host of things only tangentially related to the actual care provided to patients. Who’s to say physicians groups can’t cut back on those things before they cut back on quality programs that directly benefit patients?
Everyone agrees there is much waste in healthcare, but no one will admit their job is one of the expendable ones.
[Coming in a future post: why my job for USACS was one of the expendable ones]
Lawmakers want to punish us for the sins of a few bad apples
Another argument from doctors points out that the vast majority of surprise bills come from a minority of hospitals. Here’s the operable graph:
Here’s Adler, summarizing the takeaway:
…using data from one large insurer, a paper from Zack Cooper, Fiona Scott Morton, and Nathan Shekita finds that 50 percent of hospitals have out-of-network billing rates in the emergency department below 2 percent, whereas 15 percent of hospitals have out-of-network billing rates of more than 80 percent.
As the authors of the paper point out, there are two things going on. The first is the more nefarious one: the physicians group chooses to go out of network in order to extract higher rates from patients.
That is a bad strategy PR-wise, not to mention likely to be bad business in any market other than those where super wealthy patients can afford the higher rates. The reality is that just because a physicians groups charges patients a higher rate for an ER visit doesn’t mean the patients can actually pay it. Famously, 40 percent of Americans don’t have more than $400 in the bank for an emergency. The average total out of pocket cost to patients for the nearly 9 million ER visits analyzed was $467.75.
We can all do the math.
But it’s the second thing going on that’s the real problem - and the reason why it’s not just a few greedy apples. The tougher problem for patients occurs when everyone wants the physicians to be in-network, but the two sides just can’t agree on a price. This happens countless times to physicians groups of every size and every style of ownership. It happens with gigantic publicly-traded groups and it happens to tiny community groups owned by just a handful of doctors.
As the authors of the study point out, some groups go out-of-network much more often than others (here’s looking at you, Envision), but that doesn’t mean it doesn’t happen everywhere. Here, arguing again on Twitter with Adler, is Dr. Gary Katz, who is part of a small rural emergency group with only two hospital contracts:
So Katz’s group was negotiating rates with an insurance company and purportedly agreed to their rates, but the insurance company didn’t formally enroll them in their network for roughly another six months, during which all that time Katz’s patients were presumably receiving surprise bills from Katz’s group.
Katz doesn’t say why the insurance company didn’t enroll them or what precisely the dispute was about. It’s impossible to say who was really actually being unfair in this position. Nevertheless, whatever the reason, episodes like the one Katz describes undermine the argument that lawmakers are punishing an entire industry for the sins of a few bad actors.
It will “shred” the safety net
Finally, Rachel Bluth at KHN (in partnership with Politifact) today published a story examining the claim from Physicians for Fair Coverage that the proposed rate setting would hurt the most vulnerable populations in America:
The group is running a $1.2 million national commercial about these congressional efforts. The ad began airing in mid-July.
The ad issued a warning: “What Congress is considering would cut money that vulnerable patients rely on the most. That means seniors, children and Americans who rely on Medicaid would be hurt.”
We wondered: Will any of the surprise billing proposals being debated in Congress really affect Medicaid and these patients — “shredding the safety net,” as the ad claims? So we dug in.
Again, full disclosure: Physicians for Fair Coverage is funded in part by my former employer, US Acute Care Solutions, in addition to U.S Anesthesia Partners and US Radiology Specialists. All three of those companies, perhaps not incidentally, are listed as portfolio companies of private equity firm Welsh, Carson, Anderson, & Stowe.
Yes: a private equity firm is trying to protect its profits.
So, will the proposed solutions shred the social safety net? According to the independent experts Bluth interviews (including Adler), the answer is no. It is true that emergency rooms are in some ways the U.S.’s de facto social safety net - as mandated by federal law. But it does not follow that rate setting at a level below where physicians groups prefer will shred the social safety net. As Bluth concludes:
Neither of the proposed pieces of legislation would cut money to any programs, specifically Medicaid, CHIP or Medicare.
There is also scant evidence that these proposals would trigger emergency room closures. The group claims the consequences of this proposal would ultimately lead to ER closures. But experts say their evidence is anecdotal at best.
Doctors groups are good at protecting doctors’ reimbursement rates
Two days ago, Eric Topol published a widely circulated New Yorker piece in which he observed:
As a long-term member of the American College of Cardiology, I was impressed with how effectively the organization lobbied for preserving the reimbursement rates of cardiologists.
For several paragraphs, Topol proceeds to detail a long history of medical society actions undertaken in distasteful self-interest. That should not be surprising - the point of the societies is to protect the interests of its members. The point is that they do not exist to protect patients.
For a group that does exist to protect patients, take a look at Families USA. Right now the organization is collecting stories from patients hit with surprise bills. I asked Claire McAndrew, their Director of Campaigns and Partnerships, what approach they preferred to address the problem. She wrote back that Families USA took the position that “surprise bill legislation should hold consumers harmless while preventing inflation of overall health care costs.”
You can probably see where this is going.
McAndrew continued: “We believe that a benchmark approach to the payment mechanism is the best way to achieve this goal.” In other words, they prefer the insurance company approach. Not the doctors groups approach.