Richard Neal Got a Surprise Billing Deal for His Private Equity Donors

FAH1223

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After House Ways and Means Committee Chairman Richard Neal (D-Mass.) blew up a bipartisan deal to fix surprise medical billing last year that his private equity industry donors opposed, congressional leaders have endorsed a new proposal, and Neal is on board.

The backroom deal was announced Friday night between four congressional committees: the House Energy and Commerce Committee, House Education and Workforce Committee, the House Ways and Means Committee, and the Republican-led Senate Health, Education and Labor Committee. Their plan, which has the blessing of Nancy Pelosi and Chuck Schumer, is to circumvent the legislative process and attach it to the year-end omnibus that must be passed to keep much of the federal government functioning.

The proposal will eliminate most of the expensive bills that get sprung on people when they are unknowingly treated by an out-of-network anesthesiologist, emergency room physician, or other health care provider at an in-network hospital. But Neal got some concessions that will help medical staffing companies, including those owned by private equity firms like Blackstone Group and KKR, maintain many of the profits they have been making by springing giant bills on unsuspecting patients. The cost of the savings Neal secured for the staffing firms will be absorbed by the health insurance companies, which will almost certainly respond by jacking up premiums a bit for everyone.

‘FAR FROM IDEAL’
At the center of the deal is an arbitration system for health care providers and insurers to resolve pricing disputes. If the parties can’t agree on a price for out-of-network care after a voluntary 30-day open negotiation period, the matter goes to an independent arbitrator empowered to make a binding decision. While arbitrators under the proposal would have to consider the median in-network rates for figuring out prices, among other factors, they would also be instructed to consider the contracted rates for recent years, a period during which private equity-owned staffing companies like Blackstone Group’s TeamHealth have been using out-of-network billing to get paid amounts far above median in-network rates.

USC-Brookings Schaeffer Initiative for Health Policy Associate Director Loren Adler wrote on Twitter that this could benefit companies like TeamHealth.

“The biggest weakness of the arbitration process is that it’s instructed to consider previously contracted rates between the two parties, which helps the groups who previously leveraged surprise billing to get high contracted rates,” he wrote. “This is far from ideal & could accrue to the benefit of the large PE-owned groups who really leaned in to surprise billing leverage.”

Blackstone Group and KKR employ at least 80,000 health care providers across the country and as of 2013 they controlled 30% of the physician outsourcing market. The biggest hospital company in the U.S., HCA Healthcare, formed a partnership with KKR-owned EmCare in 2012, allowing the staffing firm’s health care workers to penetrate the companies’ hundreds of hospital facilities and allow them to bill patients whose insurance covers the HCA Healthcare facility but not the EmCare contractor.

When arbitration has been used in the states to address surprise billing, it has tended to favor providers. In New York, for example, where an arbitration-based system was enacted in 2015, arbitrators have decided on rates that are, on average, more than 80% higher than the median in-network rates. The costs associated with New York’s arbitration-based system have already been passed on to health insurance consumers in the form of higher premiums, Adler told NPR in 2019. The same thing is happening in Texas, where a system with an arbitration backstop went into effect earlier this year. The average amount agreed to through arbitration for emergency room physicians in Texas so far has been $660 across all claims, well above the average network rate of $500 for the most expensive class of care, according to Bloomberg Law.

FierceHealthcare, the health care industry newsroom, called the deal “a win for providers” and a loss for payers. A business coalition called the Coalition Against Surprise Medical Billing that includes Blue Cross Blue Shield Association as a member slammed the deal, calling it “a gift for private equity firms.”

Why would a sitting Democratic congressman blow up a deal that would have relied on benchmark median rates and then back a deal using arbitration that will likely allow providers to secure higher rates? In a joint statement, Neal and Ways and Means Ranking Member Kevin Brady (R-Texas) said that their preference for an arbitration system over a benchmark rate “respects the private market dynamics between insurance plans and providers.” But another answer might be deference to campaign contributors.

Neal got maximum donations for his 2020 re-election from multiple top Blackstone Group employees including President and Chief Operation Officer Jonathan Gray, Global Head of Tactical Opportunities David Blitzer, Global Head of Strategic Partners Verdun Perry, Senior Managing Director Neil Simpkins, and Senior Managing Director Mustafa Siddiqui. Back in the fourth quarter of 2019, when Neal first blew up the deal, his joint fundraising committee brought in $54,000 from lobbyists for companies and trade groups that opposed it, including Blackstone, KKR, and Physicians Advocacy Institute. In addition, Neal benefited from more than $300,000 worth of digital ads from the American Hospital Association, which sides with providers because many of its member hospitals have profit-sharing agreements with their staffing firms that allow them to share the benefits when they can charge more.

In the September 1 Democratic primary, the 71-year old Neal beat progressive challenger Alex B. Morse by over 25,000 votes, more than 17% of the votes cast in Massachusetts’ First District. Massachusetts Democratic Party leaders advised Neal allies at UMass Amherst’s college Democrats chapter on how to execute a homophobic smear campaign against Morse that dominated local news coverage of the race and likely cost Morse key support.
 

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Late last Friday, bipartisan, bicameral No Surprises legislation to rein in surprise medical bills was introduced, to the surprise of nearly everyone.

After similar legislation was derailed almost exactly a year ago, Congress looks serious this time. The deal has the support of four powerful congressional committees: the House Energy and Commerce, Education and Labor, and Ways and Means Committees, and the Senate Health, Education, Labor and Pensions Committee.

The proposed legislation is designed to stop patients from being billed exorbitant fees by medical providers that are not in their insurance networks. Patients often go to a hospital that is in their network and, once there, get treated by a doctor who is not. It is most prevalent when patients are treated in an emergency room or when they require an air ambulance to transport them to a hospital for treatment. Lawmakers in both parties have been clamoring to end a practice which undermines the financial security of families at a time when health worries make them most vulnerable, and may even push them into bankruptcy.

In many ways, this year’s proposal is not so very different from last year’s. Patients would be spared from receiving the dreaded bills, and any disputes over fees being charged would be resolved by the provider and the payer. Designing a mechanism for resolving these conflicts has been the sticking point.

The struggle over payment of claims by out-of-network doctors has often been portrayed as a conflict between providers and payers. In reality, insurance companies are often confronted by private equity–owned physician staffing companies that have bought up doctors’ practices, consolidated them, and now staff emergency rooms and other departments that hospitals have outsourced. Envision Healthcare, owned by Kohlberg Kravis Roberts (KKR), and TeamHealth, owned by Blackstone, are leaders in the market for outsourced doctors.

Private equity firms use massive amounts of debt to acquire the physician staffing companies ($5.4 billion in the case of KKR and Envision; $2.2 billion for Blackstone and TeamHealth), and they charge exorbitant fees for the doctors’ services in order to pay down this debt and reward their PE investors. Not belonging to an insurance network lets these companies charge whatever they want for their doctors’ services. Using the threat that they will go out-of-network lets those that are in-network hold up payers for reimbursements that exceed what is paid to other doctors. Either way, health care costs are driven up, as are the profits of the private equity firms.

A similar situation prevails for air ambulances. Two of the three biggest air ambulance providers—Global Medical Response and Air Methods—are owned by KKR and American Securities, respectively. They are notorious for the outrageous bills they send to patients.

Insurance companies have responded to this by passing along the bills to patients, including by narrowing networks to limit the bills they will pay. Insurers have grown concentrated as well, in response to consolidation of providers. None of this benefits the recipients of health services.

Patients, employers, and insurance companies would prefer to benchmark out-of-network payments to prices paid to in-network doctors in their area for the same procedure. Private equity firms and providers oppose benchmarking, as this would reduce their profits and their ability to repay debts. They favor arbitration to resolve their claims for payment, which has historically led to higher costs and premiums.

Both the legislative proposal that was derailed last December and this year’s proposal use a hybrid model. In last year’s proposal, out-of-network providers would have been paid a benchmarked payment amount, but under certain circumstances could take their claims to arbitration. Private equity spared no expense in making sure this legislation did not pass. A mysterious group called Doctor Patient Unity launched a multimillion-dollar campaign in July of 2019 that ultimately reached nearly $54 million. It was later revealed that Envision and TeamHealth were behind this dark-money campaign.

The legislation was derailed a few days before it was to be included in a 2019 omnibus spending bill when Rep. Richard Neal (D-MA), chair of the House Ways and Means Committee, introduced a competing bill. With little time remaining in the legislative session, it was not possible to reconcile differences between the proposals, and 2019 ended with no movement. Neal reported receiving $29,000 in campaign contributions from Blackstone in his September 2019 fundraising report. He would go on to win a contested primary election against a progressive challenger, in part from the proceeds from Blackstone.

This year’s proposed legislation is not so very different from the bill that was waylaid last year. It provides that both provider and payer have 30 days to work out a payment settlement. In the event that the parties are unable to reach agreement, they may access a binding-arbitration process, referred to as an Independent Dispute Resolution (IDR) process. This process would be required to consider the median in-network rate and any other relevant information brought by either party. Thus, the bill provides for arbitration if no agreement is reached, but it requires IDR to take as the starting point the median in-network rate, and not the claim of the out-of-network provider.

Private equity appears to have been blindsided when the legislation was introduced last Friday.

This is not as straightforward as a set benchmark, and allows for more arbitration than the 2019 version, which probably leads to higher overall costs. That could dismay insurance companies, even if it improves on the status quo. Plus, ground ambulances, as opposed to air ambulances, are excluded from the restrictions on surprise billing. But the deal does move the dispute away from patients, who only have to pay any in-network cost-sharing associated with their treatment. And the subsequent reactions from industry tell an important story.

Private equity appears to have been blindsided when the legislation was introduced last Friday. It would certainly end their current position of getting to charge whatever they want for their services. Within hours, a group that calls itself Action for Health put out a statement denouncing the new bill because “the IDR entity is required to consider the in-network median rate” (emphasis in the original).

By yesterday, their message had become more ominous. Speaking of Senate Republicans, Action for Health said: If they want to keep their majority after January 5, then they must also reject the No Surprises Act. Republican voters in Georgia don’t want to socialize our healthcare system, nor do they want to see their doctors go out of business (italics in the original). Is Action for Health threatening to spend massively to defeat the Republican Senate candidates in Georgia’s runoff election in January if this legislation passes in December?

Considering that Mitch McConnell has only agreed to “review” the legislation rather than to place it in a year-end spending package, passage is not guaranteed. But agreement by the major congressional committees on a mechanism for resolving disputes over payments to providers makes approval much more likely.
 

DirtyD

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Its worth it, only took two years of being in control of the house, but I'm sure Neal will finally get Trump's taxes and use it to take him down. :troll:


 
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