The American College of Emergency Physicians came out with their surprise bill “solution” framework earlier this week. It is audacious in its solution. I want to poke at the proposal a bit from the point of view of total cost and incentive structure.
TLDR: Give us more money and take away all of our headaches
Right now an emergency room visit will generate at least two claims. Many ER bills can have more than two claims. The first claim type is the facility charges. This gets paid to the hospital. It covers the ER triage nurse, supplies, materials, and room opportunity cost. This proposal does not address the facility bill. The second claim type is a professional claim. This pays for the ER doctor’s time and expertise. The professional bill is tied to the diagnosis and procedures performed. This proposal only addresses professional claims.
The split in billing types creates plenty of space for surprise out of network bills. Zach Cooper and Fiona Scott Morton up at Yale looked at the business strategy of out of network billing for ER care. Hospitals can and will contract with ER staffing companies whose business model is to be out of network for almost all insurers and charge very high fees that are then argued down.
This proposal is supposed to address that problem but it mainly improves ER physician cash flow while increasing the odds of ER providers staying out of networks.
Let’s look into those mechanics below the fold:
- Insurers will directly pay any coinsurance, copay, and deductible for emergency care to the provider.
Right now, an ER visit charge (in-network and out of network) will have two payment streams for a physician. The first stream is from the insurance company. That usually comes via an electronic funds transfer and it is the net of the allowed amount minus patient responsibility. The second stream is patient responsibility which is applicable co-insurance plus co-pay plus deductible. Co-pays are often collected at the point of service while co-insurance and deductibles can’t be collected until after the claim is adjudicated as those payments are based on the final agreed upon amount. The physician group collecting money from patients takes effort and money as well as time. There is a decay between the collectable amount and the total amount actually collected.
This would change the physician billing system. They would submit one bill to the insurer and get paid in a timely manner with no decay and far lower administrative costs on their side. They shift significant costs to the insurer as the insurer now has to chase their covered members for non-regular bills on a non-regular cycle. This will increase administrative costs which will count against the insurer’s Medical Loss Ratio (MLR) allowable amount.
- Required payments will be made within 30 days of claim submission. Failure to do so will trigger civil
monetary penalties (CMPs) of $500 per day.
The ER phsyicians want to get paid on a net 30 day cycle after claims submission. This dramatically improves the quality of their accounts receivable while getting them out of chasing money.
So far this is a cash flow management bonanza which also gets any ire of patients at high cost sharing that is predicated on high final rates directed at insurers instead of at the physicians.
The rest of the proposal is about how to find the price.
- When provider-insurer disputes arise over reimbursement for out-of-network emergency services, the following will be used to resolve them:
- o The payment amount will be determined under any state law that takes a comparable approach
to this proposal.;
- o For claims under $750 (amount to be adjusted for inflation), the balance will be paid in full. For
inflation-adjusted amounts over $750, the insurer will pay an interim payment directly to the
- Either party may trigger the alternative dispute resolution (ADR) process described below within 30
days of the provider receiving the interim payment.
If the professional claim is under $750, the insurer pays immediately and in full. The incentive here is to have a consulting firm optimize billing practices so every charged amount for low effort claims is $749.99. This is a revenue gold mine given current practices.
– average ED payment is $383
– average physician charge is $615 (75th percentile is $787)
Also worth noting, half of Americans don’t have liquidity to pay a $400 expense. That’s a good barometer for the level of arbitration.
Nevertheless, kudos to @EmergencyDocs
— Zack Cooper (@zackcooperYale) January 29, 2019
The alternative dispute method is arbitration. They would use “baseball style” arbitration where the insurer submits the interim paid amount and the physician group would submit the billed amount. The arbitrator would choose one of the two payment levels as the “reasonable” level. The physician group is guaranteed at least $750 in all scenarios.
The arbitrator would be bound by two key financial anchors:
o 80th percentile of charges for comparable services in the same geographical area, as determined
by a transparent and wholly independent Medical Claims Database (such as FAIR Health),
o 150% of the average in-network rate for comparable services in the same geographical area as
determined by a transparent and wholly independent Medical Claims Database (such as FAIR
150% of average in-network rates within a market region is a damn good reason for no one covered by this policy to be in network. Or even more cynically, if a provider group has a dominant market position of supplying ER physicians, contracting a single doc at a single facility with low ER utilization at an ungodly high level would be an obvious game to play to inflate the regional benchmark.
This is an invitation to strip mine insurers and patients. Insurers won’t mind too much as they can pass along the added costs as premiums. It sounds like a solution until one realizes that the problem it is trying to solve is not high prices of out of network emergency physician bills but a three fold problem as seen from the point of view of the emergency physician trade group:
- Congress will be yelling at us so this is “something”
- Increases our revenue
- Reduces our revenue cycle management costs
I’m impressed by the cynicism.