Reducing out-of-network medical charges would save hundreds of millions of dollars each year for residents, businesses, and taxpayers in New Jersey while slowing the growth of healthcare costs overall, according to those who support a plan to limit the practice.
But the proposal now under discussion — and approved by a key Assembly panel Thursday — would actually harm the state’s healthcare system by further eroding hospital revenue and driving physicians concerned about over-regulation out-of-state, provider representatives said.
Both sides made their case for the Assembly Appropriations Committee, which voted to support the latest version of controversial legislation to clamp down on out-of-network or “surprise” medical bills.
The measure (A1952) would require doctors and hospitals to publicize their rates for standard treatments and be clear about their participation in a patient’s insurance network, protect patients from being caught in the middle of payment disputes, and establish a binding dispute resolution process for providers and insurers who can’t come to terms on their own. (Patients are already protected against out-of-network charges for emergency room care, under current law.)
Lead sponsor Assemblyman Craig Coughlin (D-Middlesex) said most lawmakers have met constituents who faced surprise bills after a complex operation or medical procedure. Lawmakers have worked hard over the past eight years to craft a solution that was acceptable to all stakeholders, he said, but protecting consumers was the bottom line. Each year these expenses cost some 168,000 New Jersey residents an extra $400 million, supporters of the proposal said, and drive up premium costs by $1 billion.
The impact on individuals is only one expense, they noted. Assemblyman Gary Schaer (D-Bergen), another sponsor, cited figures from the nonpartisan Office of Legislative Services that showed publicly funded insurance plans that cover state, local and school workers paid out nearly $3.8 billion in claims for 2015, as of September; nearly $896 million of these payments went for out-of-network expenses. “If there’s ever a compelling number, there it is,” Schaer said.
“Ultimately, these costs affect every New Jersey taxpayer because of the impact on the state budget,” added Michele Siekerka, president and CEO of the New Jersey Business & Industry Association, which supports the bill as part of a coalition of patient advocates, labor organizations, and grassroots groups. Small businesses are struggling to keep pace with rising healthcare costs and out-of-network charges only add to the problem, the NJBIA said.
[related]But powerful provider advocates, led by the New Jersey Hospital Association and the Medical Society of New Jersey, have made opposition to the bill a priority; according to an analysis by the state Election Law Enforcement Commission, the out-of-network bill has received more lobbyist attention this year than any legislation besides the state budget. The issue also prompted a $76 million lawsuit by CarePoint Health, a Hudson County hospital network that claims Horizon Blue Cross Blue Shield has refused to pay for patient care, some billed at out-of-network rates that are among the highest nationwide.
Both the hospital association and MSNJ said they support the patient protections and other aspects of the bill but oppose the mechanism outlined for resolving disputes. The legislation would force providers and insurance companies that could not come to a payment agreement to enter binding arbitration, overseen by an outside arbitrator assigned by the state. The bill establishes a range for the final payment between 90 percent and 250 percent of federal Medicare rates; Thursday’s vote amended an earlier version, which had capped payment at 200 percent of Medicare.
Betsy Ryan, NJHA president, explained that Medicare covers roughly 90 percent of the cost of most procedures. Medicaid pays closer to 70 percent, and Charity Care, the state fund used to help offset the cost of treating uninsured patients, “is a dwindling pool that covers less than that.” Basing a payment structure on Medicare is a losing game for hospitals since the rate structure doesn’t take into account the cost of certain specialists and newer models that bundle payments, hospital officials said, noting that reforms to the federal insurance program for senior citizens also makes it an unstable foundation for rate disputes.
Providers also worry that any regulation capping their rates will diminish their bargaining strength with insurance companies to establish rate structures during network negotiations. NJHA has offered a compromise plan that requires greater disclosure about networks and protects patients from balance billing but would use market-based rates — not those pegged to Medicare — for the base of negotiations.
“The balance of power will be gone” under the legislation as proposed, Ryan said. “We are concerned about access to care going forward.”
Tom Baldosaro, chief financial officer with Inspira Health Network, which runs a trio of hospitals in South Jersey, said the new regulation would come at a particularly difficult time, since healthcare facilities are just now at a point at which they can invest in population health efforts to keep people healthy. “We would have zero leverage” under this bill, he agreed, and that loss of bargaining power would undermine this investment potential.
The Association of Health Plans New Jersey, which represents insurance carriers in the state, said that while the bill is not perfect, it supports the measure. The group did not testify in person Thursday.
Not all hospitals see the regulation as a death knell. Barry Ostrowsky, president and CEO of RWJ/Barnabas Health, New Jersey’s largest health system with 11 hospitals and 3 million annual patients, called the scope of out-of-network charges “an embarrassment” for the state. “The numbers are intergalactic,” he told NJ Spotlight during an interview earlier this week.
Rate-setting can be effective, Ostrowsky said, and giving insurance companies some protections against high provider charges doesn’t necessarily eliminate a hospital’s leverage if it is a high-quality operation. “There’s nothing inconsistent about running a business in a regulated system,” he said.
But physicians at the hearing said the added level of regulation would have a negative impact on the future of care in the Garden State. As doctors here and in other states evaluate their options and medical students decide where to set up shop, New Jersey will become less appealing, they said. MSNJ also called for a market-based solution to negotiations.
“We oppose the approach of capping payments and medical rate setting,” said Larry Downs, president and CEO of the [link:http://www.msnj.org|medical society. “This bill is not good for physician practice and not good for the healthcare of our state.”
Bridget Devane, public policy director for the Health Professionals and Allied Employees Union, which represents nurses and other healthcare workers throughout the state, said recruiting and retaining physicians is a critical concern but largely outside the scope of this bill. “That’s a conversation for another day,” she said. “This bill makes sure consumers are protected.”
Coughlin and other sponsors, including Assemblyman Troy Singleton (D-Camden), stressed that the dialogue with providers would continue but said patients can’t be left in the middle. “No one should ever go into the poorhouse just because they had the misfortune of being sick,” Singleton said.