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Out-of-Network Bill Hits Snag in State Senate, Likely Delayed Until Fall

Commerce committee members raise concerns about arbitration proposal, possible advantage to insurers

Wardell Sanders, president of the New Jersey Association of Health Plans, and Mishael Azam, chief operating officer of the Medical Society of New Jersey.

The brakes have been applied to a legislative push to lower the cost of surprise medical bills, after state senators raised concerns about the arbitration process that is at the heart of the bill, as well as whether the bill would give too much power to insurers – with one critic saying it would give them a “blank check.”

The Out of Network Consumer Protection, Transparency, Cost Containment and Accountability Act, S-20/A-4444, was pulled from a vote from the Senate Commerce Committee yesterday as committee members from both parties questioned various pieces of the bill.

Sen. Joseph F. Vitale (D-Middlesex) asked for the delay in hopes of improving its chances of being enacted. Since there are usually few committee hearings during the summer, it’s likely that the bill won’t be considered again until the fall.

The bill is intended to rein in the high bills charged by some hospitals and medical specialists for emergency or involuntary services when the hospitals and doctors are not part of patients’ insurance networks.

While state law already protects most patients from being hit by those surprise out-of-network bills, some patients who are in employer-funded plans do have to pay these bills.

In addition, legislation supporters -- including advocates for insurers, payers and patients -- say high out-of-network charges lead directly to higher insurance premiums and government insurance costs.

Opponents -- such as doctor groups and many hospitals -- argue that the the ability to go outside the insurers’ network is necessary, since it can give them leverage in negotiations with insurers.

Much of the criticism is focused on the way that the bill seeks to settle payment disputes between insurers and providers: It calls for a mandatory system in which an arbitrator would choose a proposed price submitted by one side or the other.

Sen. Nicholas P. Scutari (D-Middlesex, Somerset, and Union) said the fact that the winning side in arbitration would have to pay a lawyer to represent them “seems unjust.”

Sen. Gerald Cardinale (R-Bergen and Passaic) suggested that instead of arbitration, payment disputes could be decided by medical specialists who are experts on the services.

“Wouldn’t it be so much simpler if we used a peer review process?” he asked.

Scutari expressed sympathy with Cardinale’s idea, saying that medical experts may be in a better position to determine appropriate payments.

But Wardell Sanders, president of the New Jersey Association of Health Plans, said that medical specialists frequently aren’t well-positioned to judge payments, since many don’t have deal with the billing side of their practices.

Vitale noted that the bill drew on years of debate over the issue. As an example of why the legislation is needed, he cited the case of a patient who chooses a hospital and surgeon inside the patient’s insurance network, only to receive a bill for services by an out-of-network anesthesiologist.

Vitale also promoted a feature of the bill that would bar providers from waiving patient fees as a way of attracting out-of-network patients.

“In Medicare that’s called fraud, in New Jersey, it’s called seven days a week,” Vitale said of the frequency with which such fee waivers occur.

Vitale said bill sponsors worked with every group interested in the measure, and made a series of changes in response to concerns.

“It protects consumers where they should be protected, provides for a reasonable expectation that a provider will be paid a reasonable amount of money, (and) that an insurer company can’t be stingy and they have to pay a reasonable amount of money to the provider,” Vitale said.

Dr. Jonathan Lustgarten said the bill doesn’t strike the right balance, giving too much power to insurers to use arbitration to arrive at payments that are similar to in-network fees. He noted that under the bill, arbitrators could use previously paid in-network rates as a factor in making their decisions.

“To put in-network into that (arbitration) equation, is to basically say, ‘We’re going to pay you this rate if you join our plan or we’re going to pay you this rate if you don’t join our plan,’ ” said Lustgarten, who is a neurosurgeon, which is the medical specialty with perhaps the lowest share of doctors who are inside insurance networks.

Advocates for doctors object to several other provisions on the bill.

Medical Society of New Jersey Chief Operating Officer Mishael Azam criticized a provision that would require doctors to inform patients of potential costs they face before they provide a service. Not only do doctors frequently not know the cost, Azam said, but they also don’t know whether patients have met their annual insurance deductible.

New Jersey Hospital Association President and CEO Betsy Ryan ratcheted up her criticism of the bill, saying that she was concerned that it “will upset the healthcare economy in the state,” by shifting leverage away from providers. She said that if doctors take a significant cut in payments from insurers, they could turn to hospitals to receive additional payments from them.

Attorney Andrew Schlafly, who represents doctors, also said the arbitration process gives to much power to insurers.

“Basically you’re giving a blank check to the insurance companies,” he said.

Sanders said the bill would only affect a small minority of doctors and hospitals that choose to charge rates that much higher than those that their peers are paid.

Executives with CarePoint Health, a for-profit chain based in Hudson County, made a pointed defense of their billing practices, which have gained notice for being among the highest hospital charges in the country.

CarePoint CEO Dennis Kelly said the system’s hospitals go out-of-network because the in-network rates offered by insurers wouldn’t allow them to survive. Bayonne Medical Center, Christ Hospital, and Hoboken University Medical Center “had in-network contracts when they were purchased out of bankruptcy and this bill, if enacted, will put them on the road there again,” Kelly said.

Officials with the Barnabas Health system noted that its Jersey City Medical Center has remained in-network with insurers while serving a patient population that includes a large share of patients who are uninsured or who receive Medicaid.

“What this really comes down to is predatory business practices of a few,” said Jay Picerno, Barnabas chief operating and financial officer.

Barnabas and CarePoint compete in Hudson County. A CarePoint official added that the nonprofit hospitals in the Barnabas system receive more public subsidies than the for-profit chain receives.

Jeanne Otersen, chief of staff for the Health Professionals and Allied Employees union representing nurses at Bayonne Medical Center and Christ Hospital, offered a favorable response to the bill. She said CarePoint has said that it won’t negotiate labor contracts until it knows what’s happening with the bill. A CarePoint official said that in order to engage in negotiations, the company must have a stable idea of its financial outlook.

Consumer advocates have favored the bill, supporting both its cost-containment provisions and the pieces that promote transparency, such as a Healthcare Price Index that would gather and list median prices paid by commercial insurers for services.

Consumers Union programs director Chuck Bell said the organization has heard from more than 50 New Jerseyans hit with surprise out-of-network bills. He submitted testimony quoting a Manalapan woman who took her daughter to an in-network emergency room because she had difficulty breathing, only to receive a bill for more than $1,000 from an out-of-network doctor.

“We really want to encourage this to get done in 2015 so that people don’t have to wait another year,” Bell said.

Melanie Willoughby, senior vice president of the New Jersey Business & Industry Association, said employers wanted a legislative solution to high out-of-network costs. But she expressed concern about the Healthcare Price Index, questioning whether fees imposed on insurers to pay for its creation would be passed along to employers.

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