No Surprises Act Part 1: A Surprise for Providers

The No Surprises Act that went into effect in January 2022 places significant pressure on healthcare providers to adapt their billing practices to new guidelines and requirements. While patients may benefit from this new regulation, many providers will be burdened with the task of navigating unforeseen challenges. In this series, we will examine the intent behind the No Surprises Act, the consequences of its recent implementation, and how providers can adjust to the new reality.

Protecting Patients from Unexpected Medical Expenses

Imagine the following scenario: You experience sudden chest pain. You call your doctor’s office, and they tell you to go to the emergency room. You go to your local in-network hospital and are admitted to the emergency department. A battery of diagnostic tests are conducted. A short while later your tests come back showing that you’re not in danger, and the ER discharges you home.

A couple of weeks later you start receiving multiple medical bills from an array of providers you’ve never heard of for services rendered during your hospital visit. When you call the hospital about the bills, the billing department tells you that they outsource many of their services and that you will have to contact those outsourced providers directly to pay your bills. When you call the outsourced providers, they tell you they are out-of-network with your insurance, and you are responsible for the remaining balance not covered by your health plan. All in all, you are left with thousands of dollars in unexpected medical bills.

The No Surprises Act was passed to protect patients from these types of unexpected medical bills from out-of-network providers, that they did not choose themselves, for services they may not have even known they were receiving. The bill is intended to protect the 221 million patients covered by private insurance from surprise out-of-pocket costs through regulated price transparency. As of January 1, 2022, patients must be informed of potential out-of-network costs and have the agency to accept or reject those costs.

The No Surprises Act is also designed to punish bad actors, such as providers who routinely gouge patients by intentionally prioritizing services with out-of-network providers. It also attempts to target equity firms that buy up hospitals and let all the contracts run out, creating a scenario in which the “in-network hospital” is home to entirely out-of-network physicians. Protecting patients and limiting system abuse are noble pursuits, but it remains to be seen whether the requirements and incentives created by the act accomplish them.

A Challenging Hurdle for Healthcare Providers

Part of the challenge for providers in adjusting to the No Surprises Act is the complex process required for compliance. In order to be compliant, a provider must first send an advanced explanation of benefits to the payer, including the network status of every doctor a patient might see, whether in-network or out-of-network. The provider then has to give a good faith itemized estimate of every out-of-network provider on the bill. The payer receives the completed list from the provider and informs the patient what they will pay out of pocket for their care. Finally, the patient has to receive and sign a consent form no less than 3 days before the procedure.

One issue with this elaborate process is that it is often difficult for providers to know which physicians are definitively in or out of their network. Despite this, any mistake in which the provider incorrectly identifies in- or out-of-network physicians can result in a $10,000 fine.

Furthermore, any disputes between payer and provider are sent to a government office for arbitration, in which the maximum payment required from the payer is the median in-network cost for each service rendered. Facing risk of substantial fines and diminished payments from insurance companies, some providers will undoubtedly struggle with conforming to this new act.

Will Patient Care Suffer?

The additional requirements placed on providers by the No Surprises Act have ancillary consequences. The mandatory 3-day waiting period for non-emergency procedures will likely cause a delay in care. With this rule, even COVID-19 tests can’t be administered within 3 days of the advanced explanation of benefits unless the patient agrees to pay any potential out-of-pocket costs. This could deepen the care gap between patients who can afford to pay out-of-pocket expenses and those who can’t, allowing faster care for those with greater financial capabilities.

In response to the risk of fines, some providers may refuse care to certain patients. If a provider can’t get in touch with a patient’s insurance to verify that a consent was signed, they are incentivized to reject that patient rather than risk a $10,000 penalty for noncompliance.

There is little motivation for payers to negotiate in good faith for in-network rates with providers, since the maximum they will have to pay is the median in-network cost. This may lead to payers disputing a larger number of bills and relying on arbitration to reduce their payments to out-of-network providers. In response, providers may be incentivized to raise rates across the board, thereby increasing the median in-network cost that they receive as payment in arbitration.

The No Surprises Act successfully protects patients and payers, but provides additional challenges for providers. In the second part of this series, we will examine how providers can best adjust to the new reality and protect their interests.


Ending Surprise Medical Bills

No Surprises: Understand your rights against surprise medical bills

No Surprises Act Implementation: What to Expect in 2022

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