California's surprise-billing fix has changed provider-payer bargaining, stakeholders say

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A California policy has stopped surprise medical bills, but healthcare stakeholders say the policy's out-of-network payment standard has changed dynamics in bargaining between hospital-based physicians and payers, according to a new study.

"Interviewees report that leverage has shifted in favor of payers, and payers have an incentive to lower or cancel contracts with rates higher than their average as a means of suppressing OON [out-of-network] prices," the study's authors wrote. "Physicians reported that this experience of decreased leverage is exacerbating provider consolidation."

The study, published Aug. 5 in the American Journal of Managed Care, examined the effects of California's policy on provider-payer bargaining. Researchers looked at the first six to 12 months after policy implementation using qualitative analysis techniques as well as related documentation, such as bill text, advocacy letters and rulemaking guidance. 

They also interviewed people representing policy experts, representatives of advocacy organizations and state-level professional associations, and executives of physician practice groups, hospitals and health benefits companies. 

Under the California policy, which took effect July 1, 2017, HMO health plans are required to reimburse an out-of-network health professional, such as a pathologist or anesthesiologist, the "average contracted rate" or 125 percent of Medicare fee-for-service rates for the same or similar services in the geographic region where care was provided, whichever is greater. Additionally, the policy required that by September 1, 2017, the state establish an independent dispute resolution process that would allow an out-of-network health professional, or a plan or insurer, to resolve payment disputes.

The study's authors concluded that the policy "demonstrates that out-of-network payment standards can influence the payer–provider bargaining landscape, affecting network breadth and negotiated rates."


More articles on healthcare finance:

Some Vermont hospitals seek rate bump amid financial losses
Insured Americans increasingly turning to charity to pay for healthcare: 5 takeaways
Why a lawmaker withdrew surprise-billing legislation prompted by Zuckerberg hospital

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