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Editor’s note: Comments from the American Medical Association were added to the original article.

The patients underwent elective surgery with primary surgeons and in facilities that were in their private insurer’s network. Yet, one in five got a surprise bill after their procedure for out-of-network services, according to a new study.

The patients were left with an average potential balance of $2,011, according to the JAMA study released today.

Case Study

Across-the-Board Impact of an OB-GYN Hospitalist Program

A Denver facility saw across-the-board improvements in patient satisfaction, maternal quality metrics, decreased subsidy and increased service volume, thanks to the rollout of the first OB-GYN hospitalist program in the state.

See how

As politicians in Washington look at how to address the problem of surprise bills, researchers examined claims data from a large health insurer to examine how often patients unexpectedly received out-of-network bills after having in-network elective surgery. In 20% of the surgeries, patients received out-of-network charges, the study found.

Members of Congress have been grappling with ways to end surprise medical bills. The House Ways & Means Committee on Friday released largely provider-friendly legislation as a bid to end an impasse over how to handle surprise billing with a proposal to use a “mediation” process to handle disputes.

In the study, most commonly, the out-of-network bills occurred when patients received care from anesthesiologists and surgical assistants who were not part of their insurance network, which happened in 37% of the cases where patients received a surprise bill, the study found.

In cases where a surgical assistant was not in the insurance network, patients faced an average potential bill of $3,633. With out-of-network bills that resulted from the anesthesiologist being out of the patient’s network, the average potential bill was $1,219, the study found.

The analysis included almost 350,000 commercially insured patients who underwent one of seven common elective surgeries at in-network facilities with in-network primary surgeons between 2012 and 2017. Researchers said one limitation of their study was that the claims data came from only on insurer.

Patients had a greater risk of receiving an out-of-network bill when they were members of a health insurance exchange plan. Risks were also significantly higher when there were surgical complications, the study found.

In an accompanying editorial, JAMA editors said it’s time to stop surprise medical bills, which they described as “both common and potentially financially devastating.”

“Such billing practices are particularly pernicious because patients usually have no knowledge that they will occur, and no way to avoid them,” wrote Karen E. Joynt Maddox, M.D., of the Washington University School of Medicine and associate editor of JAMA, and Edward Livingston, M.D., deputy editor at JAMA.

It’s up to both clinicians and policymakers to act to end surprise billing, they said, arguing that surgeons have an ethical responsibility to speak out.

“When feasible, surgeons should ensure that all the personnel involved in the care team that they are leading accept the same insurance plans and should consider refusing to work in facilities that allow surprise billing,” they wrote.

The American Medical Association, the country’s largest physician organization, Tuesday came out in support of the bipartisan efforts of the House Ways and Means Committee to craft legislation to protect patients from surprise medical bills.

The legislation creates a two-step process for resolving disputes over reimbursement, first through a 30-day negotiation process that encourages parties to resolve their differences before using a mediation process administered by a third party.

“We support the underlying mechanism for resolving these disputes, including the eligibility of all disputed claims for negotiation and mediation. We also appreciate that the mediator must consider a wide range of supporting information submitted by physicians in rendering a final determination,” said Patrice A. Harris, M.D., AMA president, in a statement.

Harris said the AMA plans to work with the committee and others to refine the legislation so it is fair to everyone involved.

While hospitals and physicians support the legislation, payers have pushed to link out-of-network payments to a benchmark rate, rather than the arbitration process favored by providers.

When Carol Pak-Teng, M.D., an emergency room doctor in New Jersey, hosted a fundraiser in December for Democratic freshman Rep. Tom Malinowski, her guests, mostly doctors, were pleased when she steered the conversation to surprise medical bills.

This was a chance to send a message to Washington that any surprise billing legislation should protect doctors’ incomes in their battle over payments with insurers. Lawmakers are grappling over several approaches to curtail the practice, which can leave patients on the hook for huge medical bills, even if they have insurance.

As Congress begins its 2020 legislative session, there is evidence the doctors’ message has been received: The bills with the most momentum are making more and more concessions to physicians.

Case Study

Across-the-Board Impact of an OB-GYN Hospitalist Program

A Denver facility saw across-the-board improvements in patient satisfaction, maternal quality metrics, decreased subsidy and increased service volume, thanks to the rollout of the first OB-GYN hospitalist program in the state.

See how

As surprise medical billing has emerged as a hot-button issue for voters, doctors, hospitals and insurers have been lobbying to protect their own money flows. All that lobbying meant nothing got passed last year.

Television and internet ads are the most visible manifestation of the battle. But in taking their cause to politicians, doctors like Pak-Teng have waged an extraordinary on-the-ground stealth campaign to win over members of Congress. Their professional credentials give them a kind of gravitas compared with other lobbyists, who are merely hired guns.

Ending the practice of billing patients for the amount of their treatment not covered by insurance—sometimes triggered by unwittingly seeing a doctor out of network—is ultimately a fight between doctors and insurers over rate-setting and reimbursement. But as more patients balk at surprise bills—or suffer the enormous financial strain—lawmakers are under pressure to protect patients. In turn, powerful lobbying forces have activated to protect doctors and insurers who don’t want to pay the price for a fix.

The main message physicians are using to bring lawmakers into their corner? “We just want to be paid a fair amount for the services rendered,” Pak-Teng said.

Her congressman, Malinowski, has not endorsed any surprise billing legislation. In congressional testimony in July, he cited the “extra $420 million” in medical debt patients in New Jersey reckon with each year.

“There are many things that Republicans and Democrats sincerely disagree about in this body,” he said. “I don’t think that this is one of them. I don’t see any philosophical difference amongst us about whether people should be stuck with massive surprise medical bills.”

Doctors say they are taking the brunt of the criticism.

But little has been as powerful in shaping surprise billing legislation as the clout of hospitals and their doctors, many of whom are, in fact, employed by private equity-backed companies and armed with years of experience shaping surprise billing legislation at the state level.

 

They are throwing in a lot of money, too, funneling millions to lawmakers ahead of the 2020 elections. Four physician organizations that have heavily lobbied on surprise medical bills and have private equity ties—the American College of Emergency Physicians, Envision Healthcare, US Acute Care Solutions and U.S. Anesthesia Partners—gave roughly $1.1 million in 2019 to members of Congress, according to a Kaiser Health News analysis of Federal Election Commission records.

The biggest recipients, from all four PACs combined, were Reps. Donna Shalala and Stephanie Murphy, Florida Democrats who got $26,000 each. Sen. Thom Tillis (R-N.C.) took in $25,500, Senate Majority Leader Mitch McConnell got $25,000, and Rep. Brett Guthrie (R-Ky.) received $22,500.

That was in tandem with a ground game led by local doctors. ER doctors, anesthesiologists, radiologists and other specialists who most often charge out-of-network prices—and also are among the highest-compensated practitioners—fanned out to shape legislation in a way that maintains their pay, and to voice their concern to lawmakers that insurance companies would have too much leverage to control their compensation.

“We by necessity place a tremendous amount of trust in our physicians,” said Zack Cooper, an assistant professor at Yale University who has extensively researched surprise medical bills. “Frankly, they have an easier time lobbying members [of Congress] than the folks who are affected by surprise billing.”

Arguing over the fix

Lawmakers in both parties appear unified on the need to resolve the problem of surprise billing. But as was clear when all the air blew out of legislative proposals on the table at year’s end, that is largely where the agreement ends.

Fixing the problem comes down to settling on a system for deciding how much to pay for a disputed bill. One approach is to set up an outside arbitration process, in which doctors and insurance companies would negotiate payment—this is the model preferred by doctors, who contend it puts them on better footing against insurance companies. Another option would be to resolve surprise billing disputes by having insurance companies pay doctors based on the median in-network rate for the service, an approach known as benchmarking. Large employers, labor unions and insurance companies prefer this.

The failure to get legislation through Congress set up a potentially explosive battle in an election year. Republicans and Democrats who have vowed to do something about healthcare costs must reckon with powerful industry groups whose influence transcends party lines.

Meanwhile, physicians and hospitals have made their case in Washington and back home through in-person meetings and phone calls with lawmakers and congressional staff. They’ve hosted dinners and fundraisers and organized fly-ins to swarm Capitol Hill with in-person meetings. They’ve even led tours of their emergency rooms.

Pak-Teng is among them, coming to Washington this month with other physicians to petition lawmakers. She is employed by Envision, a physician staffing company backed by private equity firm KKR. She’s also on the board of the American Academy of Emergency Medicine, a trade organization representing ER doctors.

“There is a lot of anti-physician rhetoric out there,” said Pak-Teng, who is pushing her physician colleagues to be more active in shaping public policy by sharing stories about the reality of caring for patients.

The lobbying by hospitals and physicians trying to protect their reimbursements has divided key lawmakers, compounding disagreements among senior House Democrats over the policy details of a bill and turf wars in Congress. Three House committees have now unveiled legislation to ban surprise medical bills, each with different details.

“We are not trying to stop legislation. We are trying to stop bad legislation,” said Anthony Cirillo, M.D., an emergency medicine physician who describes a “bad” bill as one that favors insurance companies over doctors.

Cirillo is also a lobbyist for US Acute Care Solutions, a physician staffing company backed by private equity firm Welsh, Carson, Anderson & Stowe. WCAS, which manages $27 billion in assets and is focused on healthcare and technology investments, is based in New York City and co-founded US Acute Care Solutions in 2015.

In an interview, Cirillo said he met with lawmakers and their aides about “10 to 12 times” in Washington last year. Financial disclosures show he spent $340,000 between July and September lobbying on surprise billing on behalf of US Acute Care Solutions. USACS’ political committee also contributed $134,500 to lawmakers in 2019, according to FEC records.

Tilt toward doctors

Before the private equity-fueled dark-money group Doctor Patient Unity started running ads warning of the dangers of government price controls as an argument against legislation, surprise billing legislation being drafted in one of Congress’ most powerful healthcare committees was already tilting to be more favorable to doctors.

“People on the Hill are very sympathetic to hospitals and physicians because they’re actually providing the care itself,” said one Democratic aide, speaking on the condition of anonymity to candidly describe sensitive political dynamics. “Nobody wants to defend the insurers.”

In May, a House Energy and Commerce Committee draft proposal included no mention of outside arbitration. The same was true for a bill the Senate Health, Education, Labor and Pensions Committee approved in June. Instead, under those proposals, surprise billing disputes would be resolved by insurance companies paying doctors based on similar rates in that area.

By mid-July, though—roughly a week before Doctor Patient Unity registered as a business in Virginia—the Energy and Commerce legislation was amended to allow doctors to appeal to an independent arbiter if their payments exceed $1,250. The revision was pushed by two physicians on the committee—Democrat Raul Ruiz, M.D., of California and Republican Larry Bucshon, M.D., of Indiana—and was a moment Sherif Zaafran, M.D., a Texas anesthesiologist, describes as a “turning point” in negotiations over the bill.

“It’s all about fairness,” said Zaafran, who works for private equity-backed U.S. Anesthesia Partners. He has been involved for a decade in surprise billing fights in Texas, which enacted a new law with an arbitration process last year. U.S. Anesthesia Partners gave $197,900 in campaign contributions to members of Congress last year.

Zaafran chaired another coalition of medical specialists, Physicians for Fair Coverage, in 2019, and pressured Congress to pursue a surprise billing approach modeled on a New York law under which insurers and providers rely on arbitration. Under that process, if there is a payment dispute between doctors and insurers, the two sides submit a proposed dollar amount to an independent mediator, who then selects one.

In New York, the mediators were told to base their decisions on the 80th percentile of the prices set by the hospital or physician. Research has suggested that the model is broadly making healthcare more expensive for state residents because of higher payments to doctors, according to findings from the USC-Brookings Schaeffer Initiative for Health Policy.

Still, on Capitol Hill, doctors complained that many procedures would fail to cost enough to qualify for arbitration as proposed in the Energy and Commerce bill, bolstered by data ER doctors presented to lawmakers showing that prices mainly fall below $1,250.

“It’s largely out of reach,” said Laura Wooster, a lobbyist with the American College of Emergency Physicians, whose political action committee contributed $708,000 to lawmakers in 2019. “The problem with a threshold is, you just have one threshold. It’s going to impact different specialties so differently.”

By December, House Energy and Commerce Committee leaders and Sen. Lamar Alexander, a Republican who chairs the Senate HELP Committee, agreed to lower the arbitration threshold to $750 as part of a bipartisan agreement on a bill. Notably, several hospital lobbying organizations, such as the American Hospital Association and the Greater New York Hospital Association—the latter a strong financial backer of Senate Minority Leader Chuck Schumer—refused to back the deal.

Pak-Teng and other physicians also say that arbitration threshold is still too high. The House Education and Labor Committee has unveiled surprise billing legislation with a similar framework.

“I’m open to listening to all sides on this,” Rep. Greg Walden of Oregon, the top Republican on the House Energy and Commerce Committee, said in an interview. “We want to make sure doctors are adequately compensated.”

Walden had harsh words for private equity firms that have attacked the Energy and Commerce legislation in a series of TV and internet ads, saying they were “misleading and scaring people” and just made lawmakers dig in deeper. The ads prompted a bipartisan probe from Walden and committee Chairman Frank Pallone (D-N.J.) into how the companies have influenced surprise billing practices.

“I’m not trying to hurtle a rock at them, but they’ve been throwing a few my way,” he said.

What’s coming

Arvind Venkat, M.D., a Pittsburgh emergency physician employed by US Acute Care Solutions, traveled to Washington multiple times last year to meet with congressional offices representing Pennsylvania. But he also made sure to bring up surprise bills on his home turf, giving his congressman, freshman Democrat Conor Lamb, a tour of the emergency room at Allegheny General Hospital last summer.

“There are two issues here,” said Venkat, who leads the Pennsylvania chapter of the American College of Emergency Physicians and has practiced at Allegheny General for 12 years. “Patients need to be protected, [and] we need to avoid anything that disrupts in-network relationships between insurers and clinicians.”

The call seems to have been heard: Legislation is likely to change further this year as the House Ways and Means Committee pushes an approach that is friendlier to hospitals and doctors. It builds off a one-page document committee leaders issued Dec. 11 that blunted momentum for a bipartisan deal that was to be included in a December spending bill.

The latest proposal from the committee includes an arbitration process to resolve payment disputes, with no minimum dollar amount needed to trigger it, and doesn’t ban surprise billing from air ambulance companies—a win for yet another special-interest lobbying group. The patient protections would not take effect until 2022.

Richard Neal, a Massachusetts Democrat who chairs the committee, remains an ally of Massachusetts hospitals. He released the brief December surprise billing document two days after the Massachusetts Medical Society and Massachusetts Hospital Association wrote a joint op-ed in The Boston Globe arguing that benchmarking physician payments—as the Senate HELP and Energy and Commerce deal would do—would wreck the state’s healthcare system.

“The heavy hand of government would create an unfair imbalance in the healthcare marketplace and insurers would have no incentive to engage physicians in building robust healthcare networks. The connected system of care we have all been working toward in Massachusetts would immediately become fragmented and disjointed,” the two groups wrote in The Boston Globe.

“They weren’t asking for favorable treatment. They were asking for fair treatment, and there’s a big difference,” Neal said in an interview. “I don’t want to rule anything out, but I think that the momentum right now is arbitration.”

“We need to get a little bit more balance,” added Shalala, who endorsed the Ways and Means legislation unveiled earlier this month.

Shalala has at least two hospitals in her Miami-area district that rely on private equity-supported physician staffing companies.

“I’m worried about the hospitals,” she said. “And the providers obviously include the docs.”

Victoria Knight contributed to this story.

Kaiser Health News is a nonprofit news service covering health issues. It is an editorially independent program of the Kaiser Family Foundation, which is not affiliated with Kaiser Permanente.

The House of Representatives is in the middle of trying to decide which three pieces of legislation to endorse that will end surprise medical bills.

All three have advanced out of their respective committees, with two of them advancing this past week, but some differ considerably in terms of how providers will be paid for out-of-network charges.

Below is a quick rundown of what each House committee wants:

Case Study

Across-the-Board Impact of an OB-GYN Hospitalist Program

A Denver facility saw across-the-board improvements in patient satisfaction, maternal quality metrics, decreased subsidy and increased service volume, thanks to the rollout of the first OB-GYN hospitalist program in the state.

See how

Creating a ‘backstop’

Two powerful congressional committees, the House Energy and Commerce Committee and the Senate Health, Education, Labor and Pensions (HELP) Committee, released a major compromise late last year to address surprise medical bills.

The bill would use a benchmark median rate to handle any out-of-network charge.

But the legislation would create an “arbitration backstop” for any out-of-network charge of $750 or more.

The bill has gotten major pushback from hospital and doctor groups that say insurers can game the benchmark median rate to force providers to get lower payments. Insurers largely oppose arbitration because they believe it will lead to higher prices, pointing to state laws such as New York’s that require arbitration.

‘Mediation’ is the new arbitration

The House Ways and Means Committee decided to go its own way and came out with legislation last month far more favorable to providers. The bill, which advanced out of committee earlier this week, would give providers and insurers 30 days to work out any dispute over an out-of-network charge.

After those 30 days, the two parties would go into a “baseball-style” arbitration process where both sides offer an amount and an independent party chooses one. But the committee decided not to label the process arbitration and instead is calling it mediation, even though a third party will pick a final amount after a round of talks.

In a major change from the House Energy and Commerce and HELP bill, the arbitration process can start at any amount. The Senate and House bill would trigger arbitration for bills over $750.

The nonpartisan Congressional Budget Office (CBO) estimated earlier this week that the legislation would lead to roughly a 0.5% to 1% decline in premiums in markets that have a lot of surprise medical bills.

CBO estimated that under the legislation, the average payment rates for “both in- and out-of-network care would move toward the median in-network rate, which tends to be lower than average rates.”

Increasing transparency on out-of-pocket costs

The House Education and Labor Committee advanced legislation Tuesday that is similar to the Energy and Commerce compromise. It would set up a benchmark rate for out-of-network costs for amounts less than or equal to $750.

Any amount above that rate would be subject to an independent dispute resolution like arbitration for any bills above $750, just like Energy and Commerce.

But the bill would also include several provisions aimed at improving transparency, such as requiring plans to provide up-to-date provider directories and boost transparency on in- and out-of-network deductibles and out-of-pocket limits.  

As Congress considers efforts to rein them in, private equity firms are buying up more physician practices, according to a new study.

Private equity firms acquired 355 physician practices from 2013 to 2016, a number that jumped each year of the study, according to a research letter published today in JAMA. The number increased from 59 practices in 2013 to 136 practices in 2016.

Case Study

Across-the-Board Impact of an OB-GYN Hospitalist Program

A Denver facility saw across-the-board improvements in patient satisfaction, maternal quality metrics, decreased subsidy and increased service volume, thanks to the rollout of the first OB-GYN hospitalist program in the state.

See how

With approximately 18,000 group medical practices in the U.S., researchers said while private equity acquisitions increased across specialties during the study period, they still constituted a small proportion of practices. Those acquisitions continued in the years beyond those in the study period.

The 355 practices bought up included 1,426 sites and 5,714 physicians.

The majority of acquired practices (43.9%) were in the southern U.S., the study found. Practices acquired by private equity firms had several sites (a mean of four) and many physicians (a mean of 16.3 in each practice) with a mean of 6.2 physicians affiliated with each site.

The study, which identified group practice acquisitions using the Irving Levin Associates Health Care M&A data set that includes information on healthcare mergers and acquisitions, also looked at which specialties private equity firms were most interested in.

The most commonly acquired medical groups from 2013 to 2016:

  • Anesthesiology practices (19.4%)
     
  • Multispecialty practices (19.4%)
     
  • Emergency medicine (12.1%)
     
  • Family practice (11.0%)
     
  • Dermatology (9.9%)

From 2015 to 2016 there was an increase in the number of acquired cardiology, ophthalmology, radiology, and obstetrics/gynecology practices, according to the research letter.

Industry reports suggest further growth in acquisitions in 2017 and 2018, particularly in ophthalmology, dermatology, urology, orthopedics, and gastroenterology.

Within the acquired practices, anesthesiologists represented 33.1% of all physicians; emergency medicine specialists, 15.8%; family practitioners, 9%; and dermatologists, 5.8%.

That profile of practices with several sites and many doctors matches “private equity firms’ typical investment strategy of acquiring ‘platform’ practices with large community footprints and then growing value by recruiting additional physicians, acquiring smaller groups and expanding market reach,” said the study authors Jane M. Zhu, M.D., of the division of general internal medicine and geriatrics at the Oregon Health & Science University in Portland; Lynn M. Hua, of the department of health care management at the Wharton School of the University of Pennsylvania, in Philadelphia; and Daniel Polsky, Ph.D., of the Carey Business School at Johns Hopkins University in Baltimore.

They noted that more research is needed to understand the effect of the acquisitions to mitigate unintended consequences.

“Private equity firms expect greater than 20% annual returns and these financial incentives may conflict with the need for longer-term investments in practice stability, physician recruitment, quality, and safety,” wrote the researchers.

Ownership by private equity firms may create additional pressures to increase revenue streams (such as elective procedures and ancillary services), direct more referrals internally, and rely on lower-cost clinicians, the authors said.

A limitation of the study is that its data is based on publicly announced transitions and therefore may underestimate the total number of acquisitions, particularly of smaller practices, they said.