Anesthesia Business Consultants

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Anesthesia Industry and Market News: eAlerts

eAlerts are the latest industry information regarding regulatory changes, helpful compliance reminders, or any number of relevant topics in the fast-paced, ever-evolving specialty of anesthesia.

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September 5, 2017


Comprehensive laws restricting balance billing have been passed in several states, and many more states have introduced legislation.  In general, anesthesia groups have adapted by aligning with their facilities’ contracting strategies and in-network profiles; however, strategies for anesthesia practices remain diverse and market-specific.  We encourage groups to follow legislative developments in their states and to work with their specialty societies and attorneys to ensure compliance with the law.  ABC clients interested in a more thorough understanding of how balance-billing laws may affect their practices are encouraged to contact their account managers.

Given the intricacy of the interrelationships among payers, hospitals and clinicians (including anesthesia care providers), the evolving healthcare marketplace and the growing level of outrage among patients and consumer groups, balance (surprise) billing is certain to remain rooted in the spotlight for years.

Comprehensive laws restricting balance billing have been passed in New York, Connecticut, Florida, Illinois, Maryland, and California, and numerous states have introduced bills (see below for a summary) attempting to address what has become a distressing and unexpected source of medical debt.

How are anesthesia practices coping amid the controversy and changing legislative landscape? 

Overall, most anesthesia groups that serve one or more facilities in a locality have been adapting to the changing environment by taking what is probably the most pragmatic and realistic path:  entering into contract negotiations with the insurance carriers with whom they have previously been out of network, and aligning themselves with the contracting strategies and in-network profiles of the facilities they serve.  We have seen this response among anesthesia groups in, among other places, California and New York.  The strategy for groups remains diverse and market-specific.  Every group has to assess its relationship with the hospital system, its contractual obligations, and the current payment policies of its major insurance carriers.

In New York, some anesthesia groups that have not contracted with the major insurance carriers are seeing a high volume of claim-specific negotiated proposals from these companies. Rather than contract a set rate for all of the practice’s volume, the practices are negotiating charges on a case-by-case basis with these carriers.  It can vary, but the anesthesia groups will generally accept a reasonable percentage of charge as a proposal. If the carrier offers less than a fair and reasonable rate, the groups typically submit a counter-proposal.  Our sense is that these practices have had a fair degree of success with this approach and that net revenue does not seem to have been negatively affected by the state’s balance billing legislation.  The practices receive a significant volume of claim-specific proposals and regularly receive the requested percentage of the usual charge.

That’s not to say that balance-billing legislation is not affecting anesthesia practices; it is.  The effect of these laws has been to shift negotiating power disproportionately to carriers, often giving many anesthesia groups little bargaining clout to negotiate reasonable terms with insurers when they stay out of network.  As rates for anesthesia services have increased, it is not uncommon for typical PPO reimbursement rates to be 40 to 50 percent less than usual and customary charges, despite the fact that few anesthesia practices hold patients, including uninsured patients, to their full billing rate.

Of course, the increase in the past few years in patient responsibility for healthcare costs as a result of the dramatic rise in high deductible health plans also factors heavily into this equation.  In the current market, if an insurance company says it will contract with a provider to pay a certain amount for a procedure, that amount often includes the portion of the charge that is the patient’s responsibility.  With patients shouldering more responsibility for their healthcare costs, the amount the anesthesiologist or nurse anesthetist receives is more likely to be effectively much lower because collecting from patients is more difficult than collecting from insurance carriers.  The fact that patient portions are likely to be much higher now means that some anesthesia practices are absorbing greater losses.

Anesthesiologists often agree to accept the amount the patient would have been expected to pay had the anesthesiologist been contracted with the patient’s insurance carrier.  This is often considerably less than what the payment would have been had the anesthesiologist been in network.  Again, the fact that more patients have high deductible health plans and are responsible for more of their healthcare costs but are less likely to meet those commitments often translates into losses that anesthesia practices are being forced to absorb.

Overall, anesthesiologists working at a busy facility have not seen a decline in income over the past few years.  A drop in income, when it occurs, usually happens in response to a change in payer mix or an increase in the number of providers due to a hospital’s expansion into new markets.  However, continued downward pressure on anesthesiologists’ income can be expected from a variety of sources, including reductions in Medicare and Medicaid reimbursements, the expanding populations of under-insured and uninsured patients, and high deductible health plans.  Anesthesiologists and other hospital-based groups cannot control the kinds of surgery needed; therefore, they are disproportionately affected by an eroding payer mix.

The passage of balance-billing legislation in several states has also eroded the flexibility anesthesia care providers have previously enjoyed to successfully negotiate favorable contracts with insurers, and it appears that the trend will continue.  This negotiating leverage helped anesthesia practices offset the negative impact of a growing population of lower-paying or no-paying patients.  This scenario is changing as balance-billing laws have begun to upset the balance that existed in a free market.

Following is an overview of balance billing legislation in other states from insideARM:

Arizona: SB1441

Patients would be able to appeal surprise bills through the Department of Insurance, which would set up a phone conference with the patient, physician and insurance company. 

Georgia: HB71, SB8

Both bills would protect consumers from surprise out-of-network medical bills, and require more transparency. 

Ohio: SB284

Hospitals would provide written notices to insured patients clarifying whether the hospital or physician is in network, and estimating any potential out-of-network fees.  The bill would also require the patient’s informed consent for services from an out-of-network provider at least 24 hours in advance.  Otherwise, providers would be prohibited from charging more than what the patient would have paid had the provider been in network.

Oklahoma: HB 2216

Passed unanimously by the state House of Representatives, the bill requires non-contracted providers to give patients an estimate of charges and a disclosure that the provider will either accept the assignment of benefits for the plan’s allowed amount or balance-bill the enrollee. Patients could request a different, in-network provider.

Oregon: HB 2339

The bill requires insurers to reimburse non-participating providers at a “reasonable and customary” rate, and would prohibit providers or participating facilities from balance billing a patient covered by a health benefit plan or healthcare service contract for services provided at a participating healthcare facility.

Pennsylvania: SB1158

The bill, which recently died in committee, would have removed the patient from billing disputes and required insurers and providers to settle involuntary out-of-network bills through arbitration.  Sponsors plan to reintroduce the bill.

Rhode Island: HB5012

The bill, which died in committee, would have required a dispute resolution process for emergency care bills and surprise medical bills for out-of-network service.  Sponsors plan to reintroduce the bill.

Utah: HB395

The bill, which did not pass but is expected to be reintroduced, would have used a national benchmark for typical charges to limit what hospitals and doctors can charge in emergency settings.

For More Information

Balance Billing By Health Care Providers: Assessing Consumer Protections Across States, The Commonwealth Fund, June 13, 2017.

Consensus Principles on Out of Network Care, American Society of Anesthesiologists, American College of Emergency Physicians and other medical groups. The American Medical Association also passed a resolution on out-of-network care at its 2017 annual meeting.

AB72: What the New ‘Out-of-Network’ Law Means,” Phillip Goldberg, attorney, California Society of Anesthesiologists, October 10, 2016.

An Update for Anesthesia Providers on Surprise Billing,” ABC eAlert, October 24, 2016.

Growing Limits on ‘Surprise’ Bills from Anesthesiologists and Others,” ABC eAlert, May 31, 2016.

As balance-billing legislation continues to unfold across the country, we encourage you to keep yourself and your colleagues informed about the laws in your state and look to your national and state societies and attorneys to help ensure that your practice is in compliance. ABC clients:  your account manager will gladly prepare an assessment for you of how changes in balance billing laws in your state might affect your practice.

With best wishes,

Tony Mira
President and CEO