Moody's: Surprise billing solutions will hurt hospitals

surprise bill
Most of the solutions that are seriously being considered to solve the problem of surprise bills stand to hit providers and hospitals the hardest, according to a new report from Moody's. (Getty/tommaso79)

Figuring out how to prevent hospital-based providers from slapping patients with high out-of-network bills has been a central question in the surprise billing debate on Capitol Hill.

The problem is, most of the solutions that are seriously being considered stand to hit providers and hospitals the hardest—particularly those that treat a high percentage of out-of-network patients, according to a new report from Moody's Investors Service.

That includes hospitals, physician staffing companies and laboratories as well as radiology and other ancillary provider companies. Some of the proposals could also impact air ambulance providers.

Free Daily Newsletter

Like this story? Subscribe to FierceHealthcare!

The healthcare sector remains in flux as policy, regulation, technology and trends shape the market. FierceHealthcare subscribers rely on our suite of newsletters as their must-read source for the latest news, analysis and data impacting their world. Sign up today to get healthcare news and updates delivered to your inbox and read on the go.

For example, the bipartisan Lower Health Care Costs Act of 2019 from Senate Health Committee chairman Lamar Alexander and ranking Democrat Patty Murray would, among other things, require insurance companies to pay out-of-network doctors for care at a rate tied to the median in-network fee for treatments.

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

Likewise, providers would be barred from "balance billing," or requiring patients to pay the difference between what their insurer is willing to pay and what the doctor says they're owed. That legislation has been scheduled for markup next week.

"The solution that would have the least credit impact would be the arbitration avenue which is what certain states are already doing for state-regulated plans. It takes the patient out of the middle but preserves that kind of bargaining-negotiation between the provider and the insurer," said Jessica Gladstone, an associate managing director at Moody's and lead author on the report, told FierceHealthcare. (A Senate bill had been introduced last month proposing a "baseball-style" arbitration.)

According to the Moody's, the proposals of capping out-of-network charges for emergency medical services at in-network levels, setting up an arbitration process to resolve out-of-network charges or requiring a single 'bundled bill' are all considered "credit negative."

RELATED: Insurers, hospitals diverge on how Congress should address surprise medical bills

Of the potential options, bundled billing and in-network guarantees would be the most negative for hospitals and staffing companies. That is because many hospitals totally outsource the operations and billing of the emergency department to a staffing company.

"If you now require a bundled bill or an in-network guarantee, you're now asking the hospital to control very large portions of the hospital operation that it had never had to control before. Most hospitals would outsource the emergency department precisely because they did not want to have to deal with the billing and the complexities that come with that," Gladstone said. "That kind of proposal would fundamentally change the relationship between the hospital and the physician staffing companies." 

An in-network guarantee would add significant complexity, because many physicians and ancillary service providers are not employed or controlled by the hospital, she said.

The largest healthcare providers such as for-profit healthcare giant HCA Healthcare would be least likely to be impacted by the changes, because they have significant negotiating leverage with insurers and are likely to already be in-network. As well, rural hospitals that face little competition elsewhere are likely to be in-network.

But, she said, smaller providers are likely to have "high out-of-network exposures" that will make it more difficult for them to negotiate favorable in-network rates and could drive consolidation as they seek to become part of a larger group or become employed by a hospital. 

"I don't think that it's necessarily going to be an overnight, 'Oh my goodness, this is really negative for the industry. Prices are going to start falling like crazy' situation," Gladstone said. "I think it's going to be more subtle over time, especially for the marginal players in a market."

Suggested Articles

A handful of major healthcare groups and vendors are throwing their weight behind ONC's information blocking proposal.

Rebates for Part D drugs grew from 2011 to 2015 but not enough to offset price spikes, a study found.

Medicare Advantage plans still have time to meet their year-end goals.