By Antonio Hernandez Conte, MD, MBA, FASA and Sunny Jha, MD, MS
The California Medical Association (CMA) released alarming results this week from a survey of physicians across the state, regarding their experience negotiating contracts with insurance companies following implementation of California’s surprise billing legislation, AB 72, that became law in 2016.
The survey demonstrated that the vast majority of physician respondents are now having increased difficulty contracting with insurers – which raises major concerns regarding the availability of ‘in-network’ physicians and the provision of healthcare in California. The goal of AB 72 was to protect patients from “surprise bills” for “out-of-network” services, which most stakeholders agreed needed to happen, but the method of achieving that was unfortunately deeply flawed and short-sighted. What we have seen is AB 72 create outsized market leverage for insurance companies, at the expense of physicians, and to the detriment of patients.
AB 72 created a process for out-of-network billing that includes reimbursement at either 125% of Medicare, OR at the “average contracted rate” (ACR). The tricky part for anesthesia groups in particular is how to define the ACR, and CSA has heard from many members that their experience working with insurers and regulators to resolve the ACR has been negative and unsustainable. As more physician groups are unable to reach agreements with insurers, there are several potentially harmful outcomes: 1) patient access to in-network physicians will decrease, 2), independent or smaller physician practices will be forced to consolidate with larger hospital systems or groups in order to have more more balanced power for a fair negotiation with insurers, and 3) many physicians will leave California and instead choose to practice in other states with higher reimbursement levels and a more level playing field for negotiation with insurers.
AB 72 has allowed insurance companies to exert greater market leverage while physician groups are trying to negotiate without the same background information on other contract rates. More than one third of physician respondents to the CMA survey have experienced insurers suddenly terminating contracts, refusing to renew their long-standing contracts, and/or closing their panels and refusing to offer new contracts. Insurance companies are trying to rapidly drive down the “average contracted rate,” which is a short-sighted approach to reducing costs that will have long term harm for our state’s healthcare system. Upending the fair market negotiation for physician reimbursement in California will limit our state’s ability to attract or keep physicians in the state, lead to consolidation of physician groups to try to have greater standing against insurers, reduce access to ‘in-network’ physicians in many areas of the state, and jeopardize the emergency care safety net.
The CMA survey includes responses from 855 physician practice groups, representing thousands of physicians in all practice sizes and specialties, in 52 counties across California. Among the survey’s key findings:
- 88% of physicians said the California law allowed insurers to shrink physician networks, thereby decreasing patient access to in-network physicians in their community.
- 92% said the law has reduced physician leverage to negotiate fair and reasonable contracts.
- 94% of physicians have experienced contracting difficulties since the passage of California’s law.
- 91% of physicians agree that the U.S. Congressional proposals modeled after the California law will accelerate consolidation of independent physician practices into larger hospital systems or private equity groups.
- 79% of physicians said the California law negatively impacted the availability of emergency and on-call physician specialists who respond to emergencies.
- 62% said their patients experience challenges with timely access to care.
You can read the full survey results here.
“We all agree that patients must be protected from surprise medical bills,” said CMA President Peter Bretan, MD. “This survey underscores some of the potentially harmful long-term impacts of California’s approach to ending surprise medical bills, and the dangers of tipping the scales too far in favor of insurance companies.”
CMA noted that the California experience should serve as a warning for policymakers in other states and at the national level. CMA is coordinating with CSA and national partners including ASA, AMA, and other physician groups to encourage Congress to consider other models to protect patients, like the successful approach taken in New York. New York has adopted an independent arbitration process for out-of-network billing that does not give an unfair advantage to insurance companies, and has prevented insurance companies from simply offering a non-competitive rate or cancelling contracts.
In California, our state regulators must improve AB 72 implementation by fixing its dispute resolution process – it is unnecessarily burdensome for physician groups, does not have arbiters that are addressing the intended IDRP criteria, and has resulted in 100 percent of the disputes being decided in favor of the insurers.
At the federal level, it is essential that Congress avoids adopting a “surprise bill” modeled after California, as that would dramatically upend the healthcare market in favor of insurance companies while seriously eroding access to in-network physicians, including emergency physicians, surgeons, anesthesiologists and on-call specialists who respond to emergencies.
CSA encourages our physician members and practice groups to tell us their experiences/issues regarding AB 72 implementation and its effects. We encourage you to respond to ASA’s upcoming calls to action for sending letters or placing phone calls regarding congressional action on surprise billing.
Stay engaged in CSA, ASA, and CMA, and contribute to their affiliated PACs today!!
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