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Most of you are probably aware that a new federal law is going into effect concerning surprise billing. I just wanted to comment on some aspects of data for a moment.

What is UCR?

The concept of usual and customary (UCR), once upon a time, actually meant something. It was essentially the median fee schedule for a provider. The idea was, “How do you figure out how much to pay a doc?” Well, it should be based on the average of what docs are billing. That’s essentially how they came up with this idea of usual and customary. And organizations like FAIR Health would track these data and report on it. The data was frequently used to set reimbursement levels.

All that went out the window. Now, out-of-network reimbursement has nothing to do with usual and customary, what we would typically associate with what we call routine, because usual and customary has a different meaning now. It used to mean and what it essentially was set up to represent was the median fee schedule. Usual and customary is now wackadoodle, and it doesn’t mean anything. It doesn’t have to do with anything. Effectively, the UCR can be whatever the payer wants it to be. It should not be this, but in practice, it is.

Let’s discuss federal law

This takes us back to the new federal law. Under the new federal law, essentially, the reimbursement should be taken out of the carrier’s hands in the sense that you go to an arbitration process. That arbitrator effectively picks how much a refund should be. The idea being, it protects the patient. The carrier effectively has no say in what the median is. In theory, we should base on the contracted rates with that payer, meaning what is usual and customary is or what reasonable is.

There are a couple of problems. If the carrier is reporting on what the median rate is, we have many problems. First of all, you can’t trust insurance companies any further. These are behemoths, 800-pound gorillas. You can’t throw them all. So you can’t trust them. I say that not out of malice or emotion, but there’s been many shady things coming out of insurance companies.

What about the insurance companies?

Based on the federal law, the determination for the median now effectively is in the insurance company’s hands in some aspects, which means the payers are self-reporting what their own median reimbursement rate is. What they’re saying is their median contracted rate. Okay! But the problem with that is, how can you believe them? They’re self-reporting this data. 

Even if they’re not grossly lying, they can manipulate numbers by withholding specific amounts of information and saying, “Oh, well, we’ll exclude this part of the data set because it’s not applicable or somehow it’s an anomaly or something else.” They’re not going to be transparent about that. So we’ll have no insight into where the numbers came from, only the numbers they provide. Again, guess what? It’s probably going to tend to be beneficial for them. What do you know? Surprise- surprise! They’re going to manipulate the numbers in their own best interest. No transparency.

External vs. internal rates

How do we figure all that out because they’re not going to disclose that data because they’ll say, “It’s proprietary? Can’t you make us turn all that over”? There’s a reasonable argument to say, “Yeah, you can’t turn all of the contracted rates over for an insurance company for all of the providers they contract with. But if you don’t do that, they’re going to screw everybody. They’re going to take advantage of that and manipulate it.”

The second problem with that process is that it’s a self-reinforcing cycle, which means they drop the contracted rates for being in-network. For instance, they have effectively made it almost impossible to get paid out-of-network in many situations now. 

In addition, you get paid such garbage that if the external rate is somehow related to the internal rate, but the percentage of times you get reimbursed is much lower out-of-network. For example, you get paid 90% of the time in-network at $100. But out of network, you get paid 20% of the time at $100. Well, that isn’t very good! 

The networks

Nobody wants to be out of network. If they push down the pricing in-network, that will effectively push down the pricing out-of-network as well because it’s now based upon that in-network rate. So the more they push down the in-network rate, the more they make it impossible to be out-of-network and force everybody to take the in-network rate because they can’t opt-out.

Once upon a time, providers actually could opt out of contracts if they didn’t like the contracted rate from the carrier. But those days are long gone. Now, people are scrambling, just desperate to take a contract and get a contract as opposed to being out-of-network because it’s so miserable.

Where do you go from here?

If they can sort of push that down, then they essentially can lower the out-of-network rate, which then allows them to reduce the in-network rate because it’s getting everybody more desperate to take whatever they can get. I mean, you’re grasping at straws as a provider. 

There’s nowhere to go. Do you want to take $50 or nothing? How about $40 or nothing? Or $30? You’ll take anything rather than nothing. That’s the problem. Because if they have that ability to pay you effectively nothing out-of-network, you’re going to be desperate to take whatever you can in-network. So they’ll keep pushing it down and pushing it and pushing it and pushing it down. So that’s the problem. They control the self-reinforcing cycle.

The net of all of this is that there are some real benefits to passing surprise billing legislation. Further, that’s the national federal legislation because, in theory, it takes the carrier out of the equation on how much to pay for emergent inadvertent claims. So there are some real benefits to that. But there are some big problems, massive loopholes. Some of those we can discuss at some point concerning this new law for providers. 

Final thought

So get educated and learn, figure it out. We’re going to see how all this rolls out because it’s going to be topsy-turvy. Come early next year!