(Editor's note: This story was updated at 10:30 a.m. Friday with testimony from the Medical Society of New Jersey.)
CarePoint Health Chief Executive Dennis Kelly testified in Trenton on Thursday that his Hudson County hospitals aren't pursuing a business model of charging excessively high bills to patients who don't belong to CarePoint's health insurance networks. On the other side of the issue, representatives of health insurers and business groups testified that high out-of-network medical bills are driving up health insurance premiums and increasing costs for New Jersey consumers and employers.
A hearing was held by the Assembly Financial Institutions and Insurance Committee, which is considering possible legislation dealing with the cost of out-of-network medical care. Bills to address the issue have not yet been introduced.
CarePoint’s Bayonne Medical Center made headlines recently when an out-of-network patient got a bill for almost $9,000 for a cut finger that didn’t need stitches. But Kelly contended that the hospital’s out-of-network charges are just a list price, a point at which to begin the negotiations over the price of care with the insurance company or other payers. He said those negotiations invariably lead to a lower actual payment.
“That is just a price, but it’s not what we get paid,” Kelly said. He said most of the patients at CarePoint hospitals — Bayonne, Christ Hospital and Hoboken University Medical Center — are covered by Medicare, Medicaid and commercial insurance contracts. He said the 7 percent of patients who are not in some payer network may get a high out-of-network bill initially, but he said that bill is ultimately negotiated downward between the hospital and the payers.
He said 56 percent of the admissions to CarePoint emergency rooms and 38 percent of hospital inpatient admissions are covered by charity care or Medicaid, or they are uninsured and may be undocumented immigrants. He pointed to the neighborhood health centers CarePoint has created that provide primary care to thousands in Hudson County, an initiative he said is aimed at better population health and avoiding unneeded ER and hospital admissions.
“Our goal is to develop an innovative model focused on the urban community and to provide the most cost high quality, low cost care,” he said.
Ward Sanders, president of the New Jersey Association of Health Plans, which represents the state’s health insurers, testified that a number of hospitals and providers are taking advantage of consumers and engaging in price gouging.
“What we need in health care are laws that protect consumers by preventing price gouging in two areas: emergency care and care provided by out-of-network providers in situations when consumers have no choice or knowledge of the network status of their providers,” Sanders said.
He pointed out that New Jersey law protects consumers that have health insurance from being billed at out-of-network rates when they use an emergency room that is outside their insurance network. And he said patients may be admitted to a hospital that’s in their insurance network, only to find that a doctor who treated them while they were there is out of their insurance network and this is able to submit a bill at a higher, out-of-network rate.
Sanders said: “Negotiations between providers and payers occur on behalf of consumers and employers who want the best quality care for the best possible price. For better or worse, price negotiation is an integral part of our health care system. Our laws should not allow for gross or egregious charging practices which harm our residents and employers.”
Kelly said all three CarePoint hospitals were acquired out of bankruptcy by the for-profit health care company, and he said insufficient reimbursements by health insurers played a role in those bankruptcies.
Sanders argued that the issue is not one of health care providers versus insurance companies.
“In cases where an entity has self-funded its benefits, the funds used to pay the claim come from the self-funded entity,” he said. “That could be an employer, a union or a local or state entity.”
Christine Stearns, vice president of the New Jersey Business & Industry Association, submitted testimony that, “every year, thousands of New Jerseyans find themselves presented with a surprise medical bill from a doctor, like an anesthesiologist or a radiologist, who becomes involved in their care but, unbeknown to the patient, is not covered by their insurance. In other cases, the individuals may have sought services from a hospital emergency department that was not in their insurer’s network. Other individuals make a voluntary choice to seek non-emergent services from a health care provider outside their health plan’s network.”
Stearns said, “The solution is to strike a fair balance to ensure that facility-based providers are reasonably compensated, but also ensures that consumers or their insurers are not hit with unexpected, nonnegotiable bills, which drive small employer health insurance premiums even higher.”
She urged the committee to “help small businesses continue to offer high-quality health care to their employees at a reasonable price. The time has come to craft interventions that are both narrowly tailored and actually will work, which requires a deep understanding and careful analysis of the New Jersey health care system. The post-ACA landscape has altered the provision of health care and its delivery — especially how it is getting paid for. The focus is building an efficient, effective, accessible and accountable health care delivery system that delivers patient-centered coordinated care.”
Neil Eicher, vice president of government relations for the New Jersey Hospital Association, said in written testimony to the committee that nearly 95 percent of New Jersey hospitals have in-network contracts with one of the major health insurance payers in the state.
The others don’t reach agreements with insurers because the rates are “so low that the hospital would not be able to survive and keep its doors open, or the administrative burden of seeking approvals and payments from the insurance company outweighs the benefits of being in-network.”
He said that, absent the option for the hospital to go out of network, “The insurance company will have the leverage to completely dictate the rates for any in-network services.”
He argued that Medicare, Medicaid and charity care don’t cover the full cost of care delivered by hospitals. And he said, “Whatever policy is recommended by the legislature, NJHA would oppose any form of legislation that would cap reimbursement rates or otherwise inhibit a hospital’s ability to contract with an insurance company.”
The hearing was convened by Assemblyman Craig J. Coughlin (D-Woodbridge), chair of the committee, to gather stakeholder input on the out-of-network issue. Coughlin aide Daniel Harris said a second hearing may be held Oct. 23 and that proposed legislation on the issue could be introduced as early as December.
In written testimony, the Medical Society of New Jersey argued that it can be difficult for physicians to obtain reasonable contract terms from insurers. And MSNJ said the proliferation of “narrow networks” in which insurers offer discounts to consumers in exchange for a more limited choice of physicians, can result in less access by patients to physicians.
MSNJ advised the committee that “consumer access to out-of-network benefits must remain. It is vital that consumers have the option to see an out-of-network physician when they need it, especially if they are willing to pay for that benefit. We are not only seeing the elimination of out-of-network benefits in insurance contracts, but a corrosion of those benefits even if they remain.”
MSNJ contended that “some carriers are reducing their physician payments so drastically that coverage becomes illusory. Physicians must be paid at fair rates and consumers should have a clear understanding of their cost responsibility in these scenarios. If we are to tackle the 'surprise' bill from an out-of-network physician, the process must start by addressing 'surprise' inadequate coverage.”
As New Jersey faces a potential physician shortage, “improving insurance networks and contracts is essential.”
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