Four organizations owned by private equity firms — including two provider groups — dominated the No Surprises Act’s disputed bill arbitration process in its first year, filing about 70% of 657,040 cases against insurers in 2023, a new report finds.
The findings, recently published in Health Affairs, suggest that private equity–owned organizations are forcefully challenging insurers about payments for certain kinds of out-of-network care.
Their fighting stance has paid off: The percentage of resolved arbitration cases won by providers jumped from 72% in the first quarter of 2023 to 85% in the last quarter, and they were awarded a median of more than 300% the contracted in-network rates for the services in question.
With many more out-of-network bills disputed by providers than expected, “the system is not working exactly the way it was anticipated when this law was written,” lead author Jack Hoadley, PhD, a research professor emeritus at Georgetown University’s McCourt School of Public Policy, Washington, DC, told this news organization.
And, he said, the public and the federal government may end up paying a price.
Congress passed the No Surprises Act in 2020 and then-President Donald Trump signed it. The landmark bill, which went into effect in 2022, was designed to protect patients from unexpected and often exorbitant “surprise” bills after they received some kinds of out-of-network care.
Now, many types of providers are forbidden from billing patients beyond normal in-network costs. In these cases, health plans and out-of-network providers — who don’t have mutual agreements — must wrangle over payment amounts, which are intended to not exceed inflation-adjusted 2019 median levels.
A binding arbitration process kicks in when a provider and a health plan fail to agree about how much the plan will pay for a service. Then, a third-party arbitrator is called in to make a ruling that’s binding. The process is controversial, and a flurry of lawsuits from providers have challenged it.
The new report, which updates an earlier analysis, examines data about disputed cases from all of 2023.
Of the 657,040 new cases filed in 2023, about 70% came from four private equity-funded organizations: Team Health, SCP Health, Radiology Partners, and Envision, which each provide physician services.
About half of the 2023 cases were from just four states: Texas, Florida, Tennessee, and Georgia. The report says the four organizations are especially active in those states. In contrast, Connecticut, Maryland, Massachusetts, and Washington state each had just 1500 or fewer cases filed last year.
Health plans challenged a third of cases as ineligible, and 22% of all resolved cases were deemed ineligible.
Providers won 80% of resolved challenges in 2023, although it’s not clear how much money they reaped. Still, it’s clear that “in the vast majority of the cases, insurers have to pay larger amounts to the provider,” Dr. Hoadley said.
Radiologists made a median of at least 500% of the in-network rate in their cases. Surgeons and neurologists made even more money — a median of at least 800% of the in-network rate. Overall, providers made 322%-350% of in-network rates, depending on the quarter.
Dr. Hoadley cautioned that only a small percentage of medical payments are disputed. In those cases, “the amount that the insurer offers is accepted, and that’s the end of the story.”
Why are the providers often reaping much more than typical payments for in-network services? It’s “really hard to know,” Dr. Hoadley said. But one factor, he said, may be the fact that providers are able to offer evidence challenging that amounts that insurers say they paid previously: “Hey, when we were in network, we were paid this much.”
It’s not clear whether the dispute-and-arbitration system will cost insurers — and patients — more in the long run. The Congressional Budget Office actually thought the No Surprises Act might lower the growth of premiums slightly and save the federal government money, Dr. Hoadley said, but that could potentially not happen. The flood of litigation also contributes to uncertainty, he said.
Alan Sager, PhD, professor of Health Law, Policy, and Management at Boston University School of Public Health, told this news organization that premiums are bound to rise as insurers react to higher costs. He also expects that providers will question the value of being in-network. “If you’re out-of-network and can obtain much higher payments, why would any doctor or hospital remain in-network, especially since they don’t lose out on patient volume?”
Why are provider groups owned by private equity firms so aggressive at challenging health plans? Loren Adler, a fellow and associate director of the Brookings Institution’s Center on Health Policy, told this news organization that these companies play large roles in fields affected by the No Surprises Act. These include emergency medicine, radiology, and anesthesiology, said Mr. Adler, who’s also studied the No Surprises Act’s dispute/arbitration system.
Mr. Adler added that larger companies “are better suited to deal with technical complexities of this process and spend the sort of upfront money to go through it.”
In the big picture, Mr. Adler said, the new study “raises question of whether Congress at some point wants to try to basically bring prices from the arbitration process back in line with average in-network prices.”
The study was funded by the Commonwealth Fund and Arnold Ventures. Dr. Hoadley, Dr. Sager, and Mr. Adler had no disclosures.
A version of this article first appeared on Medscape.com.