Effective January 1, 2022, common prohibitions against “balance billing” under hospital professional service contracts will likely become moot due to certain superseding federal prohibitions under the federal No Surprises Act enacted December 27, 2020. As detailed below, certain hospital-based physicians, including radiologists, anesthesiologists, and pathologists, should keep these new federal billing prohibitions in mind when entering into new hospital professional services agreements (“PSAs”) and revisit their existing agreements to determine whether any changes are appropriate.
“No Surprises Act” Background.
The federal government’s growing focus on surprise medical bills reached a new high on July 1, 2021, when the Department of Health and Human Services (“HHS“), along with the Department of Labor and Department of the Treasury, released a consumer-focused interim final rule with comment period taking aim at surprise billing and excessive cost-sharing practices. The rule, which also cites an ineffective “patchwork” of consumer protections under existing state laws, represents the first implementing regulation under the No Surprises Act. Both the rule and the statute become effective on or after January 1, 2022.
Balance Billing Prohibition.
This article discusses two distinct but interwoven billing procedures that deserve clarification: “surprise billing” and “balance billing.”
“Surprise billing” describes the situation where a patient receives an unexpected bill from a provider after receiving health care services that the patient thought were covered under the patient’s health insurance plan. This often happens when the patient inadvertently or unknowingly receives care from an out-of-network provider or facility because the patient fails to realize the provider or facility was not in their insurance plan’s network.
“Balance billing” generally refers to an activity performed by an out-of-network health care provider that involves billing the patient the difference between that provider’s billed charge and the amount that was paid by the patient’s plan or insurance. Because balance billing can occur even when the patient knows that the provider is out-of-network, not all balance bills are surprise bills, but almost all surprise bills are balance bills.
Although surprise balance billing often occurs in emergency settings, the interim final rule reports that surprise medical bills are also commonly sent by non-emergency, out-of-network providers that furnish services ancillary to a patient’s hospital visit (e.g., radiologists, anesthesiologists, or pathologists). Balance billing may occur, for example, where a patient receives care at an in-network hospital and with an in-network surgeon, but also receives services from an out-of-network physician in connection with that hospital visit.
To address these concerns, the No Surprises Act generally prohibits providers and facilities from balance billing patients or otherwise holding patients liable for cost-sharing amounts beyond what they would have paid for in-network care, including in circumstances where a patient receives non-emergency services from an out-of-network provider at an in-network facility. If a provider submits a balance bill in violation of the statute, HHS may impose civil monetary penalties of up to $10,000 per violation. Therefore, unless a hospital-based provider qualifies for the limited exceptions addressed below, that provider should refrain from engaging in any activity that constitutes “balance billing.”
Limited Exception to Balance Billing Prohibition.
The interim final rule acknowledges instances in which a patient might desire to select an out-of-network specialist. The rule therefore provides exceptions to the balance billing prohibition if, for example, an adequately noticed patient consents to receive those services from an out-of-network provider at an in-network health care facility. Under these circumstances, because the patient knowingly chooses to see an out-of-network provider, the additional cost is no longer a “surprise” to the patient and thus does not pose the type of consumer threat the No Surprises Act seeks to prevent. Importantly, however, certain non-emergency physician specialties are ineligible to qualify for this exception and may not request a consent waiver. These physicians include those that furnish the types of specialist services that a patient typically does not individually select, including anesthesiology, pathology, and radiology. The interim final rule suggests that these hospital-based physicians have served as a significant source of surprise out-of-network bills and thus may not balance bill under any circumstances.
The statute’s protections go into effect beginning on January 1, 2022, and the federal government is working to issue rules and guidance to ensure stakeholders understand their rights and responsibilities under the new law. Reed Smith will continue to monitor and report on forthcoming changes and guidance as they are released.
In the meantime, hospital-based physicians should keep these developments in mind and revisit existing hospital PSAs to determine whether modifications or amendments are appropriate. Although good faith efforts to participate with health plans that maintain contracts with the hospital may be acceptable, detailed PSA provisions which impose an outright bar against balance billing now appear to be moot—and inappropriate—in light of the government’s heightened surprise billing regulatory oversight and its new prohibition against out-of-network providers billing patients more than in-network cost-sharing amounts