In his book "Better: A Surgeon's Notes on Performance," best-selling author Dr. Atul Gawande traces the origins of the first pricing method for surgical services all the way back to ancient Babylon, where surgeons were paid 10 shekels for "any lifesaving operation." It wouldn’t be until three decades ago, however, that standardized pricing methods became widespread in the United States, where the practice of reimbursing for "usual, customary and reasonable fees" gave way to a more uniform approach pushed by public and private payers in the 1980s, Gawande writes in his book.
Today, contracted and government-mandated reimbursement rates are the norm throughout our industry, detailing exactly how much an in-network provider is to be paid for surgery, office visits and other medical services. Of course, patients at times leave these networks, whether it’s to see highly desired specialists or seek treatment at centers of excellence. This practice posed few issues until a few years ago, when payers routinely reimbursed out-of-network (OON) physicians based solely on the "usual, customary and reasonable" standard.
This is no longer the case. With the Affordable Care Act now guaranteeing healthcare coverage to millions of Americans, cost containment is a top priority for commercial payers. How are they doing it? First, by creating narrow provider networks, primarily with large health systems that have the scale and capacity to absorb the influx of new patients. And second, by severely restricting reimbursements for OON care.
Unfortunately, like a lot of issues in our highly fragmented industry, there is no simple solution for addressing the current challenges outpatient facilities face in treating OON patients. Still, while ASCs must navigate this ever-evolving patchwork of court decisions and state-by-state payer rules that appear in flux, they can maximize their chances for success by implementing the appropriate processes and keeping abreast of the latest court cases.
OON best practices
Payers are waging a multi-front strategy to fight OON reimbursements, including accusing providers who treat OON patients of violating false claims statutes and practicing fee forgiveness. These serious allegations involve enticing OON patients to visit a facility without any real intention of requiring them to pay, and then billing their insurance companies for a disproportionate share of their care. Payers also are limiting reimbursements for OON patients by sending payments directly to patients and implementing a Maximum Non-Network Reimbursement Program—a standard that’s more common with public payers.
There are a variety of practices OON providers can implement to combat these allegations. First, insurance companies should be asked up front, "What’s the pricing method for this procedure?" Second, outpatient surgical facilities can limit many of their risks simply by developing a comprehensive patient registration packet that includes the following:
• Assignment of benefits: A legal form that provides the surgery center with the necessary rights under the Employee Retirement Income Security Act of 1974 to appeal on behalf of the patient.
• Disclosure of OON status
• Disclosure of any physician financial interest
• A comprehensive internal collections policy
• Indigency form, if necessary
Physicians also have a role to play in meeting the challenges of treating OON patients, including ensuring medical necessity is met and noted in the operative notes; staying current with medical policy changes for all common carriers; and working with front desk staff if anything changes in the procedure to make sure the authorization matches the performed procedure.
A primary reason it remains so challenging today to treat OON patients is that many issues are still being settled by the federal courts, including cases related to illegal self-dealing, fee forgiveness, fraud, kick¬backs and referrals in OON reimburse¬ment cases.
For example, a federal judge in June 2016 ruled against Cigna, forcing the insurer to pay approximately $14 million to Humble Surgical Hospital, a physician-owned facility. In court filings, the payer originally accused the Texas-based provider of improperly forgiving patient medical costs, thereby nullifying the payer’s reimbursement policy for OON cases. Cigna initially sued Humble for $5.1 million in alleged overpayments, but lost $13.7 million—$11.4 million for underpayments and $2.3 million in ERISA penalties—in a counterclaim, according to press reports.
A similar 2015 case, UnitedHealth Group v. Spinedex Phys¬ical Therapy USA, also was a victory for providers. In this case, the court ruled that Spinedex did not need to bill and collect from the patient before bill¬ing and collecting from the payer. And the same year, an appellate court ruled in North Cypress v. Cigna that it’s OK for providers to offer patients a discount for paying early or upfront¬—another alleged form of fee forgiveness.
Still, providers have not emerged victorious in every instance. In Cigna v. Advanced Surgery Center of Bethesda, the insurer prevailed on some claims in the 2015 case, which involved providers treating OON patients as though they were in-network for billing purposes. Unfortunately, these seemingly conflicting decisions, along with others yet to come, do not provide a definitive blueprint for OON providers as to how—and how much—they can charge patients.
But considering how relatively new our system of payment for medical services in this country actually is, perhaps it’s not surprising that we’re still working through the specifics.
"The standardized fee schedule," Gawande writes in his book, "is a thoroughly modern development."