Solving The Balance Billing Problem In New York And Elsewhere

May 11, 2012

     Over three years ago, I wrote here about the “balance billing” problem; in short, the practice of non-participating healthcare providers billing patients for the difference between the provider\’s charge and the out of network payment made by the patient\’s insurer/PPO (“payer”). As described by E.J. McMahon in Newsday, the problem in New York has taken an interesting turn, but come no closer to a satisfactory resolution.

     When Governor Andrew Cuomo was New York\’s Attorney General, he investigated charges that the Ingenix database then used to set fees for out of network providers was skewed in favor of the payers who controlled it. A settlement resulted in the creation of an independent nonprofit company, “Fair Health,” that generates a “usual and customary” fee database. In the meantime, some payers began the practice of paying non-participating providers on the basis of the (lower) Medicare fee schedule, and some providers began increasing their standard “charges” substantially in an effort to drive up the Fair Health rates. Non-participating providers unsatisfied with the Fair Health fees continue to bill their patients for the “balance owed” on the standard charge.

     While some progress has been made, the fundamental problem remains. When a balance bill is created, one of three parties must be left “holding the bag:” the patient, the non-participating doctor or the payer. E.J. McMahon suggests that New York “should set up an arbitration process to resolve reimbursement disputes between insurers and physician, while shielding consumers from bills for disputed balances.” I\’ll be the last one to object to the use of an ADR process to resolve these disputes, but some greater clarity is required.

  1. Although politics and economics may favor an absolute “hold harmless” for patients in these cases, that result wouldn\’t always be fair, or sound policy. If a patient knowingly chooses to go to an out of network provider with full awareness that the charge will well exceed the payer\’s obligation to pay, why shouldn\’t the provider be able to collect the full charge from the patient? On the other hand, if the patient is unaware of the balance bill potential, or the magnitude of the difference, the patient should be off the hook. Rules can be adopted to define what the patient must be told, when and by whom.
  2. Patients who are made aware of the potential differential and are unhappy with their predicament will likely complain to their payer, as they should. However, rather than focus on the provider\’s charges, the payer should make the patient aware of the other alternative providers, both in and out of network, who are available to provide the necessary service within the confines of the payer\’s allowable charge. If the alternative providers offered by the payer are too few, too inconvenient or otherwise unacceptable, that\’s a problem with the payer\’s network, not a “balance billing” problem, at least in the eyes of this patient.
  3. For cases in which the patient is held harmless because he or she is unaware of the balance bill potential or its magnitude, the payer and the provider must find a way to agree on what the provider should be paid. This is where an ADR process would come into play. In order to avoid every case being contested, a presumption should be adopted with respect to the Fair Health fee schedule. That presumption could be the 100th percentile, the 80th or some other point on the schedule thought to fairly represent the usual and customary charge. Absent a protest by either party, this is what the provider would be paid. If either the provider or the payer objects to the presumption created under the Fair Health fee schedule, binding arbitration could be requested.
  4. The role of the arbitrator would be to, de novo, determine fair and reasonable compensation for the provider under the particular circumstances. Using this standard, a world renowned surgeon with 30 years of experience and outstanding results might expect a higher fee than the presumptive schedule, whereas a new surgeon who simply charged well above the presumptive schedule might not fare as well.
  5. To encourage good faith and fair play, both parties would submit their best and final offer to the arbitrator. Using so called “baseball arbitration” rules, the arbitrator would then hear the evidence in an expedited procedure and choose the one that best meets the standard of “fair and reasonable under the circumstances.” The loser would pay the costs of the arbitration.

     The process just described, or something like it, wouldn\’t make “balance billing” disappear, but it would be far superior to the confusion, expense and unfairness arising from the current, ad hoc litigation approach to the problem. Let\’s see if New York and other states agree.

[Image: A balanced (roseate spoon)bill.]