IAP, CAP and ISMA to challenge the out of network law in the upcoming legislative session

The Out of Network Surprise Billing legislation passed in the previous session will seriously impact the practice of pathology.  Pathologists can make this known to their legislators.  Here are some points that can be made:

"Talking Points" On Adverse Ramifications of Indiana HB 1004

• ·         HB 1004 (House Enrolled Act 1004) provides that for nonemergency services: "An out of network practitioner who provides health care services at an in network facility to a covered individual may not be reimbursed more for the health care services than allowed according to the rate or amount of compensation established by the covered individual's network plan" (See Page 4)  unless a written estimate is provided five days in advance of the service and patient written consent is obtained (see page 5).

• ·         Under the above provision-- unlike the out-of-network (OON) coverage laws enacted in other states (See attached National Matrix of OON laws)--  the health plan is empowered under Indiana law to unilaterally determine the "allowed" amount for physician services.  Hypothetically, under HB 1004, if a health plan decided that the allowed amount for a physician service would be ten percent (10%) of what Medicare currently pays for a service, the physician would be compelled to accept that insurer determined amount with: 1) no right of appeal to any independent mediation body; and 2) no statutory safeguard against being compelled to accept unreasonably low or de minimus payments that are far below Medicare rates.

• ·         Because of the absolute conferral of state authority on insurance plans to determine out-of-network payment, it can and should be expected that health plans will reduce the number and type of specialty physicians under contract with the plan in order to exercise the enormous economic leverage that has been conferred on the plans.  For example, there is no incentive for a health plan to have contracts with specialty physicians for rates that may equate to 150% of Medicare when the plan can sever that contractual relationship and pay the physician what may equate to 25% of Medicare. Clearly, Indiana insurance plans are now patently incentivized to terminate contracts with physicians or to offer dramatically reduced payments for services.  In anticipation of such laws, some insurance payers, like Anthem, have already slashed offered contractual rates for pathologists across the nation.

• v  The economic incentive on plans, through the OON payment formula in HB 1004, is to induce the termination of contracts with physicians and physician groups with adverse impact on all in-network contracts that are maintained as well. The "unintended consequences" of using "median in-network rates" to calculate OON payment was prominently noted by the Brookings Institute in their June 5, 2019 correspondence to the United States Senate (See page 4), urging caution on this approach. The adverse economic impact on contracting that results from lowered rates for OON services was also documented by the Rand Corporation. The Rand authors estimated that a 1-percent reduction of out-of-network rates because of the caps would reduce negotiated in-network rates by half a percent, as it would weaken hospitals' contractual bargaining position.
• ·         Thus, according to the RAND report, every 25-50% reduction in OON payment depreciates the commercial market value of in-network services and thereby lead to cuts in health plan payments to in-network hospitals in the range of 12.5% to 25%.  (Accordingly, the economic spillover effect of OON cuts can adversely alter the market value calculation of all professional pathology services, whether employed or contracted, to the extent of exerting downward pressure on salary and compensation for such services.)
• ·         Furthermore, while HB 1004 provides a mechanism to waive out-of-network payment limitations when patients receive a written estimate of services five days in advance, with patient consent to such services, such provisions cannot be availed for most routine non-emergency pathology services.  The inherent nature of pathology makes it, in most cases, impossible to reliably predict when patients undergoing procedures may present a specimen for analysis.  In addition, the number of specimens or types of analysis cannot be known in advance of a procedure.  For example, non-emergency surgical pathology may be unexpectedly needed as the result of an incidental tissue finding during a surgery. In routine screening procedures, pathology analysis may not be needed at all, or, alternatively may result in a single specimen or multiple specimens, with some that may require complex molecular/genetic analysis.  Special staining of a pathology specimen is not known in advance and cannot be predicted.  Quite simply, the written estimate section of the bill does not comport with the general practice of pathology.
• ·         Of additional concern, omitted from the legislation is any requirement on health insurance plans to maintain or create health plans for their enrollees with adequate networks of specialty physicians, including pathologists, at in-network hospitals. Other states, such as New Hampshire, Washington and Virginia (most recently), have required their state insurance departments to ensure that health plans claiming hospitals as in-network must have in-network specialty physicians, such as pathologists, under contract.  Such health plan network adequacy standards are supported by the AMA,  patient advocacy groups and by both liberal and conservative policy advocates.

• ·         In sum, for these many reasons, HB 1004 overwhelmingly favors the insurance industry and presents for medicine one of the most draconian and detrimental out-of-network laws in the nation in terms of undermining the financial viability of nonemergency physician services in the hospital setting.

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