- Efforts to curb surprise billing, if enacted, would hit providers across the sector but would disproportionately affect the bottom lines of those that treat a high percentage of out-of-network patients like hospitals, physician staffing companies, laboratories, radiology and other ancillary providers like air ambulances, according to a new Moody's Investor Service report.
- Legislative proposals to end the practice of surprise billing are mostly credit negative. Fixes that include bundled billing or an in-network guarantee would have the worst impact for hospitals and staffing companies, Moody's said.
- However, large providers would be the least affected as, due to their scale and heightened negotiating power, they're likely to already be in-network with most insurers.
Curbing surprise medical bills has rare bipartisan support, with the House and Senate in the past few weeks holding numerous hearings and introducing a slew of different proposals to halt the practice. Industry players been vocal in their support for whichever proposal includes the payment model least likely to hurt to their bottom lines, with payers stumping for an in-network guarantee or median in-network contracted rates and providers advocating for a dispute resolution system.
At least 25 states have already enacted some level of surprise billing protection for consumers, but their legislation only applies to the narrow slice of the population covered under state-regulated health plans. The large majority of privately insured people covered by self-funded employer plans won't be held harmless from surprise out-of-network bills unless Congress takes action, and, as consumers wait for a solution, public ire is likely to only increase.
"Absent any action, surprise medical bills and the scrutiny around them represent a growing social risk for the healthcare industry, and can ultimately harm some healthcare providers' relationships with their customers," Moody's said.
The report published Thursday illustrates the long-term negative effects eliminating the practice of surprise billing could have on hospitals, health systems and other providers.
Bundled billing or an in-network guarantee would be particularly credit negative and difficult to implement for providers. Most hospitals completely outsource their emergency department operations and billing to a staffing company, so bundling all ER services would require a "significant change in the relationship between these entities," Moody's wrote.
Both major hospital and physician trade groups oppose this approach. Healthcare staffing companies like Envision Healthcare, Team Health Holdings and Onex TSG Intermediate that specialize in emergency room staffing would feel a particularly pronounced impact.
However, many Congressional proposals would only require payers give providers the median in-network contracted rate for that service in a particular geographic area. If this is the case, "the methodology for determining these median rates would be critical to assessing the credit impact on providers," Moody's wrote.
Both the Senate Health, Education, Labor and Pensions committee, helmed by Lamar Alexander, R-Tenn., and the House Energy and Commerce committee, run by Frank Pallone Jr., D-N.J., have released surprise billing proposals that would hold patients harmless. In both, plans would pay providers the median amount for local, in-network contracted commercial services.
The American Hospital Association called the Senate HELP plan published Wednesday "arbitrary, government-dictated reimbursement" and "unworkable." However, providers would fare better under that benchmark than if it was tied to 100%, 125% or 150% of Medicare payment rates, as the ERISA Industry Committee, Brookings Institution and Manhattan Institute have suggested.
Tamping down on surprise billing could also increase mergers and acquisitions in the provider space, Moody's found.
"Smaller providers are likely to have high out-of-network exposures because they are challenged to negotiate favorable in-network rates from insurers," the researchers wrote. "Any changes would likely make them more willing to become part of a larger group."