Why Private Equity Firms & Out-of-Network Providers Want to Stop Surprise Billing Reforms

At a time when thousands of American patients are facing hospital bill collectors at their door or the shock of an unexpected charge heading into surgery, those who benefit from these bankrupting charges – private equity firms, out-of-network providers and hospitals – are trying to stop reforms that would solve one of the biggest affordability challenges facing families today.

Surprise medical billing is a result of a small – but forceful – group of physicians who intentionally stay out-of-network. Not every provider or hospital engages in the practice; in fact, the majority of providers actually work with health insurers to make sure patients have access to affordable, in-network care. But when out-of-network providers intentionally forego negotiations with insurance companies or choose to remain out of provider networks, they exploit loopholes in the system that allow them to charge whatever price they want for their services. These charges defy any standards of “reasonable.” According to a recent report in Health Affairs from researchers at Yale, the average out-of-network rate for services far exceed the in-network rate for care.

It’s easy to see why those profiting from the current system would want to maintain the status quo. Unfortunately, we all end up paying these costs, and worse, surprise billing hits the most vulnerable patients the hardest. It’s not a surprise that many leading providers find this behavior “morally repugnant,” “a corruption to the system,” and a practice that directly undermines the patient-provider relationship.

Congress knows how to solve this problem. A local market-based benchmark approach helps create a level playing field between providers by paying those who choose to stay out-of-network the median rate based on negotiations between local doctors and health plans. The Congressional Budget Office (CBO) found that the benchmark approach would save consumers and taxpayers more than $25 billion – the most savings of any of the proposals on the table. CBO also estimated that a median benchmark rate would lead to increases in rates for providers that now receive below-median payments.

Private equity firms, hospitals and their allies make the far-fetched claim this is akin to “single payer” or “government rate setting” — but the reality is that the benchmark is actually the result of thousands of private, local negotiations with providers who are playing by the rules. Further, it would only used in circumstances where the patient would reasonably expect their provider to be in-network, but where they have chosen to remain out-of-network in order to collect higher fees.

The irony is that the hospitals’ and private equity firms’ proposed approach – arbitration – imposes a massive new bureaucratic process that will add billions of additional costs to patients and the health system. As we have seen in New York, out-of-network providers have learned how to game arbitration in order to receive payments that exceed billed charges. Arbitration = government mandate that will drive up costs for all Americans. In other words, hospitals and private equity favor greater government involvement when it leads to higher payments.

Congress can’t and shouldn’t bail out private equity firms and hospitals with bad policy. Surprise billing is a problem that can be solved. The best case would be that providers would choose to enter networks and deal transparently with consumers. But if they choose not to, then they shouldn’t be able to force consumers and employers to pay far more than they pay other providers in the same market for precisely the same service.