TMA Opposes Upfront Comprehensive Price Estimates(2)

TMA Testimony by David Bryant, MD

House Insurance Committee
Committee Substitute House Bill 2359
April 16, 2013

Good afternoon, Chairman Smithee and members of the committee.  My name is David Bryant. I’m a practicing anesthesiologist in Dallas. I’m also the chair of the Texas Society of Anesthesiologists (TSA) Economics Committee and a partner in Pinnacle Anesthesia. On behalf of the Texas Medical Association’s (TMA’s) 47,000 physicians and medical students and the more than 3,000 TSA members, I would like to thank the chair and committee members for the opportunity to respectfully testify today in opposition to Committee Substitute House Bill 2359 by Rep. Greg Bonnen.

Our position today is not in opposition to the requirement that insurers disclose to a physician their payment and compensation methodology.  We support the disclosure of payment for services and compensation methodology by health plans.  It is the necessary linchpin in any discussion or legislation going forward that requires physicians, or any other health care provider for that matter, to comply with a provision of an upfront estimate. The provision of an upfront estimate is, as you know Representative Bonnen, what your other bill HB 2360 requires. 

I would like to point out and discuss our areas of opposition, plus offer some alternatives.

Sec. 1470.005.  Disclosure to Third Party. This section allows our contract rates to be shared and used by ANY third party who was not a party to the contract between the physician/provider and the health benefit plan issuer. It seems to allow ALL third parties to use the contract to obtain/pay for goods or services. This is rather precedent-setting, even though the section attempts to bind a third party to any applicable confidentiality requirements stated in the contract. This raises several basic questions:

  • Is it intended that ANY third party may USE the health care contractor’s contract with the health care provider?  If so, what type of anti-trust protections would need to be entertained and enforced? 
  • Who are the third parties?
  • Lastly, this type of contract access could very well occur without the physician’s knowledge or consent and essentially bless the very silent PPO activity this committee voted to regulate just last week on a vote of 8-1. I say that because this section allows access and use of a health care provider’s contracted rate without any mention that the third party has to have the provider’s consent or authorization. This is definitely contrary to our efforts to regulate silent PPOs.

TMA Recommendation:

  • Don’t allow unfettered access to contracts by third parties that are not the initial parties to the contract.
  • Don’t allow contract rates to be used without providers’ express authority to do so.

1. Sec. 1470.006.  Required Disclosure and Permissible Range of Payment and Compensation. We appreciate Representative Bonnen’s desire to make transparent and available the payment and compensation information that allows health care providers to effectively evaluate the contract offer on the table. Not often in today’s contract negotiations do we know or are we able to determine the compensation and payment for services we provide, even when the offer is on the table. This is especially the case for small practices.

However, we are concerned with language in the committee substitute requiring the disclosure and provision of the range of compensation to different health care providers performing the same service. This may actually drive up the cost of health care. If my contract rates are on the lower end of this range, and I now know the contractor is willing to pay up to a higher amount, I would definitely want to negotiate to get that higher amount as well. 

The requirement that a health care contractor may not pay an amount of compensation that is less than 85 percent of the same amount paid for the same service to another health care provider of the same license, certificate, or other authority on the surface seems to promote equality amongst peers. What we cannot support is the location of the provider having no bearing on that amount. Physicians are both small and large employers. As employers, business overhead costs will differ from the rural versus the urban market. In addition, health plans want me to compete on quality and provide pay-for-performance incentives. What incentive will I have if another provider will be paid the same or close to the same without making the effort to compete on quality?

It appears much of the language in this section runs contrary to the desired effect of transparency, which has been said would drive down costs and increase quality.

TMA Recommendation:

  • Require health care contractors to make transparent and available the payment and compensation information that allows providers to determine the compensation and payment for the services we provide.

2. Sec. 1470.001 Definitions and Sec. 1470.002 Definition of Material Change.  Finally, there is a need for some changes to the definitions section of the committee substitute, primarily for the terms “Procedure Code” and “Material Change.” Sec. 1470.002(7) Procedure Code currently does not include the term “Diagnosis-Related Group.” This is what is used by hospitals to bill for inpatient stays. It should be added to the list found in this section.

Sec. 1470.002, Definition of Material Change, should not be limited to only a change to a contract that decreases the health care provider’s payment or compensation. A material change should be ANY change, not just decreases to the fee schedule. This would be important if 1470.006 (c), which requires payment of at least 85 percent of the amount paid to another health care provider, remains in the bill. You would want to know if and when the health care contractor raised your rate as well. This is because a patient’s in-network coinsurance percentage is calculated on the contract rate. In order for health care providers to quote with any accuracy an estimate or a patient’s out-of-pocket payment responsibility, a health care provider would have to know the new payment amount.

Chairman Smithee and members of the committee, thank you for allowing me to testify today.   As you have heard, this is a very intricate issue that requires careful balance and consideration.  I would be happy to answer any questions. 

83rd Texas Legislature Letters and Testimonies main page