Testimony In Opposition to Senate Bill 603, an Act Relating to Equitable Provider Reimbursement, before the Joint Committee on Health Care Financing

The Massachusetts Medical Society wishes to be recorded in opposition to Senate bill 603, An Act Relating to Equitable Provider Reimbursement. The Medical Society is firmly committed to seeking a solution to this issue, but has strong concerns about the policies put forth in this bill.

The Medical Society has long supported a solution that ends the situation whereby patients receive unavoidable out-of-network bills. Any such solution must: 1) promote greater education and transparency to prevent such billing situations when possible; 2) completely remove patients from receiving unavoidable out-of-network bills by holding the patient harmless and eliminating balance billing; and 3) find an equitable and sustainable formula for the payment of services provided, with proper safeguards to ensure fair payment in exceptional circumstances.  

The aforementioned bill fails to meet the third important criteria: the proposed default payment formula of 100-110% of Medicare in each of these bills is an inappropriate benchmark for payment by commercial insurers, and it would have drastic effects on the sustainability of many physician practices and health care institutions, ultimately jeopardizing access to care in many underserved areas. The physician community opposes the use of the Medicare fee as the default out-of-network physician reimbursement in legislative proposals. 

Medicare is not currently and was never intended to be a broadly applicable index for commercial physician payment. Medicare rates are not established to represent a valuation of professional services provided; instead, they function as a distribution of an already limited budget of this social service program.  Further, Medicare rates differ widely across specialties as evidenced by a study published recently in JAMA Internal Medicine that found significant variation in the relative price of services across specialty billing Medicare.  A driving factor of this variation is that the denominator—the rate of Medicare payment—varies significantly across specialties.  For example, a GAO report highlighted, “Medicare payments were lower than private payments [for anesthesia] by an average of 67%.”  While other specialties may not have such wide variation, this example underscores why tying any payment formula to Medicare is not appropriate and will have incredibly negative impacts for certain specialties which could ultimately impede patient’s access to quality medical care.  

But the implications of an insufficient reimbursement strategy extend beyond just underpayment for the current sliver of unavoidable out-of-network care. If a default rate is substantially below market value, insurers would have little incentive to negotiate in good faith with physician practices, knowing that any resulting out-of-network scenario would be reimbursed at a low default out-of-network rate.  Having this insufficient reimbursement rate be an expanding portion of overall payments would significantly jeopardize the sustainability of many physician practices, threatening access to care for patients across the Commonwealth.  This also has the potential for disincentivizing physicians from practicing in Massachusetts, making recruiting and retaining physicians increasingly difficult.

The Medical Society instead believes that the best legislative approach includes a default formula for reimbursement of unavoidable out-of-network care that is based upon a percentile of average charges for a given procedure or service, in the same geographic area, as determined by a third party, independent, transparent non-profit data base such as Fair Health. This would promote a sustainable, transparent solution that fairly reimburses physicians for their services. 

Given the complexity of this issue, the Medical Society supports an inclusive commission or task force, such as that proposed by Rep. Mariano (H.3571), to look more closely at this issue. The medical community reiterates its commitment to working with the legislature, patient advocacy groups, and other stakeholders to see the adoption of legislation to address out of network billing.

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