Efficient, fair payer-provider negotiations first step in solving surprise bills

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Surprise medical bills are tough on patients' pocketbooks, but fostering just, efficient negotiations between payers and providers offers a way forward.

Payment negotiations have proved to be a “30-year tug-of-war between providers and health plans,” said Tom Priselac, president and CEO at Cedars-Sinai Medical Center, at a Brookings Institution and University of Southern California Schaeffer Center for Health Policy and Economics event Thursday to address the problem of surprise medical billing.

But payers and providers have a “shared desire” to solve consumers’ surprise medical bills, says Colin Drozdowski, vice president of national provider solutions at Anthem. 

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Incorporating independent arbiters, using a presumptive pricing model and benchmarking payment rates are crucial to facilitating payer-provider negotiations, says Mark Hall, law professor at Wake Forest University and nonresident senior fellow at Brookings.

mark hall in a library
Mark Hall

Patients with HMOs and EPOs have little to no coverage for out-of-network services. As a result, the patients who are least able to afford surprise medical bills are often the ones who receive them most frequently, Hall says.

By banning balance billing, payment for specialty services as emergency care, anesthesiology or pathology could be sorted entirely by providers and payers, according to Hall and his team at Brookings. Such a strategy could go a long way toward reducing sticker-shock for patients with little choice but to get care services from an out-of-network provider.

Hall suggests a "baseball" style of negotiation featuring an independent arbiter to review health plans and providers proposed payment rate. The model places a price ceiling on the rate a provider can charge and a lower-bounded minimum price floor that payers must pay. Each side is allowed to submit one final price proposal, which encourages them to offer a fair rate, Hall added.

While the tug-of-war between payers and providers is “healthy,” surprise billing is driven by two special components that make the issue particularly unique in today’s regulatory climate, Drozdowski says. First, there is a certain subset of providers who refuse to agree to reasonable payment rates--and end up driving medical costs “exponentially.”

A patient can receive a bill for $100,000 that might only run $5,000 for a contracted provider, Drozdowski says. Because of balance billing, specialists have an incentive to charge high rates when providing services to out-of-network patients, he added.

Second, some surgeons bill patients for the services of a surgical assistant who may not even be present in the operating room during the patient’s procedure, according to Drozdowski. And because current regulations require payment of all charges, the current regulatory landscape actually rewards this type of scheme, he says, though he did note some regulation is appropriate.

For his part, Jeffrey Plagenhoef, president of the American Society of Anesthesiologists, says physicians are trained in medicine and improving patients’ health, not the intricacies of health plans.

Other promising avenues for improving payer-provider negotiations, according to Hall, include: 

  • Benchmark provider payment rates to Medicare; 
  • Determine payment as an average of regional “amount generally billed” price schedules for that service or outcome;
  • Set payment rates based on historical averages from designated databases, such as FAIR Health.

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