This is the first in what I expect to be a three-part series of articles discussing an equal number of vaguely-related provisions in the national health care reform bill which inspired little or no debate at the time, but which I expect to generate substantial litigation, lobbying, and rulemaking. The national health care reform bill has, after all, been called (only half-jokingly) a “jobs bill for lawyers.”
These notes were drawn up in preparation for an upcoming seminar. At the time, back in early July, when I volunteered to present at this Health Law CLE scheduled for October 8, these three provisions in the national health care reform legislation had still not inspired much discussion. In the time since then, however, one has exploded. I’m saving that one for conversation last.
Part One
Perhaps the very last thing added to national health care reform legislation before it was sent to the White House for the President’s signature was this:
SEC. 2719A. PATIENT PROTECTIONS …
(d) Medical Reimbursement Data Centers--
(1) Functions.--A center established under subsection (c)(1)(C) shall--
(A) develop fee schedules and other database tools that fairly and accurately reflect market rates for medical services and the geographic differences in those rates;
(B) use the best available statistical methods and data processing technology to develop such fee schedules and other database tools;
(C) regularly update such fee schedules and other database tools to reflect changes in charges for medical services;
(D) make health care cost information readily available to the public through an Internet website that allows consumers to understand the amounts that health care providers in their area charge for particular medical services; and
(E) regularly publish information concerning the statistical methodologies used by the center to analyze health charge data and make such data available to researchers and policy makers.
That this provision was hurriedly added to the bill resulted in a funny scrivener’s error. This provision is found in Section 10101 in Title X, Subtitle A. Title X, Subtitle A collects miscellaneous provisions relating back to Title I. This provision is subsection (i) of 10101, but there are no subsections (d), (e), (f), (g), or (h) coming before it.
Subsection 10101(i) reads:
(i) Section 2794 of the Public Health Service Act, as added by section 1003 of this Act, is amended--
(1) in subsection (c)(1)--
(A) in subparagraph (A), by striking “and'' at the end;
(B) in subparagraph (B), by striking the period and inserting “; and''; and
(C) by adding at the end the following: “(C) in establishing centers (consistent with subsection (d)) at academic or other nonprofit institutions to collect medical reimbursement information from health insurance issuers, to analyze and organize such information, and to make such information available to such issuers, health care providers, health researchers, health care policy makers, and the general public.''; and
(2) by adding at the end the following:
“(d) Medical Reimbursement Data Centers--
(1) Functions.--A center established under subsection (c)(1)(C) shall—
(A) develop fee schedules and other database tools that fairly and accurately reflect market rates for medical services and the geographic differences in those rates;
(B) use the best available statistical methods and data processing technology to develop such fee schedules and other database tools;
(C) regularly update such fee schedules and other database tools to reflect changes in charges for medical services;
(D) make health care cost information readily available to the public through an Internet website that allows consumers to understand the amounts that health care providers in their area charge for particular medical services; and
(E) regularly publish information concerning the statistical methodologies used by the center to analyze health charge data and make such data available to researchers and policy makers.
What’s this about?
Winding all the way through the maze, you find that subsection 10101(i) amends subsection 1003, which in turn amends Section 2794 of the Public Health Service Act, to add (c)(1)(C) and (D).
In Title I, Section 1003, the PPACA amends the Public Health Service Act to create Section 2794, which reads:
SEC. 2794. ENSURING THAT CONSUMERS GET VALUE FOR THEIR DOLLARS
(a) Initial Premium Review Process.--
(1) In general.--The Secretary, in conjunction with States, shall establish a process for the annual review, beginning with the 2010 plan year and subject to subsection (b)(2)(A), of unreasonable increases in premiums for health insurance coverage.
(2) Justification and disclosure.--The process established under paragraph (1) shall require health insurance issuers to submit to the Secretary and the relevant State a justification for an unreasonable premium increase prior to the implementation of the increase. Such issuers shall prominently post such information on their Internet websites. The Secretary shall ensure the public disclosure of information on such increases and justifications for all health insurance issuers.
(b) Continuing Premium Review Process.--
(1) Informing Secretary of premium increase patterns.--As a condition of receiving a grant under subsection (c)(1), a State, through its Commissioner of Insurance, shall--
(A) provide the Secretary with information about trends in premium increases in health insurance coverage in premium rating areas in the State; and
(B) make recommendations, as appropriate, to the State Exchange about whether particular health insurance issuers should be excluded from participation in the Exchange based on a pattern or practice of excessive or unjustified premium increases.
(2) Monitoring by secretary of premium increases.--
(A) In general.--Beginning with plan years beginning in 2014, the Secretary, in conjunction with the States and consistent with the provisions of subsection (a)(2), shall monitor premium increases of health insurance coverage offered through an Exchange and outside of an Exchange.
(B) Consideration in opening exchange.--In determining under section 1312(f)(2)(B) of the Patient Protection and Affordable Care Act whether to offer qualified health plans in the large group market through an Exchange, the State shall take in to account any excess of premium growth outside of the Exchange as compared to the rate of such growth inside the Exchange.
This is not, by the way, that well-publicized section of the national health care reform bill which makes health plans show at least a 20% loss-ratio each year, or provide enrollees with a rebate. But I discuss that section, too, briefly.
First thing in the national health care reform bill, Section 1001 amends the Public Health Service Act to create Section 2718.
SEC. 2718. BRINGING DOWN THE COST OF HEALTH CARE COVERAGE.
(a) Clear Accounting for Costs.--A health insurance issuer offering group or individual health insurance coverage shall, with respect to each plan year, submit to the Secretary a report concerning the percentage of total premium revenue that such coverage expends--
(1) on reimbursement for clinical services provided to enrollees under such coverage;
(2) for activities that improve health care quality; and
(3) on all other non-claims costs, including an explanation of the nature of such costs, and excluding State taxes and licensing or regulatory fees.
(b) Ensuring That Consumers Receive Value for Their Premium Payments.--
(1) Requirement to provide value for premium payments.--A health insurance issuer offering group or individual health insurance coverage shall, with respect to each plan year, provide an annual rebate to each enrollee under such coverage, on a pro rata basis, in an amount that is equal to the amount by which premium revenue expended by the issuer on activities described in subsection (a)(3) exceeds--
(A) with respect to a health insurance issuer offering coverage in the group market, 20 percent, or such lower percentage as a State may by regulation determine; or
(B) with respect to a health insurance issuer offering coverage in the individual market, 25 percent, or such lower percentage as a State may by regulation determine, except that such percentage shall be adjusted to the extent the Secretary determines that the application of such percentage with a State may destabilize the existing individual market in such State.
(2) Consideration in setting percentages.--In determining the percentages under paragraph (1), a State shall seek to ensure adequate participation by health insurance issuers, competition in the health insurance market in the State, and value for consumers so that premiums are used for clinical services and quality improvements.
(3) Termination.--The provisions of this subsection shall have no force or effect after December 31, 2013.
This law makes group health plans show at least a 20% loss-ratio each year, or provide enrollees with a rebate, but provides some wiggle-room for states to exercise discretion in its enforcement.
Note the expiration date. That did not get much press at the time.
My other point is that, immediately following this otherwise highly-politicized section, is the following-- of which I heard no discussion at the time, or in the time since for that matter.
(c) Standard Hospital Charges.--Each hospital operating within the United States shall for each year establish (and update) and make public (in accordance with guidelines developed by the Secretary) a list of the hospital's standard charges for items and services provided by the hospital, including for diagnosis-related groups established under section 1886(d)(4) of the Social Security Act.
What’s that about? First, I submit this clause’s placement in Section 2718 illustrates a kind of schizophrenia on the part of Congress, as well as the rest of the nation, on the question of “who is to blame?” for the high--and continually rising--cost of health care. Is it unjustifiable hikes in insurance premiums, as health care providers contend? Or is it unreasonable increases in provider’s charges, as health plans argue? And how can we ever know?
Making every hospital in the country publish its chargemaster is one way of improving the collection and study of health care provider charge data. That, in turn, is useful in determining whether any health plan’s annual premium hike is unreasonable or justifiable.
Unintended consequences? Consider the holding and reasoning in Banner Health v. Medical Savings Insurance Company, 216 Ariz 146 (2007).
That case interpreted the effect of Arizona statutes requiring that every hospital in the state publish its chargemaster.
ARS §36-436 Filing and review of rates and rules as prerequisite to operation.
A. A new hospital or nursing care institution shall not engage in business within this state until there is filed a schedule of its rates and charges and rules that relate to those rates and charges with the director for the director's review. The schedules of rates and charges shall be in the form and contain information prescribed by the director.
B. The director shall adopt or establish reasonable guidelines for review of rates and charges for hospital or nursing care institutions. Those health care institutions which are classified by the director as hospitals pursuant to section 36-405, subsection B shall use the current edition of the statement on the financial requirements of health care institutions and services, as adopted by the American hospital association, or amended editions thereof if applicable, as a guide for establishing hospital rates and charges.
C. After a hospital or nursing care institution files the schedule required under subsection A of this section, the director shall promptly review the schedule within sixty days and publish information on gross charges based on that schedule.
ARS §36-436.01 Rate schedules; printing and posting requirements; outpatient treatment centers; posting and filing requirements.
A. The schedule required under section 36-436 shall be printed in legible type and shall contain a listing of all services performed and commodities furnished for which a separate charge is made, together with the charges for each. The schedule shall plainly state all rules or regulations which may in any way change, affect or determine any part or the aggregate of the rates or charges or the value of the services or commodities covered by the schedule. Hospitals shall also include the number of times a separate charge was imposed for services performed or commodities furnished for each item listed during the twelve month period immediately prior to submission
B. After review by the director a copy of the schedule shall be posted in a conspicuous place in the reception area of each hospital and any of the hospital's outpatient treatment centers or nursing care institutions using the schedule. Another copy also shall be kept in the reception area and be available for inspection by the public at all times upon request
C. Licensed health care institutions classified as outpatient treatment centers and home health agencies shall file a copy of the schedule with the director before implementing those rates or charges and shall post a copy in a conspicuous area.
§36-436.02 Increases of rates or charges; filing.
A. A hospital or nursing care institution shall not increase any rate or charge until the proposed increase has been filed with the director and reviewed in the same manner as the schedule set forth in section 36-436.
B. A copy of any proposed reduction in any rate or charge shall be filed with the director for informational purposes prior to the effective date of such reduction
From the Banner decision:
“MSIC is a health insurer that issued ‘group health insurance’ to each of the Patients or their families. Banner is an Arizona non-profit corporation that owns and operates several hospitals throughout the state. The Patients were either patients of a Banner hospital or were spouses or parents of a Banner patient. Each of the patients or their representatives signed a COA form before Banner provided treatment. The COA form signed by four of the seven Patients included the following provisions
I agree that in return for the services provided to the patient by the hospital or other health care providers, I will pay the account of the patient ... I will pay the hospital’s usual and customary charges, which are those rates filed annually with the Arizona Department of Health Services ....
...
It is understood that the undersigned and patient are primarily responsible for payment of patient’s bill.
“After treatment, Banner billed each of the Patients the full amount specified for the provided medical services in its Charge Description Master (“CDM”) that was filed with the Arizona Department of Health Services (“DHS”) in accordance with Arizona Revised Statutes (“A.R.S.”) sections 36-436 to -436.03 (2003).
“The COA forms constituted the only agreements between Banner and the Patients regarding payment of Banner’s charges. Banner has no agreements with MSIC. No insurance company contracts or government programs require Banner to accept reduced payments in satisfaction of its billed charges to the Patients
“MSIC, as the medical insurer of the Patients, reviewed the charges billed by Banner using a methodology developed by the MSIC to “calculate the reasonableness of hospital charges and thus the reimbursement rates paid to medical providers.” MSIC then tendered payment in the form of restrictively-endorsed checks to Banner on the seven Patients’ bills that ranged from approximately 15 to 43 per cent of the billed charges. Banner refused to negotiate these checks
“Banner sued the Patients and MSIC, asserting breach of contract for failure to pay. After Banner filed a motion for summary judgment, MSIC and the Patients argued that genuine issues of material fact existed because the amounts billed by Banner were unreasonable. MSIC and the Patients provided deposition testimony and various documents purporting to show that Banner charged the Patients over 400 per cent of its cost in providing their care, sought full payment from only 2 per cent of its customers, usually received only 34 per cent of its billed charges from patients who received treatment similar to that received by the Patients, and collected only 30 to 40 per cent of its overall billed charges annually.
“The trial court granted summary judgment to Banner on its breach of contract claims against the Patients and awarded attorneys’ fees to Banner against the Patients on a pro-rata basis ....
Arizona’s Court of Appeals upheld the trial court’s judgment, a majority reasoning:
“The COA agreements must be interpreted in light of existing Arizona statutes pertaining to hospital rates. See 11 Richard A. Lord, Williston on Contracts § 30.19 (4th ed. 2006) (“contractual language must be interpreted in light of existing law”). The legislature has enacted guidelines for the setting of hospital rates, and has established comprehensive procedures for the filing, review, and disclosure of hospital rates and charges. See A.R.S. §§ 36-436 to -436.03.
“The statutes and regulations summarized [above] constitute part of the COA agreements and the agreements must be interpreted with this statutory scheme in view. The statutes and regulations require the filing and publishing of the hospitals’ rates and charges, which are the current prices for which the hospitals offer their services to members of the public. When the Patients agreed to be responsible for the “bill” and to “pay the account,” they agreed to pay the hospital’s charges calculated in accordance with the filed rates and charges. The Restatement (Second) of Contracts provides an analogous Illustration regarding the existence of a price term necessary to formation of a contract
A telephones to his grocer, “Send me a ten-pound bag of flour.” The grocer sends it. A has thereby promised to pay the grocer’s current price therefor.
One judge dissented, writing:
“That analogy fails, however, for two reasons. First, that illustration in the Restatement is not provided to show what the terms of the contract are, but only that the customer has entered in to a contract. Id., cmt. 1 (stating that an assent and intent to contract may be manifested by words or other conduct). Neither the patients nor MSIC claims that there was no agreement for the hospital to provide and the patients to accept healthcare services
“Second, that analogy is factually faulty. This is not a situation in which a customer calls a retailer and asks for a specific product, impliedly agreeing to pay a current price. The filed rates in this case consisted of 576 pages of single-spaced services and products, many of which are meaningless to anyone until the service is provided. For example, the hospital’s filed rates included $2,140 if a patient needed a “shaft femoral 15.0cm,” but $1,968 if he needed a “shaft femoral VFEMS70SP.” A patient coming to his local hospital is not going to tell the doctor or admitting person that he wants a “shaft femoral 15.0cm”; he only wants to be diagnosed and hopefully cured of his condition. Unlike a customer calling his local grocer for a ten-pound bag of flour, most often a patient has no idea exactly what services and products he might need after being admitted to the hospital. Thus, he is not ordering a specific product. Nor is he agreeing to pay a “current rate” for all such products and services unless the COA says so. To hold a patient has implicitly agreed to pay any one or more of 576 pages of single-spaced impenetrable filed rates simply by stating he would pay his hospital account is the modern day equivalent of the information given persons entering Dante Alighieri’s vision of purgatory.
Part Two
Returning to where I started in Part One, we saw that subsection 2794(a) and (b) establish monitoring of premium increases for “reasonableness.” Subsection 2794(c) gives the states money in support of the process. Subsection 10101(i) makes 2794(c) of the Public Health Service Act read:
(c) Grants in Support of Process.--
(1) Premium review grants during 2010 through 2014.--The Secretary shall carry out a program to award grants to States during the 5-year period beginning with fiscal year 2010 to assist such States in carrying out subsection (a), including--
(A) in reviewing and, if appropriate under State law, approving premium increases for health insurance coverage;
(B) in providing information and recommendations to the Secretary under subsection (b)(1); and
(C) in establishing centers (consistent with subsection (d)) at academic or other nonprofit institutions to collect medical reimbursement information from health insurance issuers, to analyze and organize such information, and to make such information available to such issuers, health care providers, health researchers, health care policy makers, and the general public; and
(2) Funding--
(A) In general.--Out of all funds in the Treasury not otherwise appropriated, there are appropriated to the Secretary $250,000,000, to be available for expenditure for grants under paragraph (1) and subparagraph (B) ....
(d) Medical Reimbursement Data Centers.--
(1) Functions.--A center established under subsection (c)(1)(C) shall--
(A) develop fee schedules and other database tools that fairly and accurately reflect market rates for medical services and the geographic differences in those rates;
(B) use the best available statistical methods and data processing technology to develop such fee schedules and other database tools;
(C) regularly update such fee schedules and other database tools to reflect changes in charges for medical services;
(D) make health care cost information readily available to the public through an Internet website that allows consumers to understand the amounts that health care providers in their area charge for particular medical services; and
(E) regularly publish information concerning the statistical methodologies used by the center to analyze health charge data and make such data available to researchers and policy makers.
(2) Conflicts of interest--A center established under subsection (c)(1)(C) shall adopt by-laws that ensures that the center (and all members of the governing board of the center) is independent and free from all conflicts of interest. Such by-laws shall ensure that the center is not controlled or influenced by, and does not have any corporate relation to, any individual or entity that may make or receive payments for health care services based on the center’s analysis of health care costs.
(3) Rule of Construction.--Nothing in this subsection shall be construed to permit a center established under subsection (c)(1)(C) to compel health insurance issuers to provide data to the center.
There’s more to this, of course, but I think one of the reasons this is here is because, again, collecting and studying health care provider charge data is useful in determining whether any health plan’s annual premium hike is unreasonable or justifiable.
But, like I said, there’s more to it. Familiar with the Ingenix litigation?
In March 2000, the AMA brought a class-action lawsuit against United in New York challenging its use of Ingenix’s database for calculating UCR payments.
This was almost simultaneous, by the way, with the initiation of the ClaimCheck litigation which became know as in re Managed Care, a class-action by 600,000 physicians across the United States against the big seven health insurance companies. That litigation, too, dragged on for nearly seven years. That litigation, too, was resolved (mostly) in settlements. That litigation, too, led to important changes in the industry regarding “edits” and multiple procedure discounts--especially for advance notice of the same.
The AMA filed its Fourth Amended Complaint in the Ingenix case against United on July 10, 2007, claiming damages for breach of contract and covenant of good faith, deceptive acts and practices, Sherman Antitrust Act violations, RICO, and more--even libel.
February 13, 2008, New York’s attorney general Andrew Cuomo announced he was launching an investigation in to United’s and other plans’ use of the Ingenix database. That snowballed in to an investigation of all things relating to UCR payments for out-of-network services whatsoever. Quite apart from just finding a conflict of interests with United’s use of Ingenix’s UCR database, the Attorney General concluded in a report published January 13, 2009, that out-of-network reimbursement is “broken” in lots of respects.
My favorite bits from this report are these:
“During the investigation, the OAG subpoenaed a broad range of plan documents describing out-of-network policies. Review of these materials revealed a shocking lack of transparency and accuracy. Most insurers failed to disclose accurately and clearly what they would pay or how they would determine payment for out-of-network care. One national insurer filled an entire page with a list of alternative ways in which it purported to calculate out-of-network rates, in language that can best be described as gobbledygook. After twenty minutes of questioning of in-house counsel about the meaning of this language, it emerged that the plan pays the same rates for in-network and out-of-network care. The fact that this Report can state in a single phrase how that insurer calculates out-of-network rates shows the needless obtuseness of that insurer’s page-long description. This observation leaves aside entirely the question of whether it is appropriate to charge consumers higher premiums for the right to go out-of-network and then pay the same for in-network and out-of-network care
“Another national insurer pointed to a change in policy language in approximately 2003, when the insurer stopped using the term ‘usual and customary’ to describe its out-of-network reimbursement policies. The OAG reviewed the new language and found it vague and lacking in substance. When asked repeatedly to explain what the new language means, the head of litigation for the insurer finally replied, ‘I don’t know.’
Before Cuomo’s report, however, in mid-August 2008, United’s motion to dismiss in the AMA case was granted in part, denied in part. The combination of that (partial) victory for the AMA with the Attorney General’s ongoing investigation encouraged United to settle all of it ...
January 13, 2009, Cuomo announces settlement with United.
January 14, 2009, the AMA and United announce settlement.
The following day, Cuomo announces settlement with Aetna.
February 17, 2009, Cuomo announces settlement with Cigna .
February 18, 2009, Cuomo announces settlement with WellPoint.
In Cuomo’s settlements with a dozen NY insurers, each agreed to discontinue use of Ingenix’s database and fund creation of an independent database, further agreeing to use this new database for five years.
Meanwhile, February 9, 2009, the AMA files a class action lawsuit in federal court in New Jersey against Cigna. Two days later, the AMA files a class action lawsuit against Aetna in the same court.
March 20, 2009, Senator Rockefeller IV announces a series of hearings on out-of-network reimbursement.
March 25, 2009, the AMA files class-action lawsuit in federal court in California against WellPoint.
April 1, 2009, Senator Rockefeller sends letters to 18 different health insurance companies asking what data they use to determine payment rates for out-of-network services.
June 29, 2009, Cuomo announces creation of FAIR Health at Syracuse to run the independent UCR database.
March 23, 2010, national health care reform legislation will give states money to create independent UCR databases following the example of New York.
