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You Say ‘Network Matching,’ I Say ‘Arbitration’

WASHINGTON — Although Senate Health, Education, Labor & Pensions (HELP) Committee members sounded very harmonious Tuesday at a hearing on their bipartisan bill to lower healthcare costs, disagreements among witnesses at the hearing indicate that the solutions may not be easy to come by.

Take the matter of “surprise bills,” in which patients at an in-network hospital receive an unexpectedly large bill later on because one of the treating physicians was out of network. To solve that problem, “the ‘in-network guarantee’ is the best option,” said Benedic Ippolito, PhD, research fellow in economic policy studies at the American Enterprise Institute, a right-leaning think tank here. Under that option, every provider at a hospital would have to agree to be “in-network” for whatever networks the hospital belonged to.

“By tasking hospitals with ensuring that physicians are in-network for insured patients, market actors would [negotiate] prices themselves, rather than having prices set by arbitration,” said Ippolito. Arbitration, in which the insurance company and the doctor each submit what they think is a fair price for the service to an independent arbiter for a decision, “represents an inferior version of setting a simple benchmark. … The process is less transparent, includes unnecessary expenses, and can be unpredictable … and it doesn’t stop surprise bills from occurring in the first place.”

Not so fast, said Tom Nickels, executive vice president of the American Hospital Association. “The network-matching approach … interferes with fundamental relationships with hospitals and their physician partners, and interferes with our ability to negotiate,” he said.

Nickels sounded more favorable to arbitration, noting that a bill introduced by HELP Committee member Sen. Bill Cassidy, MD (R-La.), would have out-of-network claims paid at a median in-network rate; physicians who are dissatisfied with that amount could request arbitration. However, he added, “we do believe automatic payment prior to initiating dispute resolution undermines fair reimbursement.”

Elizabeth Mitchell, president and CEO of the Pacific Business Group on Health, in San Francisco, said her group, which represents Bay Area employers concerned about healthcare issues, favors basing out-of-network payments at 125% of Medicare rates. “We believe this fairly captures cost and is the most straightforward, transparent approach to prices.”

Surprise billing is just one of the elements addressed in the bipartisan Lower Health Care Costs Act that the committee is working on. Committee chairman Sen. Lamar Alexander (R-Tenn.) noted in his opening remarks that the bill contains more than three dozen proposals agreed to by both Republicans and Democrats, including measures that would:

  • End surprise billing.
  • Create more transparency. “There are seven bipartisan proposals in the bill that will eliminate gag clauses and anti-competitive terms in insurance contracts, designate a non-profit entity to unlock insurance claims for employers, ban pharmacy benefit managers (PBMs) from charging more for drugs than the PBM paid for the drug, and require patients to be given more information on the costs and quality of their care,” said Alexander. “You can’t lower your healthcare costs until you know what your healthcare costs actually are.”
  • Increase prescription drug competition. “There are nine bipartisan proposals to bring more lower cost generic and biosimilar drugs to patients; that’s about 90% of all the drugs that are prescribed,” he said.

Sean Cavanaugh, chief administrative officer at Aledade, a company here that helps physicians work under value-based payment models like accountable care organizations, urged senators to do everything they could to support independent physician practices. “Anything you can do to support physicians in independent physician practices — loan repayment programs, even for those who work in private practices — would be great,” he said.

“And we believe hospitals should be required to share patient-centric data,” he continued. “There’s literature that shows when a patient is discharged from a hospital and sees a primary care physician shortly thereafter, they do better — they have fewer comorbidities and fewer readmissions. … We think hospitals ought to be compelled to share these data.”

Drug pricing also played a prominent role in the conversation. “Reports show that median drug company CEO pay increased by 39% in 2018, with some of the highest-paid executives making $20 million to $50 million per year,” said Sen. Tammy Baldwin (D-Wis.). Baldwin, along with several Republican and Democratic co-sponsors, sponsored the Fair Drug Pricing Act, which requires transparency from drug companies when they raise prices on existing drugs; she urged the committee to add her bill to the Lowering Health Care Costs Act.

Drugmakers “work hard to defend and often distract from price increases, often citing industry-sponsored statistics showing large investments in developing new cures,” Baldwin said, “[but] one study found that 80% of every dollar spent by drug companies goes to something other than research and development, like marketing and stock buybacks.”

Frederick Isasi, executive director of Families USA, a left-leaning healthcare consumer group, said his organization supports Baldwin’s bill. “This industry is currently broken,” he said. “These drugs are life-saving; at the very least, companies should be able to justify why they’re charging what they’re charging and what the increases are for.”

Mitchell said the members of her large employer coalition “are trying to offer [drug] discounts. … They’re basing those on estimates because they can’t get insights into the actual price of the drug. We need transparency, but that’s just a starting point.”

“Prescription drugs are an area where an opportunity is apparent for us to help the American consumer,” said committee member Mitt Romney (R-Utah). He said that he and another committee member, Sen. Mike Braun (R-Ind.), are working on language requiring drug copays to be “determined on the net price, not the retail price of the drug, so when rebates are provided, that the consumer has the advantage of that. We hope that becomes part of the final bill.”


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