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New study supports national database for out-of-network reimbursement

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(Editor's note: This report was updated at 1:20 p.m. with additional information.)

A report out of the University of Chicago has validated what many in the state seek in solving the out-of-network debate: standard reimbursement rates from the independent organization FAIR Health.

How to reimburse surprise bills has been one of the most contentious points in the out-of-network debate in Trenton in the past year.

Oscillating between arbitration and capping rates at 250 percent of Medicare, state legislators have been unable to find a solution that makes all stakeholders happy.

Sen. Joe Vitale (D-Woodbridge), chair of the Senate health committee, said recently that arbitration was the fairest option.

Assemblyman Craig Coughlin (D-Woodbridge) said arbitration and FAIR Health aren't mutually exclusive.

The new report released Friday from NORC at the University of Chicago supports rates from the national transparency advocate FAIR Health as fairest of them all.

The report was done in collaboration with Physicians for Fair Coverage, which has been advocating for the use of the FAIR Health rates since its inception in June 2016.

Michele Kimball, CEO of Physicians for Fair Coverage, said she is aware of New Jersey's eight-year struggle to get a law on the books to protect patients from surprise balance bills.

“Legislators across the country are recognizing that surprise insurance gaps are leaving patients exposed,” she said. "As they work to close these gaps caused by insurers narrowing physician networks, this NORC analysis demonstrates that using the FAIR Health database to better understand for out-of-network payments is the more comprehensive, transparent and inexpensive avenue for legislators compared to any other national or state database.”

Her sentiments were echoed by Mishael Azam, chief operating officer of the Medical Society of New Jersey, who said that the state's Department of Banking and Insurance has taken the step in the right direction using FAIR Health for laws already on the books — without waiting for legislation.

"New Jersey was ahead of the curve in establishing patient protections decades ago," Azam said. "The law states that any patient touched by an out-of-network provider in an in-network facility is only responsible for the in-network payment amount. This is a really big deal and a huge patient protection. 

"On the back end, once the patient is held harmless, we have a dispute resolution program. The reason the (insurance) carriers wanted a new one is because of the way Maximus, the (current) arbitration vendor ... applies the New Jersey hold (patients) harmless law. ... Doctors were winning arbitrations and being awarded billed charges. However, as of November 2016, Maximus is no longer awarding billed charges. The most they will award is 90 percent of FAIR Health and they are advising doctors they cannot balance bill patients."

The existing out-of-network bill seeks to use Medicare as a benchmark and cap payments to doctors at 250 percent of the government rates.

Kimball said: "Medicare was never meant to be a benchmark. Reimbursements are arbitrarily set based on the budget and politics, quite frankly."

Kimball said she knows this firsthand from her time on the U.S. House Ways and Means Health subcommittee.

The caps based on Medicare, in New Jersey's current out-of-network bill, look reasonable when the price is higher, but if the rates of Medicare reduce, that reduces what doctors and providers will be reimbursed, she said.

Neil Eicher, vice president of government relations and policy of New Jersey Hospital Association, also said FAIR is fair.

“We haven’t had a chance to review the report yet, but it doesn’t surprise us that FAIR Health would be tagged as the best database for reimbursing OON claims. It is a well-respected organization and has done a lot to bring transparency to the payments made by insurance carriers to providers,” he said.

Coughin said a draft of the latest version of the bill does include FAIR Health.

"Nothing is off the table," he said, adding that the main components sought on previous versions remain front and center for legislators.

That includes accountability, transparency and ending balance billing.

NORC said it came to the conclusion of FAIR Health after reviewing state data of All Payer Claims Databases, Truven Health Analytics, Blue Health Intelligence and Health Care Cost Institute.

Physicians for Fair Coverage has previously been critical of two databases: HCCI and Optum360 — the latter of which declined to participate in the study because it is funded by major insurers in the country.

A RAND Corp. study funded by CarePoint Health late last year suggested that capping rates at 250 percent of Medicare would be too low.

The report from NORC stated the purpose of the study was to address affordability concerns caused by a gap in cost versus reimbursements from insurers and create an “appropriate and fair Minimum Benefit Standard for out-of-network services that establishes a charge-based reimbursement schedule connected to an independently recognized and verified database

Kimball said the report does reinforce PFC's belief, but there was no request made to that effect.

NORC previously did a study that came to the same conclusion in 2014, she said.

The request PFC, which formed as a nonprofit in June last year, made was simply to expand and update the report.

If it had returned a different result, Kimball said the results would have still been circulated, "but not with as much fanfare."

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