The biggest winners from the No Surprises Act seem to be big healthcare providers, all backed by private equity — which suggests that the act may not ultimately reduce prices for consumers, but actually inflate them, according to a new academic analysis.
The No Surprises Act was supposed to protect consumers from surprise out-of-network bills by forbidding providers and facilities from sending balance bills for payments above normal in-network costs — balance bills being what’s left after the insurer pays what it thinks is the right price, and the balance is billed to the consumer.
The idea of protecting consumers was at the heart of the bill, and it was intended to reduce prices overall. Many medical services based in facilities are governed by the law, including most emergency services, non-emergency services from out-of-network providers at in-network facilities, and out-of-network air ambulance fees.
The idea was to remove the bills from the consumer’s responsibility and put them into a negotiating process between the insurance company and the provider, first by direct contact and then by independent dispute resolution (IDR), in which a third-party arbitrator makes a decision on whether the insurer or the provider will prevail. The new study finds that the providers won in a large percentage of the cases, based on a release of information on data from resolved cases in 2023, released in February and June of this year.
The process is convoluted: It is a negotiation on a qualifying payment amount (QPA), “which is the inflation-adjusted median rate paid by a specific insurer in 2019 to its contracted in-network providers, based on insurance type and geographic location,” the authors of the study explain.
70% from four P.E.-backed groups
“There were 657,040 newly initiated cases filed in 2023, about 70 percent of which came from just four organizations, all backed by private equity: Team Health, SCP Health, Radiology Partners, and Envision,” said the report, by Jack Hoadley, Kennah Watts and
Zachary Baron of the Center for Health Insurance Reform at Georgetown University.
“Team Health (backed by the Blackstone Group) and SCP Health (backed by Onex) are revenue cycle management companies that work with affiliated physician groups to file cases and otherwise help physicians maximize their revenues. Radiology Partners (backed by Starr Investment Holdings and New Enterprise Associates) and Envision (backed by KKR) are large physician practice companies. Radiology Partners, as the name suggests, concentrates in radiology medicine, while Envision is a multispecialty practice organization with a large presence in emergency medicine.”
Private equity, of course, has a business model that involves buying in, getting profits fast and getting out — with little concern for what’s left behind after. As such, private equity providers have a reputation for charging more than non-P.E. grou’s
The early years of the resolution process were marked by confusion and court challenges, and attempts by insurers and providers to extract more money from the process, so the pace was slow and trends were difficult to see.
But now, “the rate of resolving cases grew steadily, reaching a high point of 104,000 cases resolved in the fourth quarter of 2023 — and payment determinations were made in 73,000 of those cases. Across the year, about 22 percent of all resolved cases were deemed ineligible,” the report says.
Providers win
“As seen in the first data release, providers won the vast majority of resolved IDR disputes, and their win rate crept upward throughout the year. From the first to last quarter of 2023, the provider win rate grew from 72 percent to 85 percent. When providers won, they continued to win payments at a median rate of more than three times the QPA — 322 percent to 350 percent, depending on the quarter. By contrast, plan offers in the IDR process adhered closely to the QPA.
“As further context, an analysis by researchers at the Brookings Institution found that the prevailing payments coming out of IDR proceedings in the first two quarters of 2023 were between 3.7 and 5.1 times Medicare rates for three types of services commonly contested in IDR proceedings (emergency care, imaging, and neonatal/pediatric critical care) and even higher in the past two quarters.”
In a related paper, Matthew Fiedler and Loren Adler of the Brookings Institution found, “For emergency services, the prices emerging from IDR during the second half of 2023 averaged 4.0 times what Medicare would pay; for comparison, adjusted estimates of pre-NSA mean in-network prices for similar services range from 2.6 to 3.0 times Medicare.”
The No Surprises Act is likely to have an effect on healthcare prices, and the original idea was to bring them down. But in this case, as in others, it seems that industry players are finding ways to make regulations work well for them, and perhaps not as well for consumers.
The authors of the first study write: “A key policy question is whether the projection by the Congressional Budget Office (CBO) that the NSA would have a modest dampening effect on health costs and premiums paid by consumers will prove accurate. The evidence to date points in the other direction, but it will take more time and experience to offer a definitive answer. In particular, the CBO estimate relied on the idea that future rounds of in-network fee negotiations between plans and providers would be influenced by IDR outcomes. It remains too early to know whether and how the early trends in IDR decisions — occurring in a small minority of all health care claims — may affect these negotiations.”
The underlying data released by CMS is here.
