Testimony for House Insurance Committee on House Bill 2256
Texas Medical Association
March 24, 2009
By William Hinchey MD, TMA past president
Good afternoon, Chairman Smithee and members of the committee. My name is William Hinchey, and I am a practicing pathologist in San Antonio, Texas. I am past president of the Texas Medical Association (TMA). I also was TMA's representative on the Senate Bill 1731 Health Network Adequacy Advisory Committee at the Texas Department of Insurance (TDI).
On behalf of TMA and nearly 44,000 physician and medical student members, I would like to thank the chair and committee members for the opportunity to testify against the committee substitute on House Bill 2256 by Rep. Kelly Hancock (R-North Richland Hills) that relates to requirements for contracts between physicians, hospitals, and health plans.
Before I discuss the exclusive contracting section of the bill, which is where our concerns lie, I want to highlight sections of the bill that address two important issues that affect our patients:
- The first is the need for adequate network standards specific to local markets, and
- The second is recognizing the importance of examining how insurance companies compute their maximum allowable amount and its affect on the patients' out-of-pocket expenses.
TMA has continued to stress to TDI, this committee, and members of the legislature that a patient's out-of-pocket costs for out-of-network services are impacted dramatically by:
- The adequacy of the health plan's network; and
- The amount the health plan pays toward the patient's claim based on the health plan's determination of its maximum allowable amount for the out-of-network service.
In addition, due to the great variation in "maximum allowables" used by health plans to pay out-of-network claims, it is evident that how health plans determine a maximum allowable is not consistent, not well understood, nor transparent to the patient.
Network Adequacy Standards
Physicians contract with health plans because they receive certain payment protections and guarantees under Texas' prompt payment provisions and generally will receive payments more quickly from health plans. These are some of the reasons any physician is able to sign a network agreement at a discount to the individual physician's fee schedule. Senate Bill 1731 Network Adequacy Committee data illustrated that an overwhelming majority of medical services (90 percent) on a statewide basis were provided by facility-based specialists and delivered in network.
An easy conclusion would be that the data showed an overwhelming majority of medical services provided by facility-based specialists were delivered in network. So why are we having this discussion? Unfortunately, because the health plan data presented to the SB 1731 workgroup was blinded and submitted in an aggregate fashion, neither the workgroup nor TMA could evaluate the status of the health plan networks in their local markets . This means that the TDI can't determine where the patient still may be susceptible to receiving services from an out-of-network, facility-based physician.
In addition providing claims information, the largest Texas health carriers also completed lists to demonstrate the network relationships in local markets. What I want to underscore to the members of this committee is that the lists provided to TDI by the health plans were not always accurate or complete.
Even small markets such as Tyler had errors. For instance, the facility-based anesthesiology information provided for Tyler was not correct. One health plan had the East Texas Anesthesiology Associates (ETAA) group as "in-network" and providing services at Trinity Mother Francis hospital, but ETAA had not been in-network at Trinity Mother Francis hospital for more than two years. The health plan also listed the Trinity Mother Francis anesthesiologists as the in-network group for The University of Texas Health Science Center at Tyler. This also was incorrect. The ETAA group has had that contract for the last four or five years.
The significance of these inaccuracies is that they illustrate how difficult it is for patients to determine if a particular physician is in network or out of network based on their very own health plan's data. If patients rely on the inaccurate information provided to them by their health plan, it can cause them to incur additional out-of-pocket costs even after best efforts to be treated by an in-network physician. There were inconsistencies in the smaller and midsize markets' data, and many more inconsistencies in large urban markets' data where multiple hospitals and hospital systems exist.
In my opinion and based on my personal experience, most pathologists, if not all, would be in the plan's networks if:
- Health plans didn't exclude clinical pathology services,
- There was some protection when a plan unilaterally and arbitrarily decreases the fee schedule without any discussion or negotiation, and
- The market for outpatient services was provided by local physicians and not through a health plan's exclusive arrangement with national labs for outpatient/nonhospital pathology services.
All these factors will be highlighted later in my comments regarding "exclusive contracting."
Out-of-Network Reimbursements/Max Allowables and Out-of-Pocket Costs
Despite the appearance of network adequacy, the real issue for out-of-network services becomes - "Did the health plan fairly settle the claim?" Based on information you have received throughout the interim and a couple weeks ago in this very committee, we know many patients don't realize their financial responsibility is not based on the bill the health plan receives for out-of-network services. Instead, health plans use an "allowable amount" they determine to calculate the patient's share of the medical loss. This calculation tends to cause the patient to pay more, while the health plan pays less, especially in this day of high-deductible plans. It is this "allowable" (and the tendency for it to be lower than the actual medical loss) that resulted in TDI issuing an agreed-to Disciplinary Order against Blue Cross and Blue Shield of Texas (BCBSTX) (TDI Order 08-0514) and spurred law enforcement in other states to investigate insurers.
Prohibition on Exclusive Contract Arrangements
TMA cannot support restrictions to an exclusive contract arrangement with a specific group unless it has 100-percent participation in the provider network of each health benefit plan that has contracted with the hospital. One-hundred percent participation in the same networks as the facility sometimes is not attainable for various reasons I will discuss.
First, it is imperative to understand pathologists and other facility-based groups as a whole prefer to be in network. It is better for patients, for our relationships with hospitals, and for our practices. We, at times, are pressured or strongly encouraged by the hospitals to be in all the same health plans as the hospitals. I sincerely believe the hospital-based groups make concerted efforts to reach an agreement with the plans.
What are the barriers for pathologists?
1. Exclusion of clinical pathology services
Some health plans refuse to acknowledge clinical pathology services as a reimbursable service. This can be a deal breaker when pathologists and health plans enter into contract negotiations. There is absolutely no reason why health plans should not pay pathologists for these services. Many of their counterparts do pay for clinical pathology services and have developed payment structures, such as per diems, flat fees, and quarterly lump sum payments, based on utilization data.
2. Unilateral and arbitrary reductions in fee schedules absent negotiation with the physician
A few years ago, Blue Cross and Blue Shield of Texas asked for a meeting with the major pathology groups. The meeting took place in Dallas. A number of us traveled to Dallas at our own expense, only to be told by BCBSTX that it was reducing our inpatient payment rates for anatomic pathology services. We had no opportunity to negotiate or debate the issue with BCBSTX. BCBSTX had made its decision. It was a done deal.
What alternative did we (pathologists) have? We could:
- Accept the reduction,
- Drop out of the BCBSTX network, or
- Try to negotiate a new contract.
One large pathology practice, which at that time covered approximately 80 hospitals in Texas, was able to negotiate a new agreement that did agree to a reduction of inpatient fees but altered the arrangement for outpatient services. I am sure this was done since so many medical services are being pushed to the outpatient arena. Some of the pathologists did accept the rate reduction. A number of the pathology groups, especially in Harris County, dropped out of the BCBSTX network. The sole reason was to get BCBSTX back to negotiating table and often the only recourse we have.
The bottom line: When a health plan makes an arbitrary decision, no physician practice has any recourse but to get out of the plan's network.
3. The impact of health plan exclusive arrangements with national for nonhospital pathology services on patient care
Often a health plan, either wholly or in segments, has reached exclusive arrangements with a national lab. Here are some examples of exclusion from the health plan network for nonhospital pathology services:
- Humana HMO would not include a pathology practice in San Antonio in the network just for bone marrow examination on outpatients. Instead, Humana HMO contracted with a group of Austin pathologists. This causes disruption of services and interrupts continuity of care. The San Antonio pathologists may have taken care of the pathology work during a hospitalization, including the bone marrow examination, but then, when the patient is being cared for in the oncologist's office, the marrow has to go somewhere else. It becomes difficult and time-consuming to compare specimens, and make determinations regarding remission and other changes since the last exam.
- Another group cannot get on Cigna's HMO plan in San Antonio for outpatient services even though the group participates in all the other Cigna plans.
- BCBSTX HMO Blue has an exclusive agreement with LabCorp and publishes that LabCorp is the preferred lab for BCBSTX. This implies to clinicians that specimens on all BCBSTX insureds have to go to LabCorp even though many pathologists are part of other BCBSTX networks and are eligible to receive referrals from physicians. Pathology practices have to spend resources to counteract this inaccurate and confusing information and that costs everyone, including patients, money.
- UnitedHeatlthcare has an exclusive contract with LabCorp for outpatient services nationwide.
- Aetna has a similar arrangement with Quest.
Bottom line: When health plans enter into exclusive contracts with national vendors, it fragments the delivery of pathology services, as well as other services, and can negatively impact the patient. As a result, the status of the patient's disease and the effectiveness of treatment could be compromised when the tissue samples are being read inconsistently and by different physicians. Plus, the patient will incur additional out-of-pocket costs if any of those physicians are out-of-network.
Recommendations Going Forward
Hold health plans to network adequacy standards specific to local markets.
Require transparency about how the health plans determine their maximum allowable and ultimately the impact to the patient's out-of-pocket cost. In addition, require plans to place on their Web site the out-of-network fee they have determined to pay for the facility-based CPT codes.
Prohibit health plans from entering into exclusive arrangements with national vendors as opposed to locally-based physician groups. This would incent more physicians to participate in the health plans' network.
Make sure that any substitute language going forward does not provide incentives to the health plans, intentional or otherwise, to terminate facility-based physician contracts or to unilaterally decrease their contracted rates. As illustrated in my testimony, such actions would lessen the likelihood of facility based-physicians remaining in network.