What's Adequate?

New Rules Seek Better Physician Access Under PPO Networks

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Legislative Affairs Feature – November 2011

Tex Med. 2011;107(11):31-35.

By Ken Ortolon
Senior Editor

It was a four-year odyssey that took two pieces of legislation and years of study by state insurance officials and representatives of physicians, hospitals, health plans, and others, but the Texas Department of Insurance (TDI) has finalized rules defining adequate physician networks for preferred provider health plans. 

While insurers say the rules will be burdensome and difficult to implement, physicians believe they finally will put the onus on health plans to actively pursue adequate physician networks and lessen the likelihood that patients will have to go out of network for care, paying more out of their own pocket. 

Physicians, particularly facility-based physicians, also retained protections against health plans forcing them into contracts. 

"It took a long time, but we got a good product in the end," said former Texas Medical Association President William Hinchey, MD, of San Antonio. "Finally, we have some definition about an adequate network beyond the health maintenance organizations." 

Former Texas Insurance Commissioner Mike Geeslin, who took a personal interest in developing the new rules, says they give patients "greater clarity" on their health plans' provisions, including who is an in-network provider and who is out of network. 

Despite health plan skepticism, he is confident the rules will succeed in getting insurers to develop more adequate physician networks and will give patients more transparency about their in-network and out-of-network options. 

The rules include network adequacy standards that limit how far patients must travel for either primary or specialty care. Insurers cannot require patients in urban areas to travel more than 30 miles for primary care or general hospital care, while the limit for rural patients is 60 miles. Plus, they cannot force urban or rural patients to travel more than 75 miles to see a specialist or get care at a specialty hospital. 

TMA officials say those standards are similar to standards already in place for HMOs. 

In addition, the rules retain a prohibition against forcing facility-based physicians to sign contracts with the same health plans as their facilities to keep their medical staff privileges, but they permit insurers to require physicians to tell patients that they are referring them to out-of-network physicians. 

Other provisions:   

  • Require health plans to provide accurate listings of physicians and other providers in their networks and to pay a larger share of the actual costs when patients go to out-of-network physicians because of inaccurate directories. 
  • Establish an "approved hospital care network" for plans whose hospitals succeed in getting a high percentage of their facility-based physicians to contract with the health plans. 
  • Require annual network adequacy reports and access plans if networks do not meet adequacy standards. 
  • Set payment standards for out-of-network claims, including standardizing how "usual and customary" charges and claims data may be used in setting payments, giving patients credit for balance-billed amount paid when there was no choice to stay in network, and giving patients comparison information based on the insurer's negotiated rates to allow them to better negotiate balance bills. The rules require an insurer to base its usual and customary rates on generally accepted industry standards that fairly and accurately reflect market rates and geographic differences in cost, not use data more than three years old, and pay all covered services at least at the plan's basic benefit level of coverage.   

The complete rules are posted online [PDF]; the actual adopted rules start on page 330 of the 400-plus page document.  

Setting the Standards

TDI adopted the new rules earlier this year under provisions of House Bill 2256, authored in 2009 by state Rep. Kelly Hancock (R-North Richland Hills) and sponsored in the Senate by Sen. Robert Duncan (R-Lubbock). The rules take effect May 19, 2012, a delay that TDI and TMA officials say is necessitated by the amount of work health plans, hospitals, and others will have to put in to comply with the rules.  

But the debate on network adequacy goes back at least as far as 2007, when Senator Duncan passed Senate Bill 1731 which, in part, required TDI to create a workgroup to study adequacy issues. 

According to a TDI summary, the rules enhance PPO regulation to:   

  • Ensure availability of contracted physicians and providers by ensuring that network physicians are available where the patient actually lives, works, and seeks treatment in the designated service area;
  • Allow waivers in narrow circumstances, such as when plans cannot contract with an adequate number of physicians in certain specialties; 
  • Give consumers important information to enhance their decision making, such as requiring physicians to disclose to the patient at the time of the referral to another physician whether that physician is in or out of network and requiring insurers to disclose on their websites information about their networks, as well as give patients a way to obtain a real time estimate of how much the insurer will pay for a particular out-of-network service; 
  • Give information to TDI to enhance its ability to regulate, such as requiring insurers to provide data about the number and type of physicians with whom they have contracted, and to demonstrate what specialties may not be available at in-network facilities.  

Getting It Right

Both Mr. Geeslin and Dr. Hinchey say the rulemaking process took a long time because of the complexity of the issues. 

"When you look at how much care is provided through these networks, this wasn't just about making a few modifications to an existing rule," Commissioner Geeslin said. "This was about a major change in public policy." 

Dr. Hinchey credits Mr. Geeslin with remaining intimately involved throughout the process, including being present to hear all stakeholder comments on the proposed rules. 

Mr. Geeslin says adoption of the rule was one of the bigger challenges during his tenure as insurance commissioner. 

"This process had started with some research that we had done on network adequacy and also a great deal of stakeholder outreach. So this wasn't something that was started and finished in a three-month period. It was one of those long, long processes, and it was very deliberate," he said. "When you have that much time invested in it and you see all the effort that the staff has put into this effort, as well as all the stakeholders -- hospitals, doctors, consumers, health plans, carriers -- then you want to make sure that one, the process is fair, but, two, the outcome at the end works like it's supposed to." 

Dr. Hinchey says in the end it probably was a good thing the process took so long "because I think we got a lot of right answers."  

Where's the Problem?

The debate over the adequacy of PPO networks and the financial implications for patients has gone on for years. Health plans argued they frequently have difficulty reaching contract agreements, particularly with facility-based physicians, resulting in large numbers of patients getting balance billed for out-of-network care. 

But a January 2009 report from the Health Network Adequacy Advisory Committee created under SB 1731 found that 90 percent of claims by facility-based physicians submitted to the five largest Texas PPOs were from in-network physicians, although the percentages varied substantially from plan to plan and by specialty. 

The report found that services surrounding emergency care were most frequently provided by out-of-network physicians. Anesthesiology and radiology followed.  

The health plans sought to reduce the incidence of out-of-network care by requiring facility-based physicians to contract with the same PPOs as their hospitals to retain staff privileges. Such a requirement was prohibited even before the new rules were drafted. 

Jared Wolfe, executive director of the Texas Association of Health Plans (TAHP), admits even he doesn't think that is fair to physicians but "when they started putting certain requirements on the plans, our position was if you're going to require us to do these things, the only way we're going to be able to comply is if we have some type of negotiating leverage or a hammer with certain providers." 

Mr. Wolfe says the plans contract with enough facility-based physicians to achieve an adequate network without "the ability to tell a hospital that if we're going to list you as a network provider you've got to undertake certain efforts to have the physicians you grant privileges to in the network." 

TMA and other medical groups objected when a draft of the TDI rules phased out the existing prohibition against forcing physicians to contract with health plans as a condition of maintaining medical staff privileges. In comments on the draft rules submitted to TDI in February, those groups argued there was no demonstrated need for removing the prohibition and that doing so could hurt access to care, particularly in smaller communities with only one hospital where loss of staff privileges could force a physician to relocate to stay in practice. 

In addition to TMA, those comments were signed by the Texas Society of Pathologists, the Texas Association of Obstetricians and Gynecologists, the Texas Society of Anesthesiologists, the Texas Urological Society, the Texas College of Emergency Physicians, the Texas Radiological Society, the Texas Chapter of the American College of Cardiology, and Pediatrix Medical Group, South Central Region. 

In fact, results of a recent TMA survey showed that, in large part, health plans themselves were at fault for their inability to contract with physicians. 

That TMA survey found that 44 percent of physicians who requested to join a health plan network eventually signed a contract. Twenty-seven percent said they received no response from the plans to their requests, and 29 percent said they received an offer that was unacceptable. 

TDI eventually agreed with the physician groups and deleted that proposed language. 

Dr. Hinchey, who represented TMA on the network adequacy advisory committee, says that action was a big win for physicians. 

"If that had happened, all negotiating leverage would have been left with the plan because they knew they could disrupt anybody's practice very quickly by not coming to terms with them," he said. "It could have ruined a person's practice." 

Out-of-Pocket Relief

TMA officials say patients will not only benefit from greater access to in-network physicians and more transparency, but also should see lower out-of-pocket costs because of the provision that requires plans to credit some expenses to their deductibles or annual out-of-pocket maximums. 

Lee Spangler, JD, TMA vice president for medical economics, says patients previously never received credit for out-of-pocket expenses even if they were forced to go out of network because in-network care was not available. 

Now, those expenses will count against deductibles or annual maximums, meaning patients' out-of-pocket costs will be less, Mr. Spangler says. "The new deductible provisions will certainly benefit people in actually getting an insurance product for their premium dollars." 

Mr. Wolfe of TAHP thinks the new rules will be "problematic" for health plans and suggests other interested parties, particularly hospitals and even some physicians, are not enthusiastic about them. 

"They tried to split the baby about 20 times, and we ended up with a 400-page rule based on three lines in a bill that I think are going to be incredibly difficult to implement and are largely at odds with the reality of how health care is delivered," he said. 

Mr. Wolfe calls the provision creating an approved hospital care network designation, which he says encourages hospitals to make a good faith effort to use only health plan-contracted physicians, one of the "more absurd" provisions. 

"That is absolutely something that cannot be regulated," he said. "What is a good faith effort? If they don't comply or don't make a good faith effort, how do you go about resolving that situation?" 

But Mr. Geeslin stands behind the final product. 

"I think it's going to require everybody to make some changes, as a lot of rules do," he said. "But, ultimately, the true test will come in May of 2012. I'll let the facts speak for themselves at that time."    

Ken Ortolon can be reached by telephone at (800) 880-1300, ext. 1392, or (512) 370-1392; by fax at (512) 370-1629; or by email.

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