Sharing Is Not Always Caring

From The Chair of the Commission on Economics Gregory N. Nicola, MD, FACR

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In a recent national survey of hospital-based providers, over half of respondents indicated that their practice had been threatened with removal from a health insurer’s network. A New York Times exposé offers insights into what may be driving this push to force certain specialties out of network. Termed “shared savings,” this complex financial arrangement helps commercial health insurers profit, often at the expense of patients and providers.

Unlike the similarly named “Medicare shared savings” program, this shared-savings program involves private, commercial health insurance companies. Most Americans under 65 years of age receive health benefits through work, typically in self-funded employer-sponsored health plans. In this arrangement, the company and its employees pay into a fund that then pays for beneficiaries’ medical care. A health insurance company, acting as a third-party administrator (TPA), handles the administrative work of processing the claims. It is in this role as a TPA that insurers found a lucrative niche involving payments for care that is out of network.

Given the advantages of being in network, providers generally offer substantial reductions in their non-discounted “chargemaster” rates to be in an insurer’s network. When beneficiaries of the health plan receive care that is outside of the insurer’s network, the provider may bill the full, non-discounted amount. In these cases, using the employer-sponsored health plan’s money, the TPA will generally pay the provider a fraction of the billed amount. The patient may be left owing the balance, known as a “balance bill.” In addition, the TPA may charge the employer a shared-savings fee, a percentage of the difference between the billed and paid amounts. While insurers claim this is reasonable since they are saving the employer money, the data uncovered by The New York Times paints a different picture, as explained in this video.

As an example, imagine an examination with a non-discounted rate of $1,000 and an in-network rate of $500; if the insurer pushes the practice out of network, instead of paying $500, the insurer may choose to pay $200. With a difference of $800 between billed and paid amounts, a 35% shared-savings fee nets the insurer $280. Those supposed savings for the health plan have essentially disappeared. Also note that in this example, the insurer is paid more than the provider. The New York Times provides an example of a substance abuse treatment center that was paid $134 for delivering care; however, for processing the claim, the insurer was paid almost $660.

The federal No Surprises Act (NSA) helps insurers profit from the shared-savings scheme. The NSA, passed in 2020 and in effect since 2022, is designed to protect patients from balance bills that result from unanticipated out-of-network care while also protecting their access to care by encouraging responsible network contracting between insurers and providers and reasonable out-of-network payments. While the NSA received support from the provider community, implementation of the law has been deeply troubled. As a result of the law’s implementation, insurers may have an incentive to push hospital-based radiology practices out of network. That’s because if an insurer displaces a radiology practice from its network, the insurer can profit from shared-savings fees that occur when beneficiaries receive care that is out of network. The smaller the network, the greater the likelihood of care being provided out of network, generating a shared-savings fee.

Since the shared-savings fees are greater with lower payments, insurers have an incentive to reduce payments for care. And because patients can’t be balanced billed due to protection from the NSA, the only path for providers to receive additional reimbursement is use of the NSA’s arbitration system, termed independent dispute resolution (IDR). However, since the government established barriers to IDR during implementation of the law, radiology practices may not be able to access IDR in a cost-effective manner. Further, it may take up to a year to receive an arbitration decision and, even when providers win, insurers may not pay fully, on time or at all. As a result, insurers may feel emboldened to make unreasonable demands on radiology practices to be in network, knowing providers’ only other choice is to go out of network and fight to get paid through the IDR process. Additionally, if the costs of IDR are passed along by the insurer to the employer-sponsored health plan, the total amount the company pays for the episode of care could be (much) more than the previous cost of in-network care.

With radiology practices already dealing with a Medicare payment rate that is on par with rates from the early 1990s, a physician shortage and decades of inflation, large cuts to commercial reimbursement will have consequences. Practices may lose physicians or reduce their services, and, in the end, patients suffer.

Prior to the NSA, radiology as a specialty was overwhelmingly in network (97 to 99%). Insurers should not be incentivized to push radiology practices and their patients out of network. The ACR Payer Relations Committee and the Government Relations team are working to bring this issue to the attention of policymakers. The good news is that Congress seems concerned about the problem; however, much work remains to end this misaligned incentive. Our practices and patients deserve better.