How Will the New Federal Surprise Billing Law Impact Anesthesia Reimbursement?
Summary: For practices that submit a significant number of out-of-network claims, the coming federal law that addresses surprise medical bills will likely mean less revenue for such claims. But how much less? Today's article addresses what we currently know and what remains to be seen.
A 2018 study from the Kaiser Foundation suggested that 18 percent of inpatient visits in participating facilities received care from a non-participating provider, resulting in a surprise bill. The source of the out-of-network (OON) care could have included any provider type, and in fact the highest incidence of OON care in that study was not attributed to physicians at all, but to medical transport providers. The idea of legislation limiting patient balances from out-of-network care has long had bipartisan support, but lawmakers struggled with the appropriate model to address the issue. After several years of political wrangling, the "No Surprises Act" was included in the year-end stimulus bill from December of 2020. The law applies to surprise billing not addressed by existing state laws. Starting in January of 2022, the bill limits OON patient balance billing to co-payments and deductible as defined by the member's in-network plan benefit.
Current Considerations
To forecast how significantly the new legislation will impact anesthesia practices, we reviewed participation data from a large sample of our clients. Identifying the population of interest required classifying various types of coverage within our claims database.
The largest group in terms of claim volume involved public payers. Medicare, Medicaid, Worker's Compensation, Veterans Administration services and other government plans operate under a different set of reimbursement criteria and are not impacted by the legislation. We also isolated uninsured patients. It is no surprise that medical bills are unpleasant for those without coverage, nor are they impacted by the new law.
The remaining products were divided into those with whom our clients participate via contract and those that are non-contracted. The portion of our nationwide case volume and revenue attributed to non-participating claims was minimal. While 8.9 percent of the insurance codes in our system were non-participating, only 1.1 percent of our claims in 2020 were for non-contracted care—even lower than our overall uninsured penetration. In terms of existing out-of-network volume, the impact will be low.
The summarized data also demonstrated that there is currently a financial advantage to being out-of-network. There is a wide variance, but overall yield per case on non-participating carriers was higher than contracted commercial reimbursement in each of the last three years.
Assessing the Future
Predicting the impact on out-of-network reimbursement under the new federal legislation has been largely guesswork until the Department of Health and Human Services (HHS) published its rules to govern the execution of the bill on July 1st. Much further review will be required to digest that information. A glimpse into the bill's effect on anesthesia reimbursement may be provided by two states that have already implemented surprise billing legislation.
In 2015, New York applied a relatively provider-friendly model for addressing surprise billing. It employs a model where a neutral arbiter must choose between proposals put forth by the two parties—no compromising in the middle. California followed with a less transparent model in 2017 in which reimbursement is based on carrier-specific average rates.
Narrowing our focus to clients in those two states yields some interesting results, though at an anecdotal-volume level. Reviewing the impact on reimbursement of OON claims filed in the first two years of active legislation shows a similar trend in both states. Unsurprisingly, yield per case dropped approximately 20 percent versus pre-legislation rates. The actual decrease, however, was of a more reasonable proportion than the feared race to the bottom at Medicare rates.
Of interest also is the regulation's impact on the volume of out-of-network claims. New York saw a reduction in OON volume, while California conversely saw an increase in the volume of non-participating claims. Taking into consideration that both models resulted in similar reimbursement impact, one possible interpretation is that anesthesia groups in New York were able to successfully negotiate with insurance plans in that state under the new reimbursement environment. In California, insurers leveraged their advantage to make participating rates untenable or even terminate existing agreements. Despite the intent to encourage participation, one unintended consequence may be that this legislation inhibits negotiation of reasonable contract rates by anesthesia practices.
California's benchmark-based model does incentivize terminating highly reimbursed groups to achieve lower average contracted rates. Higher rates that practices have used to their advantage in facility subsidy arrangements may now make them a target under this new legislative environment. United Healthcare has publicly terminated agreements with anesthesia practices owned by Mednax, Team Health and Envision, blaming their above-market rates.
We look forward to further clarity on how the new legislation will be implemented in the rules soon to be released. Until then, the total impact is speculation. It may be some comfort to anesthesia providers that the bill has more similarities to the New York model than California's. While the No Surprises Act is a significant new wrinkle for our specialty, it does appear that the market will dampen its most feared outcomes. If you have questions on how this law will impact your practice, please contact your client manager or reach out to us at info@anesthesiallc.com.