A while back I wrote about firms helping physician practices argue cases before independent dispute resolution (IDR) boards for out-of-network fee disputes. A Texas firm is among many raking in huge profits helping doctors win fees that are often a multiple of in-network fees. More strangely, the firms appear to be winning almost 90% of the time.
Arbitrators are not free to set fees. Rather, the process is a type of baseball arbitration. Each side offers what is supposed to be their best offer and the IDR board accepts one or the other, presumably the offer that is the most reasonable. Except that is not happening. Arbitration boards are awarding physician groups fees that are hard to fathom, often an order of magnitude above usual & customary in-network rates.
The New York Times reported on some extreme cases where the IDR entity seemingly got it wrong:
Dr. Norman Rowe, a plastic surgeon with offices in New York and Florida, advertises on his website that breast reduction surgery usually costs between $15,000 and $25,000.
But these days, his practice sometimes earns $440,000 for the procedure.
Breast reduction surgery is not usually covered by insurance. Thus, plastic surgeons who perform the procedure must offer prices that patients are willing to pay out-of-pocket. That is the clearest indication of what the market price for the surgery. Dr. Rowe offers a price of $15,000 to $25,000 to patients who are paying for their own surgery, but an arbitration board recently awarded $440,000 in a fee dispute with an insurer. NYT explains how perverse incentives are making out-of-network billing disputes worse:
Medical specialties like spinal and plastic surgery, for which surprise bills were rare before the law, now frequently have cases in arbitration, according to the public data. Some practices are using the law to obtain high payments for routine medical care, including gynecologists who have won fees 600 times higher than usual rates for placing intrauterine contraceptive devices, or I.U.D.s.
Why would an IDR arbitrator award 18 to 25 times the fee that a doctor has already revealed he or she is willing to perform a surgery for? Why would an IDR entity award 600 times the usual rate for inserting an IUD? Those are important questions. Some policy analysts have suggested that doctors overwhelmingly win arbitration cases because doctors are more sympathetic than health insurers. While that is arguable true, arbitrators are supposed to be both professional and independent. Egregious awards make them look biased. Indeed, there can be no other explanation. More from NYT:
Health policy experts have been surprised to see such lopsided results that favor doctors. Some argue that because the arbitrators are paid per case, they may have an incentive to render decisions that keep doctors coming back.
The incentives to dispute fees are perverse. Or, as one insurance industry executive stated:
“There are no checks. There are no balances. There’s no oversight.”
One result of lopsided awards is a huge increase in arbitration cases being brought. When the No Surprised Act was first passed officials projected there would be around 17,000 cases brought before arbitrators annually. The number skyrocketed to 1.2 million in the first two quarters of last year. Doctors won 88% of them. Another result of huge awards are rising health insurance premiums and rising medical prices. It is also likely more physicians will drop out of networks to dispute in-network fees.
There is a straightforward way to ascertain fair market prices. That is by negotiating fees between health plans and providers as a necessary precondition to treating health plan enrollees. An alternative would require hospitals to negotiate reimbursement rates or pay in-house providers directly and build the cost of services into hospital prices. The key is mutually agreed upon prices in advance, which is the norm in virtually every other market. In no market should vendors be allowed to provide services against the will of their customers, with fees determined by third parties uninvolved in the transactions. Furthermore, Congress does not seem to care about the problems they created with the No Surprises Act.
Read more at New York Times: A $440,000 Breast Reduction: How Doctors Cashed In on the No Surprises Act and Arbitration
Goodman Institute Health Blog: No Surprises Act is Flawed, Bogged Down and Being Abused
This is indeed puzzling. It makes me wonder if the arbitrators are somehow getting paid under the table by the doctors. If a simple procedure returns $120,000 or $250,000 in bloated fees, that is a lot of room to give the arbitrator a gift or a vacation trip, etc.
Here is another thought. If a stupid corrupt arbitrator awards $200,000, that does not mean that the doctor will collect $200,000. The patient can declare bankruptcy and pay a small fraction of that amount.
The lopsided awards described here seem to be between providers and insurance companies. Are the outcomes different when insurers are not involved?
The No Surprises Act only applies to insurance companies and health plans. I wonder why there is not some mechanism to investigate and fire arbitrators whose awards far exceed norms. Also, I wonder why nobody in Congress has realized huge awards create an incentive for more physician practices to drop network affiliation to argue their fees before an arbitration entity. The incentives are perverse.