How California's surprise billing policy led to healthcare consolidation

Morgan Haefner - Print  | 

A California law aimed at addressing surprise medical bills influenced bargaining leverage between payers and providers, and led to greater consolidation, according to a study published in The American Journal of Managed Care.

For the study, Erin Duffy, PhD, a researcher with the RAND Corp., examined the early effects of a California policy implemented in 2017. The policy addressed surprise medical bills for out-of-network nonemergency physician services at in-network hospitals. Dr. Duffy completed a case study of how the policy affected stakeholders within the first six to 12 months after the policy implementation. Twenty-eight policy experts, advocates and executives of physician groups, hospitals and health plans participated in interviews for the study.

The stakeholders reported the out-of-network payment standard "set at payer-specific local average commercial negotiated rates has changed the negotiation dynamics between hospital-based physicians and payers," according to the 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 prices. Physicians reported that this experience of decreased leverage is exacerbating provider consolidation."

The author concluded that California's policy shows how out-of-network payment standards may change the bargaining landscape between payers and providers, as well as affect the breadth of networks and negotiated rates. Dr. Duffy noted the "findings may not be directly generalizable to states with markedly different regulatory and market contexts."

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