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Surprise Billing Initiatives Face Not-So-Surprising Resistance

“Surprise billing,” also known as “balance billing,” is one of few areas that garners bipartisan support. Surprise billing occurs when a patient inadvertently goes out of his or her insurer’s network, resulting in a “surprise bill” – often times when they had no choice in the matter. According to a recent analysis of 2017 national claims data by the Health Care Cost Institute, an independent, nonprofit research organization, emergency medicine specialists are the most likely to generate surprise bills. How does this play out? A patient goes to the emergency room at a hospital that is in-network, only to be provided services by a doctor staffing that emergency room who is out-of-network, with the patient having no idea about this billing dichotomy and no means to stop it.

Both states and the federal government are making strides to address this issue. There are two main approaches taken – one is arbitration, and the other is benchmarking. Arbitration involves the provider and the insurer participating in an independent review process to negotiate the appropriate charge on a surprise bill. Benchmarking involves limiting the payment a provider may receive from the insurer to the average of what local in-network providers are paid.

The benchmarking approach was taken up in California via a 2016 law that mandates a cap on reimbursement rates. The law limits payments for out-of-network providers to fair market value. While some argue California’s law too significantly benefits insurance companies – by basically allowing them an excuse not to pay unexpected medical bills – studies on the impact of the law show that the number of doctors participating in networks has increased since the law’s implementation. In addition to California, twenty-seven other states also have consumer protection laws to combat surprise billing.

While there has been a lot of movement at the state level, there is also legislation pending on the federal level to address the issue. At least six bills have been introduced in this session of Congress. One bill, S. 1895, which was recently approved by the Senate Health, Education, Labor and Pensions Committee, is modeled after the California law. The bill would require insurers to pay “median in-network” rates for out-of-network services. While the impact on levels of reimbursement in California is still unclear, the Congressional Budget Office estimates that, if the Senate bill becomes law, the average payment to affected doctors could end up falling by between 15 percent and 20 percent. Another bill, H.R. 2328, recently approved by the House Energy and Commerce Committee, is substantively similar to S. 1895, although H.R. 2328 includes binding arbitration for cases over a certain threshold, while the Senate Bill is silent on the issue of dispute resolution.

This type of surprise billing legislation has met resistance, however, and is being aggressively lobbied against, largely by private equity funds who in recent years have purchased large physician-staffing companies. One group, Doctor Patient Unity, which is funded by two private equity-backed physician-staffing companies, has spent more than $28 million alone to oppose surprise billing legislation. Physician-staffing companies have the most to lose from this legislation, as their profit margin benefits from staying out-of-network, where they have more control over price-setting. Physician-staffing companies tend to provide doctors for various departments in hospitals, including emergency departments.

While the federal legislation is moving slowly, we do anticipate seeing more of these legislative and regulatory initiatives at the state level.

Copyright © 2020, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume IX, Number 347


About this Author

Kathleen Stratton, Sheppard Mullin Law Firm, Washington DC, Corporate Law Attorney
Senior Counsel

Kathleen M. Stratton is Special Counsel in the Corporate Practice Group in the firm’s Washington D.C. office.

Areas of Practice

Kathleen Stratton represents health care industry clients in a range of matters focusing predominantly on regulatory compliance, licensure, certification, and operational issues facing a vast array of provider types. Over the past 30 years, her provider clients have included hospitals, specialty pharmacies, ambulatory surgery centers, durable medical equipment suppliers,...

Theresa E. Thompson, Sheppard Mullin Law Firm, Washington DC, Corporate Law Attorney

Theresa E. Thompson is an associate in the Corporate and Securities Practice Group in the firm's Washington, D.C. office.

Areas of Practice

Ms. Thompson's practice focuses on such areas as health care fraud and abuse, particularly in matters relating to the civil False Claims Act, physician self-referral (Stark law), and anti-kickback issues, as well as telehealth and telemedicine. She has experience in government investigations, litigation, and regulatory compliance, including in response to government anti-fraud and abuse enforcement efforts and regulatory inquiries.

A contributing author for the American Health Lawyers Association's Health Care Reform Educational Task Force, Ms. Thompson received her J.D., with a Health Law Certificate, from the University of Maryland Francis King Carey School of Law, where she also served as the Manuscripts Editor of the Journal of Health Care Law and Policy, President of the Student Health Law Organization, and Treasurer of the Women’s Bar Association. She is a recipient of two CALI Excellence for the Future Awards—one for the study of Health Law Fraud and Abuse and the other for Written and Oral Advocacy—and was part of a team that won first place in the Fifth Annual Health Law Regulatory and Compliance Competition.