Maryland Chapter Testimony on Balance Billing

1211 Cathedral St
Baltimore, MD 21201
July 4, 2005

Ben Steffen
Deputy Director, Data Systems and Analysis
Maryland Health Care Commission
4160 Patterson Avenue
Baltimore, MD 21215

RE: House Bill 805 Reports

Dear. Mr. Steffen:

Thank you for the opportunity to comment on the HB 805 reports prepared by the Maryland Health Care Commission. The Maryland Chapter of the American College of Emergency Physicians (MD ACEP) has been involved with HB 805 from its inception, by providing testimony and later by offering assistance in preparing the reports. In fact, we performed a survey of billing companies for emergency physicians in order to obtain data on the uncompensated care provided in Maryland’s emergency departments.

MD ACEP generally concurs with the analysis and conclusions of reports 1-4. However, we disagree with the conclusions of report #5, "Desirability of Changing Policies Related to Balance Billing". The current prohibition of balance billing of HMO subscribers is unacceptable and must be either repealed, or changed to create a methodology for rate setting that is equitable for both the HMO and the physician.

An excellent history of the prohibition of balance billing in Maryland and elsewhere is provided in the analysis; however it leaves out testimony and comment provided during the hearing for HB805. A major concern of HMO’s, businesses, and legislators is that the General Assembly does not have the expertise to set rates for physician services. Even though we supported setting the rates as a percentage of the Medicare fee schedule, we agree with this concern and is the reason we supported a study of whether rates should be set at all.

The analysis does not provide an accurate account of the market that establishes fees paid to emergency physicians. The market works in the following way: HMO’s have an incentive to contract with physicians to build their network and ensure the quality of their physicians and to make sure that services are available to their subscribers. They then can sell their insurance product to employers by advertising the depth and breadth of their network. On the other side, physicians have an incentive to contract with HMO’s to market their services, to provide speedy reimbursement, to please hospital administration, and as a service/convenience to their patients.

Physician groups and HMO’s then sit down at the negotiating table and establish a fee schedule that meets the needs of both sides. This is how fee schedules are set for non-HMO private insurance in Maryland and is how they are established in most other states. The market takes into account local variations in payer mix, staffing requirements, qualifications, liability insurance rates, research, and teaching that no rate-setting scheme could ever account for.

Maryland’s prohibition of balance billing greatly alters this negotiation, but only for physicians mandated to provide emergency care under EMTALA. Other physicians simply walk away from unacceptable contracts or negotiate a "private contract" with their patients. The only leverage that emergency physicians have in this negotiation is the threat of "balance billing", which is bad for HMO’s, hospitals, physicians, and their patients, but a necessary evil when the rates proposed by an HMO are below the cost of providing care. If talks break down, a few weeks of balance billing brings everyone back to the table to negotiate a solution acceptable to all.

The prohibition of balance billing removes the ONLY leverage that emergency physicians have to negotiate a fair solution that takes into account the cost of providing uncompensated care and Medicaid. With the prohibition, the negotiation becomes one-sided with the rate paid determined in earlier years by the usual and customary rate (UCR, a nebulous number, basically whatever the HMO wanted to pay) and later adjusted in statute by the General Assembly. Under the current system, there is no incentive for emergency physicians to contract with HMO’s. Despite the statutory formula, there is wide variation in the rates paid by HMO’s. Physicians in most cases don’t know what they are supposed to be paid and HMO’s have great difficulty bringing emergency physicians into their networks - meaning that they do not credential these non-participating physicians and cannot assure the quality of the services provided. Finally, most Maryland emergency physician groups require a subsidy provided by their hospital to remain solvent, which, as the report states, cannot be included as a legitimate cost to the hospital.

The best solution is to eliminate the prohibition of balance billing and let the market decide what the rates should be. The report repeatedly describes the prohibition as important "consumer protection", but a better term for it is "HMO protection" because HMO's do not have to worry about the adequacy of their primary care networks since they can always count on the emergency departments to provide this care at a cheap price. The reality is that continued underfunding of Maryland’s emergency care system will exacerbate the severe overcrowding and diversion problem because of the inability to hire enough physicians to provide hospital EMTALA-mandated care.

If the legislature insists on keeping the prohibition of balance billing, then it must agree with the testimony provided by HMO’s and others that it does not have the expertise to set physician rates, even as a percentage of Medicare. As noted above, a myriad of factors goes into the open market rate-setting process, and it is definitely not "one-size fits all". Therefore, we suggest that a neutral party be given the authority to set the rates, much like the Public Service Commission hears testimony from both sides and sets utility rates. Isn’t emergency care at least as essential a public service as our utilities are?

One additional point not addressed in the report is how Maryland’s prohibition of balance billing pertains to HMO products developed under federal ERISA law and exempt from Maryland insurance law. Approximately 40% of Maryland’s HMO subscribers are covered by an ERISA plan exempt from Maryland law.

Physicians have no way of knowing which subscribers are covered by ERISA plans and which aren’t. If the prohibition is maintained, we recommend that HMO's provide identification either on the cards or explanation of benefits that a subscriber is covered by an ERISA plan. HMO's do not provide this information so we have no knowledge of who is covered by Maryland law.

As an aside, the report is not accurate in stating that ALL emergency and out of network urgent care is a "covered service". Typically it is only covered if the service meets the prudent layperson of an emergency. HMO's frequently deny payment for care provided in an emergency department as not meeting the prudent layperson definition. The subscriber is then billed for the full charge of the service provided. The report should be amended to reflect this common type of "non-covered service."

Once again, thank you for the opportunity to comment on the reports and we look forward to your presentation to the General Assembly. As always, we are available for questions you may have.

Linda M. DeFeo, MD, FACEP

David A. Hexter, MD, FACEP
Chair, Public Policy

Click here to
send us feedback