One reason surprise billing solutions are so tricky for hospitals

Surprise bills
Among the potential speed bumps for surprise billing solutions being examined by Congress: corporate practice of medical laws that bar corporations from directly employing physicians. That could make some network-matching requirements tricky, says one healthcare law expert. (Callie Richmond for KHN)

As Senate lawmakers plan to mark up a sweeping piece of legislation aimed in part at curbing surprise bills, healthcare experts say the solutions before them could ultimately create some tricky entanglements for hospitals.

Among the potential speed bumps: corporate practice of medical laws.

In a nutshell, those laws bar corporations from directly employing physicians to ensure physicians work in the best interests of their patients. The laws differ from state to state, but in some places the laws block doctors from being directly employed by hospitals. That is why so many hospitals rely on contracted physicians within their walls.

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But several proposals in Congress, including the Lower Health Care Costs Act to be examined by the Senate Health, Education, Labor and Pensions Committee Wednesday, include network-matching requirements—which would require facility-based practitioners to contract with every plan for which every hospital has a contract. 

Therein lies the rub, said Susan Feigin Harris, a partner at Morgan, Lewis & Bockius.

RELATED: Network matching, benchmarking remain major sticking points to surprise billing solutions

"The hospital can’t mandate that someone who is not employed by them contract with anyone," the healthcare lawyer said. "They also can’t mandate they get paid a certain amount because they don’t have any control over what the salary or payment is for a physician. Those physicians are in physician groups. It is a separate corporate entity."

The goal is to reduce the surprise bills that can occur when a patient is provided with services by an out-of-network provider in an in-network facility. But the idea of network-matching challenges the very idea of networks and managed care, she said.

"There will be consequences as a result of that. Everyone is going to have to figure out to make that work within the confines of the law," she said. "They are conceptually setting a rate and, in essence, are saying: ‘You and I, as consumers, we really can go anywhere because we’re not going to be hit with a surprise bill in certain circumstances.'

"In certain circumstances, there is no network. You need to go where you need to go and here is the price that is going to be paid as a result," she said. "That eliminates the incentive to go in-network. It’s done for the right reasons with respect to emergency care and other circumstances. But you’re eliminating the concept of a network."

RELATED: Experts on Capitol Hill: Solution to surprise billing should fall to hospitals, insurers—not patients

The idea, as well as the idea of benchmarking rates, has been a non-starter for officials from the American Hospital Association (AHA) and other hospital groups who have said they hamstring providers' ability to negotiate their rates with insurers. "Once the patient is protected, providers and payers should be able to determine fair and appropriate reimbursement," testified Tom Nickels, AHA executive vice president, at a recent hearing. “We believe health plans should not be absolved of their core function of establishing provider networks and negotiating rates with providers.”

It also creates a tricky logistical situation for hospitals, Feigin Harris said. 

"All of us who are healthcare lawyers who work with facilities would have to look really carefully at what are the ways that are legal for hospitals to bind a group of physicians to a contract. It’s complicated because there are limitations on any kind of incentive hospitals would offer physicians," Feigin Harris said. "It all has to be done very carefully in consideration of a number of laws. It may be a little bit more difficult. The easiest thing would be to eliminate corporate practice." 

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