Cover: The tip of the iceberg - Debate on out-of-network bill uncovers issue of network adequacy

Friday, May 01, 2015 12:00 PM
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by Kate Alfano, CMS communications coordinator

A debate in the Colorado legislature over out-of-network charges by health care providers has uncovered a much broader discussion of the complexity of network adequacy and fierce competition within the health insurance industry in the state.


  • CMS opposed SB15-259, “Out-of-Network Health Care Provider Charges,” and pushed for an interim study that will bring together physicians, health plans and consumer representatives to address matters related to network adequacy.
  • Narrow networks happen when insurers negotiate lower rates with a smaller group of providers in return for higher volumes of patients. This allows them to decrease the cost of their insurance products.
  • Physicians testified before a senate committee that they often do not choose to be out of network; rather the insurer will not negotiate. They are concerned that patients unknowingly buy insurance products that do not provide adequate coverage.

Senate Bill 15-259, “Out-of-Network Health Care Provider Charges,” filed by known patient advocate Sen. Irene Aguilar, MD, (D-Denver), aimed to enhance consumer protections from surprise bills by out-of-network providers by increasing disclosure requirements for physicians. CMS opposed the bill after an independent analysis of the bill revealed unintended negative consequences for physicians and patients: It could worsen an already unequal balance of power between insurers and doctors by allowing health plans to set and cap physician payment, would increase administrative burdens and expenses, and could worsen patients’ access to care by encouraging narrower networks.

Aguilar worked with stakeholders, including CMS, on several drafts of the bill. The medical society convened numerous conference calls with specialty and component society leaders to get a broad physician perspective on the legislation, and retained legal, practice analytics and market experts on out-of-network pricing and dynamics to inform the debate.

Even after removing the most controversial provisions from the bill regarding how providers are paid, the medical community still felt the disclosure requirements were administratively unworkable and the bill would have removed some of the existing consumer protections. Eleven physicians plus practice managers, medical society executives and other experts testified against the bill before the Senate Committee on Business, Labor and Technology at a hearing on April 20. The committee voted 5-4 to postpone the bill indefinitely.

As an alternative to the legislation, a coalition led by CMS that included most component and state specialty societies, the Colorado Medical Group Management Association and others, persuaded the committee that the dynamics surrounding out-of-network charges and network adequacy are complex and interrelated, and should be studied in the legislative interim to develop sustainable, equitable and fair policy solutions for consideration in the 2016 General Assembly.

“Most witnesses who testified on Senate Bill 259, regardless of their support or opposition, expressed a desire to protect patients,” said Sen. David Balmer (R-Centennial), chair of the Senate Committee on Business, Labor and Technology. “No one disputes the fact that our health care system is complicated and relies on a delicate balance of market forces to function. The interim study ensures that all stakeholders participate in a process that moves us all forward.”

“I am grateful to the physicians who took time out of their schedules to give their perspective on this complex issue,” said Sen. Tim Neville (R-Littleton). “This debate opens the door for productive discussions on the function of health insurance and the ways we can encourage market competition and consumer choice.”

CMS seeks a rational approach to protect patients from excessive pricing, while similarly protecting physicians from being exploited by health plans that may manipulate pricing databases to either deselect doctors or to inappropriately squeeze physician payments.

“When needing surgery, the average consumer chooses their provider based on who will accept their insurance and they choose to have their surgery done at a facility that accepts their insurance because they know the cost of medical care can sometimes be outrageous,” Aguilar said. “Many consumers don’t realize that it is possible to have picked an in-network hospital and doctor and still have an out-of-network provider in your operating room. When that happens, if your plan is not regulated by the state, you could potentially have to pay the difference in charges between what your plan pays and what your provider wants to bill. It is for patients like this that I filed this legislation and I look forward to continuing this discussion in the interim and into the 2016 legislative session.”

The rising trend of narrow networks
Network adequacy, as defined by the Colorado Department of Insurance, refers to a health plan’s ability to deliver promised benefits by providing reasonable access to a sufficient number and type of providers, including in-network primary care and specialty physicians, facilities and all other health care services included under the terms of the contract.

The Affordable Care Act took away some of the methods insurers previously used to offer insurance coverage to the consumer at a low price point and turn a profit. This has led to the narrowing of provider networks for many plans. Insurers negotiate lower rates with a smaller group of providers in return for higher volumes of patients, and in turn decrease the cost of their insurance products, which makes them more competitive on the state and federal health exchanges.

As the DOI said in a frequently asked questions document, “adequate networks for managed care health plans are necessary to ensure that consumers have choices and access to covered benefits and quality health care services.” Insurance Commissioner Marguerite Salazar commissioned a study on network adequacy in Colorado in December 2014 to get a baseline picture of insurance networks, evaluate the ability of networks to provide reasonable and sufficient access, and assess recent trends in order to establish standards in the future.

Salazar told the Denver Business Journal that the analysis shows insurers are offering sufficient options for customers to receive the health care they need, and that affordability of the plans must be considered along with the accessibility to care. “I really don’t have significant concerns right now,” Salazar said of narrowing networks in an April 17 DBJ article. “I think that’s the best way these insurance companies have to save money. I need to support that.”

However, physicians voiced concerns at the April 20 hearing about the creation and administration of networks under health plans, and the effect on patients’ access to quality care.

Neuroradiologist Peter Ricci, MD, provides screening and diagnostic breast imaging services through the state’s largest network of freestanding breast screening centers. “As of last Friday, those facilities were excluded from five payer network products in the state – not by choice mind you, but because payers won’t even negotiate with us for inclusion in those network products,” he said. “And it’s not about quality.”

Ricci showed the committee data that compares his practice’s quality and cost effectiveness to national benchmarks. “Our recall rate for diagnostic studies following the screening mammogram is 25 percent lower than national benchmarks. Yet we diagnose cancer at a rate that is more than double the national averages. And we diagnose cancer at earlier stages – 15 percent better than national benchmarks. By any objective measure, we offer a quality of breast imaging services to women in the state of Colorado that is on par with the nation’s best breast centers. To be clear, we are out of network not by choice but by the payers’ choice.”

Ophthalmologist Ron Pelton, MD, PhD, said the worst part of being a solo practitioner, by far, is the constant struggle and incessant fighting with health plans about insurance contracts, payments and paperwork. “Three of my six employees work full time, every day, just dealing with billing, collecting and contracting with health plans. Although I contract with almost every company in Colorado, the fact is that the contracts I am offered by these huge corporations are pretty much take-it-or-leave-it affairs. I have no real power to negotiate terms with them. Although being out of network is a rare occurrence for me, sometimes my only option to get one of these insurance corporations to the negotiating table is to refuse the contract that they offer me and go out of network.”

“These large managed care plans already hold all the cards,” he said. “If they refuse to pay, I have little recourse except to spend hours and hours rebilling, appealing, emailing and calling. After enough time, it sometimes costs me more in office wages than I actually collect.”

Pediatrician David Markenson, MD, chief medical officer of Sky Ridge Medical Center, expressed concern about the lack of pediatric subspecialists in many of the state networks. “Many of these networks we’ve discussed may not have a single specialist in a pediatric field available,” meaning that parents must take on the burden of making a financial decision or getting necessary care for their child. “We need to be sure that when patients go out and purchase insurance they have adequate coverage, have access to the specialists they expect, and that the insurance companies are compelled to negotiate in good faith with providers to provide appropriate and reasonable care. I do agree there are outliers; I do agree we can do better. We need to study this,” he said.

Pathologist Ron Lepoff, MD, said, “We believe that effective out-of-network legislation to benefit patients must require the state to rigorously evaluate and determine whether insurance networks are indeed adequate. Narrow provider networks that exclude physicians in critical medical specialty areas lead to patients receiving out-of-network services and balance bills. Ultimately, patients are best protected when insurance networks are adequate to meet all the patient’s medical needs.”

Diving deeper
Some provider business practices may exploit out-of-network charges, though there are also instances of legitimate pricing of appropriate medical services that happen to be out of network through no choice of the treating provider. In a post-Affordable Care Act marketplace when more patients than ever have access to health insurance, how can health care providers, insurers, legislators and employers ensure intense competition for price that also improves the quality of health care and patient experience? Is the health insurance market a race to the bottom to provide the lowest-price product that covers fewer providers and services, or will competition improve health care quality and patient experience?

The inevitable debate is fully underway and will continue through the interim study that will bring together providers, health plans and consumer representatives in facilitated meetings. The primary focus and objective shall be addressing the issues arising from out-of-network services and charges, as well as related network adequacy matters as time permits.

“We have been talking for quite a few months now with the Colorado Medical Society about network adequacy, network size and certain billing practices, and we agree that we want to work with our colleagues in the medical field,” said Ben Price, executive director of the Colorado Association of Health Plans. “We have committed to doing that this summer.”

CMS President Tamaan Osbourne-Roberts, MD, said SB 15-259 was just the tip of the iceberg and will require deliberate exploration to uncover its depth and breadth. “We are committed to actively participate in what may prove to be the most important interim study of the decade for physicians and patients. We continue to seek a physician consensus to what we perceive to be a symptomatic manifestation of more complex structural dysfunctions that distort the value of appropriate services. The very nature of the building and subsequent narrowing of physician and other provider networks has similar distorting influences on care timing, pricing and delivery.”

Posted in: Colorado Medicine | Cover Story | Practice Evolution | Payment Reform | Interacting With Payers


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