Organized medicine won't back down from the latest assault to physicians--the Schwarzenegger administration's proposed regulations to control billing practices for emergency services. Doctors are fighting back in the legal and legislative arenas. Absent satisfactory resolution, some worry the changes will diminish patients' access to care and boost insurance company power.

The Schwarzenegger administration's efforts to rewrite the rules for emergency services billing may, as one physician puts it, represent the biggest threat to doctors since the malpractice liability crisis of the 1970s.

But the California Medical Association--assisted by county organizations statewide--has leapt into action, launching a multipronged attack on the proposed regulations and a massive fundraising and public awareness campaign. No one is predicting what degree of success organized medicine will ultimately have, because the fight is too new and the issues are too complicated for prognostication.

Nonetheless, the stakes are high. Those in favor of the changes and those opposed are already duking it out.

Points of Contention
After originally stating his intention to have the Department of Managed Health Care enact emergency regulations impacting physicians' ER billing, the governor instead opted for three new--and permanent--regulations.

Perhaps the most onerous regulation, according to CMA leaders, would impact the definition of "fair and reasonable" reimbursement by adding a seventh criterion to the existing six in the Gould case. The new criterion would allow the introduction of "any other relevant documentation necessary to determine reasonable and customary value." What constitutes "other documentation" isn't defined in the proposal, but CMA officials are concerned it will include contract and Medicare rates.

"A clear set of criteria established by a court in responding to the challenge of fairly compensating a physician is now being proposed for alteration with a line that says something like 'and anything else you feel like,'" says Richard Frankenstein, MD, a Garden Grove pulmonologist who is speaker of the CMA House of Delegates. "That is simply unacceptable."

The second proposed regulation would prohibit noncontracted emergency care providers from billing insured patients for amounts their insurers don't pay, also known as balance billing.

"The DMHC is focused on protecting Californians who have made the right choice to participate in health insurance programs," says the DMHC, in a statement to Southern California Physician. "The governor's action fully supports the consumer and tells patients that they will not be billed for emergency care services that they expect will be covered by their insurance. It is also understood that to fully eliminate the potential for balance billing, the underlying problem must be eliminated, which is to better define the reasonable and customary value of services of noncontracted providers."

And the third proposed regulation would set up a voluntary independent dispute resolution process (IDRP) for emergency care bills. The proposed IDRP is similar to what the CMA has been discussing in a workgroup, yet different enough to cause concern. In particular, it's linked to a prohibition on balance billing, which the association won't accept.

Groups Divided About Dispute Resolution
The idea to create an IDRP has been around for years, but differences between the CMA and DMHC approaches are now clear. If the CMA approves a formal IDRP policy at the House of Delegates this month, it would likely recommend starting with a pilot project, which the proposed regulation doesn't allow. Both sides want participation in the IDRP to be voluntary, but the CMA doesn't want it to be tied to a prohibition on noncontracted physicians from billing patients. The DMHC also wants physicians to use an insurance plan's own IDRP first, for a minimum of 45 days. Any CMA policy would likely say noncontracted physicians should not be required to exhaust a plan's internal remedies.

Both sides would require payers to participate in the IDRP. When it comes to arbitration, the DMHC version would allow physicians to submit their original bill amounts or alternative amounts they're willing to accept. If the physician offers an alternative amount, the payer could also offer a different reimbursement amount. In any likely CMA version, the billed and paid amounts would be unalterable figures, to encourage submission and payment of fair bills at the outset. Both say the payment standard should be whatever amount is closest to the reasonable value of services.

The proposed regulations don't set dollar limits for the IDRP, but they allow an independent arbitrator to set them. The CMA would likely want to be sure there are exceptions for smaller claims, but no exceptions for larger claims. Both sides would allow aggregation of claims for similar services.

For supporting documents from the plan, the DMHC wants to see an Explanation of Benefits, a copy of the plan's written determination and a narrative discussion of its final offer that is not inconsistent with the justifications in its written determination. The likely CMA process would require an EOB as well, with a clear description of the specific coding edits used, the reason for the edits, and the specific methodology and data used to calculate the payment level. Absent those data, the physician would receive his or her billed charges.

Both sides want the dispute wrapped up in 60 days. And both sides want decisions to be appealable. An independent organization, subject to DMHC approval, would establish filing fees and a reasonable cost structure under the state's proposal.

Opponents Square Off on Balance Billing
The balance billing ban in particular reveals deep rifts between physicians and insurers, between physicians and the DMHC, and between noncontracted physicians who bill for ER services and the groups that pay those bills.

For example, organized medicine characterizes the ban as usurping noncontracted physicians' rights to bill for services rendered and threatening the healthcare safety net. Some risk-bearing physician groups, independent practice associations and insurance companies see balance billing as "an unfair, abusive tactic being used against patients" and "an inappropriate form of hostage-taking," says Donald Crane, CEO and president at the California Association of Physician Groups. "All physicians should be paid fairly for the services they perform. The question is the procedural way that's achieved."

Consumers see things differently still--and the court of public opinion may decide the fate of the governor's efforts. "Clearly, patients should not have to pay when insurers refuse," says Jerry Flanagan, healthcare policy director at the Santa Monica-based Foundation for Taxpayer and Consumer Rights. "The healthcare system has shifted costs to consumers to the point that they cannot carry any more of the burden. Insurers waste too much of our healthcare dollars on CEO salaries, record corporate profits, overhead and advertising. Patients and employers have been paying for that waste for years in the form of premiums that are increasing two to three times faster than physician and hospital expenses."

Flanagan adds: "Doctors should see patients as their allies in the fight to rein in errant insurers, not as a mark to pay when the insurers won't. It is wrong for insurers to waste so much of our money--and it is wrong for physicians to force patients to pay the price." The ultimate solution, he says, is regulating health insurers' premiums-like auto insurers' premiums are--to ensure that more of the healthcare dollar is spent on hands-on care.

Toward that end, the CMA is seeking support for a legislative package that would help stabilize California's emergency care system by requiring insurers to contract with sufficient numbers of physicians to provide care for their insureds and by requiring that they spend at least 85 cents of every premium dollar on healthcare. Now, several major for-profit HMOs spend less than 80 percent of premiums on patient care, with the rest going to administrative and marketing costs and profit. Getting the full 85 percent would mean an immediate $750 million from just two insurers, according to the CMA.

Still, the DMHC is taking no prisoners in trying to quash balance billing. It has asked the California Supreme Court to reconsider the landmark appellate court ruling against Prospect Medical Group. The appellate court supported Northridge Emergency Group's right to bill a patient or a risk-bearing organization--or both--for the balance of "fair and reasonable" bills. That ruling specifically referred to the Gould criteria as a method for determining what constitutes "just and legal" billing. The reconsideration will not be complete until late next year, so the Prospect case can't be used as precedent in the current debate.

Gould Changes Deliver Serious Blow
In the end, the DMHC's plan to add an additional Gould criterion allowing controversial information to be weighed in determinations of reasonableness of fees could change the rules of the game even more than the IDRP and the balance billing ban. Experts predict that the move is really to promote Medi-Cal, Medicare and contract insurance rates as standards, any of which are inappropriate for the evaluation of noncontracted fair and reasonable payment, CMA officials say.

"The DMHC is taking advice from insurance companies that want the state to enforce Medicare and Medi-Cal payments as reasonable," says Jack Lewin, MD, CEO of the CMA. "That's a very dangerous strategy in terms of whether the middle class will have broad access to a doctor in five or 10 years."

The California Chapter of the American College of Emergency Physicians agrees that the Gould prong of the proposals might hurt the most. "The standards were adopted in 2002 by the DMHC after an exhaustive three-year review, and have been cited by numerous California courts," notes CAL/ACEP in a statement. "Instead, the DMHC proposes an open-ended standard that will boost already obscene health plan profits and stock prices while it chops reimbursement for emergency care services off at the knees. The regulations could shift as much as $500 million a year from hospitals and ER providers to health plans."

Of course, there's another view in the mix. Crane says the Gould criteria actually arise from a workers' compensation case, meaning the court was specifically seeking rates above what's normally considered reasonable and created standards designed to elevate those rates. The DMHC's adoption of the Gould criteria was in error and the governor's proposals are the remedy. "The new quest will be to develop a roster of criteria that fairly reflects customary practices in the community," Crane says.

Winners and Losers
Nobody's predicting an easy conclusion to this clash, but doctors are hopeful their efforts will result in an outcome they can live with. "Probably the most likely happy ending would be for the DMHC to start a pilot project in dispute resolution without a balance billing ban using physician volunteers," says J. Brennan Cassidy, MD, chairman of the CMA board of trustees. "Through that project, we can find out if there's really a problem and determine what it really is instead of relying on isolated examples."

In any event, time is of the essence and doctors have their work cut out for them. "Physicians should be working with the CMA on comments that describe how bad the regulations will be for patients and for emergency care," Dr. Lewin says. "Every doctor needs to join the CMA. We need everybody's help to cover our costs in fighting the regulations if they're implemented. We all need to stand together--but we're going to do it."

The stakes are simply too high not to succeed, Dr. Frankenstein emphasizes. "Doctors need to communicate to their patients that physicians' ability to be there is being eroded by the shortsighted, unilateral, arbitrary actions of some health plans," he says. "The law says emergency rooms shall be available to all regardless of ability to pay. But emergency rooms that are closed are closed to all--regardless of ability to pay."

FEATURE ARTICLE SIDEBARS

How Did We Get Here? Timeline of Regulations Exposes Quick Pace

Early July: Unconfirmed rumors circulate that Gov. Schwarzenegger has been meeting with health insurers and may announce a plan to "protect patients from balance billing."

Late July: Governor holds Health Care Summit; California Medical Association participates.

Tuesday, July 25: Governor issues order on ER billing.

Tuesday, Aug. 8: Office of Administrative Law, under guidance from governor and the Department of Managed Health Care, issues emergency regulation to restrict billing for emergency services; new rules to take effect in seven days. CMA schedules emergency meetings for the next day to address the issue.

Wednesday, Aug. 9: Governor drops emergency regs, instead pursues new permanent regs to re-evaluate the Gould criteria, ban balance billing and develop an independent dispute resolution process.

Friday, Aug. 11: DMHC signals desire to shorten 120-day notice and comment period to 60 to 70 days. Expedited process likely to result in regulations being filed with the Secretary of State and implemented in late November or early December.

Early September: CMA makes Public Records Act information demands on DMHC and governor seeking records of activities leading up to the regulation filing.

Early September: CMA Legal Center prepares lawsuit to stop implementation of the regulations.

Early September: CMA-friendly legislators offer to help with global bill including dispute resolution, adequate networks, fair contracting and medical loss ratios.

Sept. 13: DMHC holds a hearing in Burbank; CMA and physician leaders testify. Other hearings are scheduled.


HOW ARE ER DOCS IMPACTED? Billing Battle Stresses Physicians Daily

Brian Bearie, MD, medical director and chair of the emergency department at San Bernardino's St. Bernardine Medical Center, sees the ER billing issue from two perspectives, as a practicing emergency physician and as the hospital's point person for ER collections.

"I deal with the patients who come in with bills in their hands," Dr. Bearie says. "I explain that our services are not bundled with the hospital's services and that we attempt to bill their insurance companies first--but that they either didn't pay us or only paid us a fraction of our bill." Indeed, he adds, he often shows patients what his providers' charges are and what their insurers paid.

Dr. Bearie has contracts with most of the major insurers, and rarely has disputes with them. "It's the IPAs that I have a problem with," he says. "That's who the insurance companies assign responsibility to. They're the ones responsible for the bills." He says it's worse than just a problem--it's "a dirty business." In one example, he says, a large practice group took on risk for about 20,000 managed care lives in St. Bernardine's market. "My bills to them average $300," he says. "The practice group writes a check for just over $100. They say, 'This is what we pay and you're going to have to accept it.'"

John Bibb, MD, is a Los Angeles-based emergency doctor and chair of the American College of Emergency Physicians. Emergency docs generally bill less than 30 percent of a total emergency care bill, and the total is rarely higher than $400, he says. Still, emergency doctors often have to "chase down" the medical group that took on the financial risk for the patient's emergency services. "If you're contesting $200, there's a limited amount of time and energy you can devote before it's not worthwhile," he says. "Trying to take health plans to small claims court over a $200 bill is insane, so we bill the patients."

The governor's proposals could require ER physicians to deal with 300 or 400 payers around the state. "That leaves us in a very difficult situation," Dr. Bibb says. "Going through the insurance company or IPA for payment will be very expensive."

The result? "If you underpay emergency physicians in California, they'll go and practice somewhere else," Dr. Bibb predicts. The regulations would similarly affect call panels of specialists. "You can expect less participation from call panels," he says, "and if they don't back up emergency departments, you're going to see bad outcomes."


WHO PICKED THIS FIGHT? Doctors Try to Uncover the Instigators
How could something like this happen? Heads are being scratched statewide, as physician leaders trace the chain of events that could lead a seemingly physician-friendly governor to propose what some doctors are calling an intentional shot across the bow.

Physician leaders want answers and have launched projects to search public documents, from Schwarzenegger's office down. "We're asking for information on who met whom and how the issue came to the governor's attention," reports J. Brennan Cassidy, MD, chairman of the California Medical Association board of trustees. "We want to know who was proposing this kind of solution and what kind of numbers the Department of Managed Health Care has for complaints--which it hasn't been able to tell us."

Dr. Cassidy adds: "The governor decided to go after doctors because they're an easy target. We will learn what motivated him in our investigation. He doesn't have this as a personal issue, but he has staff members who've been heavily influenced by the insurance companies. They're telling him this is the way to solve the problems. But apparently no one is telling him it will reduce access to healthcare."

The California Chapter of the American College of Emergency Physicians sees the insurance industry's fingerprints as well, characterizing the proposals as "a request from the health insurance industry."

"CAL/ACEP believes the governor has received bad advice, and that the DMHC and for-profit health plans are using the regulations as a smokescreen for manipulating the marketplace for emergency care services," says CAL/ACEP in a statement. "The proposed regulations are a direct attack on physicians and their ability to pursue payment for lifesaving care and an attack on the value of those services." The organization intends to study publicly available background information from the DMHC to gauge whether the data showing alleged public concern and complaints are valid or not.

The DMHC says its actions should be no surprise. "This is not a new issue or focus for this administration," says the department, in a statement to Southern California Physician. "Over the past two years, all parties have been engaged by the DMHC in thoughtful and meaningful discussions, where every viewpoint has been aired. Unfortunately, intractable issues remain and a solution has been evasive because of the open-ended question at the end of the tunnel, which is who is responsible for payment and at what level."