How powerful health providers tamed a ‘surprise' billing threat

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Powerful hospital and physician groups that tied up Congress for nearly two years on how to end “surprise” medical bills saw their efforts pay off with the compromise lawmakers inserted in the giant year-end spending package.

The health care providers — including private-equity backed physician staffing groups — chipped away at leading legislative proposals through high-profile lobbying and tens of millions of dollars worth of attack ads while promoting a solution that would submit their payment feuds with insurers to independent mediators.

The compromise in the year-end package settles what was supposed to be health care’s “easy fix” in the 116th Congress and ensures patients will no longer have to pay huge bills from out-of-network specialists, air ambulances and other clinicians. But it also underscores the clout of corporate medicine at a time when the health system and safety net programs are reeling from the effects of the pandemic.

Elizabeth Mitchell, president of the Pacific Business Group on Health, which represents large employers including Walmart and major tech companies, predicted the legislation will yield an “opaque, expensive bureaucratic process” favoring “those with the resources to navigate that most effectively.”

“These bills will still end up driving up premiums overall,” Mitchell said.

Patient advocates and policy experts have framed the policy battle over these reforms as a microcosm for why fixes to the U.S. health care system are so hard — and a grim harbinger for more ambitious overhauls, like President-elect Joe Biden’s campaign promise to create a public health insurance option.

There was always strong bipartisan interest in addressing the billing issue. The problem was the way it divided health interests intent on avoiding picking up the extra cost of holding patients harmless.

Last year, leaders of the House Energy and Commerce and Senate health committees proposed settling disputes by pegging payments for providers to a federal benchmark payment based on in-network rates insurers paid for services and procedures. Doctor and hospital groups quickly raised the specter of “government rate-setting.” Meanwhile, conservatives pounced on the approach as the equivalent of price controls, saying it could also be a prelude to “Medicare for All.”

“There was a great amount of emphasis placed on making the term government rate-setting a politically toxic term,” said a consultant to provider groups.

The idea of outside arbitration instead played well with a vocal contingent of physician-lawmakers in Congress who backed a federal replica of New York’s own approach to settling billing disputes — using “baseball-style arbitration.” Critics say that policy has encouraged hospitals to charge more for care, which patients eventually pay for in the form of higher premiums.

Even in the last few days, providers secured changes from Congress to adjust the arbitration process and help boost their profits. Technical fixes, obtained Sunday by POLITICO, prevent independent mediators from considering the lower rates of Medicare and Medicaid when deciding how much money providers should get for their services.

Chip Kahn, CEO of the Federation of American Hospitals representing for-profit chains, said negotiators “came a long way” in recent days. He said his group could endorse the final version after it eliminated what he termed efforts to influence the payments providers get from the insurers in their network or insurers they’re contracted with. “That wasn’t appropriate,” Kahn said.

Other provider groups like the private equity-backed physician staffing firm TeamHealth, which spent millions of dollars attacking the benchmark payment approach, have praised the agreement — while health insurer and employer lobbyists see it as a Pyrrhic victory.

One insurance lobbyist said the outcome showed how private equity-backed physician groups and hospitals dictate policy, adding,“For consumers, this will mean higher and higher costs, year over year, forever.”

The grinding nature of the debate and the tight congressional schedule also worked in the providers’ favor. House Speaker Nancy Pelosi, tired of infighting among powerful committee leaders, forced Ways and Means Chair Richard Neal (D-Mass.) back to the negotiating table just days after he said he wanted to punt on addressing sky-high medical bills until next year, according to multiple sources. Neal’s efforts were essential to making the bill more friendly to doctors and hospitals.

The fighting won’t end once the legislation is signed. Since the federal health agencies will have the ultimate say in how the mediation system works, the special interest lobbying will turn next to the executive branch, where the incoming Biden administration will be in charge of writing the rules. And the legislation still doesn’t bar ground ambulances from sending massive bills to insured patients.

“Who ultimately wins and loses is something we’ll not know for years,” said Benedic Ippolito, an economist with the conservative-leaning American Enterprise Institute who consulted with key health committees on the legislation. “And what I worry about is, what does an arbitration system look like in five to 10 years when this isn’t under a microscope?”

The spending deal puts guardrails in place. Mediators can’t weigh the sky-high charges providers bill when settling on the amount insurers will have to pay for their customers’ out-of-network care. But arbitrators also can’t consider Medicare rates, which employer groups and others wanted to serve as the price peg in order to curb costs.

Loren Adler, who also consulted with Congress on the reforms as associate director for the USC-Brookings Schaeffer Initiative for Health Policy, is optimistic the system will work out as envisioned. While an arbiter adds complexity to the process, he sees the rules Congress put in place as sufficient to keep costs in check.

For instance, he noted, providers have to space out their appeals of settlements, meaning their incomes would dry up if they fought every payment. “It’s unclear how a provider can game the process,” Adler said.

House Energy and Commerce Chair Frank Pallone (D-N.J.), who helped steer the reforms over the past 18 months, heralded the compromise as “the biggest victory for consumers” since Obamacare for the way it relieves patients from having to worry about getting shocked with a huge bill.

And though surprise billing headlined a host of patient protection reforms originally pushed by Senate health committee Chair Lamar Alexander (R-Tenn.) and ranking member Patty Murray (D-Wash.), other policy changes aimed at stopping anti-competitive practices among health insurers, hospitals, prescription drug middlemen and the pharmaceutical industry were either watered down or axed — to the chagrin of employer and patient groups that badly wanted them.

“They folded on every single issue that mattered to those of us who actually wanted to lower health care costs,” one employer lobbyist said.

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