The erosion of out-of-network (OON) reimbursement is accelerating. The No Surprises Act (NSA) became effective on January 1, 2022, empowering payers to have greater control over managing the cost of care by creating reimbursement limits and parameters. The NSA interim final rule with comment, titled “Requirements Related to Surprise Billing; Part II,” issued on September 30, 2021, and the corresponding “Requirements Related to Surprise Billing: Final Rules,” issued on August 19, 2022, create an environment where health plans can utilize their self-determined qualifying payment amount (QPA) to suppress OON reimbursement and pressure high-reimbursing, in-network providers to accept less in network contractual arrangements.
These activities signal lighter paychecks for providers, creating instability in access to emergency medicine (EM) providers and placing increased pressure on hospital executives. EM providers who are OON are on the front lines of patient care and have historically depended on robust OON payments. The NSA creates immediate risk for reductions in reimbursement. In turn, hospital executives should be prepared for increased demand by EM providers to offset losses in reimbursement with subsidies, coupled with renegotiation of professional services agreements (PSAs).
At the heart of this progression is the contentious topic of surprise billing, or balance billing. This occurs when a patient is treated by an OON provider and is billed for the difference between the OON allowed amount, as defined by the patient’s health plan, and the total billed charges. Given how common it is for providers to be OON and not contracted with payers, 33 states and the federal government have developed legislation to protect patients by prohibiting balance billing.
In addition to the reduced revenue from balance billing patients, to date, 14 of 33 states with surprise-billing legislation have enacted laws that legislate OON provider reimbursement. This growing trend, coupled with the broad-reaching federal NSA and commercial payer policies, is placing downward pressure on access to OON provider reimbursement. The map in figure 1 highlights the states that contain surprise-billing legislation with a defined payment standard.
FIGURE 1: States with Surprise-Billing Legislation Containing a Defined Payment Standard
For example, in one state, the law contains a state fee schedule that pays OON providers the greater of:
- The median amount negotiated by the patient’s carrier for the region and provider specialty or
- 150% of Medicare, excluding any in-network coinsurance, copayments, or deductibles.
This has a meaningful impact on reducing the cost of EM services, which also benefits the patient financially and increases patient satisfaction. With reductions of this magnitude, coupled with the savings and mitigation of financial risk that protects the patient, we expect more states to develop their own surprise-billing legislation and implementation of regulations.
Other Factors Affecting Reimbursement
In addition to the NSA and state surprise-billing legislation, several other factors are influencing the possible reductions in reimbursement. Specifically, health plans are:
- Extending greater discounts to themselves through tools such as DataiSight.
- Developing homegrown benefit-design programs to limit OON reimbursement, such as Cigna’s Maximum Reimbursable Charge program and UHC’s Maximum Non-Network Reimbursement Program, lowering payer reimbursement while shifting a greater financial burden to the patient.
- Using management programs designed to reduce the level of care or deny the claim altogether, led by Anthem and UHC.
Despite the benefits for patients, it is anticipated the NSA will accelerate trends that result in material reductions in OON reimbursement and further empower health plans to pressure in-network providers to agree to lower contractual arrangements. These factors close the gap between in-network and OON provider reimbursement and create more competition with provider groups. The decline in reimbursement also risks exacerbating the labor shortage, as provider groups compete for talent.
Key Questions for Hospital Executives
With the implementation of the NSA, hospital executives must address critical questions:
- How will you respond to further reductions in reimbursement to your EM providers?
- How will you address the reduced access to providers that is anticipated to arise from potential program instability?
- Are you prepared for requests to renegotiate PSAs, including increases in subsidy?
Due to the ongoing changes resulting from legal actions and regulatory changes, such as the Texas Medical Association suit challenging the QPA and arbitration process, these questions highlight the challenges facing hospital executives as a result of the NSA. In the coming months, we expect the landscape will continue to evolve with legislation and outcomes of legal activity. This will provide further insights into the implications of the NSA, but time is not expected to reduce the impact of the NSA on provider reimbursement, staffing shortages, and demand for provider subsidies across the country.
Edited by: Matt Maslin
Published October 12, 2022