Hospitals Criticize Senate Committee Revised “Benchmark Payments” Approach as Fix to End Surprise Billing

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On June 19, 2019, the Senate Committee on Health, Education, Labor and Pensions (HELP), in the latest effort to curb “surprise billing,” released the “discussion draft” of its proposed “surprise billing” legislation. The draft bill adopted one of the three proposed solutions to the issue released by HELP on May 23, adopting “benchmark payments” as the preferred policy fix. Hospitals immediately reacted to the proposal, which could negatively impact reimbursement for some hospitals.

The surprise billing issue picked up momentum just over a month ago as President Trump, multiple House and Senate committees, and numerous consumer groups offered up various policy solutions to eliminate so-called “surprise bills” from out-of-network providers. In the last weeks, the House Energy and Commerce Committee marked up legislation adopting “benchmark payments” as the prevailing approach. Hospital groups have been critical of the benchmarking payment rate proposal, and prefer the more-fluid arbitration process to settle such payment disputes with insurers.

There is broad consensus among lawmakers and stakeholders that patients should not be liable for surprise medical bills. But, these groups have remained divided as to the solution of who should bear the financial burden as costs shift away from patients.

Three broad policy options emerged from the policy debate:

  • In-network guarantee: All in-network facilities would guarantee to patients and health plans that all independent practitioners, including physicians and independent practice associations, at their facilities will be considered in-network;
  • Baseball-style arbitration: Payment disputes are to be settled through negotiations between providers and insurers for surprise medical bills, with the award being either the payor’s or the provider’s offer (and not an arbitrator’s compromise figure); and
  • Benchmark payment rate: All surprise medical bills are reimbursed by insurers based on a fixed median in-network rate for the service in the local market.

The Senate legislation, called the Lower Health Care Costs Act, or S.1895, establishes a payment rate that insurers will pay for out-of-network services that is benchmarked to median in-network rate in the geographical area where the care was provided. HELP Chairman Lamar Alexander (R-TN) indicated that his preference for benchmark payment rates came from a Congressional Budget Office estimate that it would be the most effective at lowering health care costs among the competing policy proposals. The House Energy and Commerce Committee’s discussion draft, No Surprises Act, contains a similar benchmark payment rate provision.

Hospital groups, however, have been staunchly opposed to benchmark payment rates, favoring the baseball-style arbitration process to settle disputes with insurers over surprise bills. American Hospital Association Executive Vice President Tom Nickels testified before the Senate HELP Committee that “[o]nce the patient is protected, hospitals and health systems should be permitted to work with health plans on appropriate reimbursement. We strongly oppose the imposition of arbitrary rates on providers. . . .” In another statement, Nickels also mentioned that contracting mandates like benchmarked payment rates “could lead to even more narrow networks with fewer provider choices for patients, while adversely affecting access to care at rural and community hospitals serving vulnerable communities.” Arbitration is not completely off-the table, however, as that measure is contained in the “STOP Surprise Medical Bills Act of 2019” legislation introduced by Senator Bill Cassidy, M.D. (R-LA).

Interested stakeholders will await the Senate HELP Committee markup and vote on the bill, scheduled for June 26, 2019.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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