MACRA’S QUALITY PAYMENT PROGRAM HAS GONE LIVE – ACTION REQUIRED IN 2017 TO AVOID PART B PAYMENT REDUCTIONS IN 2019 – QPP BASICS TO KNOW IN GETTING STARTED

A new Congress has convened, a new administration is at the helm, and repeal of the Affordable Care Act (ACA) is on the docket, an action of consequence for, among other things, the Medicare Shared Savings Program (MSSP), primary care medical homes, and other Medicare-developed alternative payment models (APMs). On the other hand, the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), establishing a Medicare Part B Quality Payment Program (QPP), is bipartisan legislation of little debate. The American Medical Association, the American Hospital Association, and over 100 other health care entities have appealed to the Administration to preserve value-based care.  https://www.premierinc.com/wp-content/uploads/2017/01/Jan-25-letter1-24-17-Administration.pdf. So, even in the midst of ACA uncertainty, MACRA and its QPP are moving forward. The Centers for Medicare and Medicaid Services (CMS), by rule, has developed a QPP structure that went live on January 1, 2017.

Continue Reading MACRA’s Quality Payment Program Has Gone Live

Medicare/Medicaid Reform and ACA Repeal on the Horizon, MACRA Moves Forward for Now

The new administration’s agenda for health care may have come into clearer focus with President-Elect Donald Trump’s nomination of House Representative Tom Price, MD, a Republican from Georgia, as Secretary of Health and Human Services (HHS) and Seema Verma, MPH, as CMS Administrator. The American Medical Association (AMA) released a statement of strong support for Congressman Price, encouraging a swift confirmation vote. “Dr. Price,” the AMA said, “has been a leader in the development of health policies to advance patient choice and market-based solutions as well as reduce excessive regulatory burdens that diminish time devoted to patient care and increase costs.”

Continue Reading President-Elect Trump Names Rep. Tom Price, MD (R-GA) as HHS Secretary, Seema Verma, Health Care Consultant, as CMS Administrator

On October 14, 2016, the Centers for Medicare & Medicaid Services (CMS) released its final rule implementing the new Quality Payment Program for physicians in lieu of the repealed sustainable growth rate factor (SGR). Rather than facing substantial annual reductions in Medicare payment fees as a result of the SGR, physicians now have two interrelated pathways to earn quality-based, cost efficient incentive payments under Medicare:  the Merit-based Incentive Payment System (MIPS) or Advanced Alternative Payment Models (Advanced APMs). MIPS consolidates three existing quality-based incentives programs – the Physician Quality Reporting System (PQRS), the Physician Value-based Payment Modifier (VM), and the Medicare Electronic Health Record (EHR) Incentive Program – while maintaining an ongoing focus on achieving quality and cost efficiencies through use of certified EHR technology (CEHRT).

Continue Reading CMS publishes Final MACRA Rule for MIPS and APM Incentives

CMS proposed rule details Medicare’s new physician “Quality Payment Program”

Reporting under new measures slated to begin in 2017

The Centers for Medicare & Medicaid Services (CMS), the federal agency responsible for Medicare payment to physicians, released a proposed rule on April 27, 2016, setting forth key provisions of its Quality Payment Program for physicians, implementing key provisions in the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). MACRA repealed the Sustainable Growth Rate (SGR) formula for annually adjusting Medicare payment to the nation’s physicians, replacing the SGR with a value-based payment system to be developed by CMS consistent with MACRA’s directives. The proposed rule has been published in the May 9, 2016 Federal Register. Comments are due by June 27, 2016.

Continue Reading MACRA on the Move!

US Supreme Court Upholds ACA Tax Credits for All Qualified Individuals Purchasing Health Insurance Through a Marketplace Exchanges

In King v. Burwell, the Court’s 6-justice majority concludes that denying ACA tax credits to individuals on federally-facilitated State exchanges is contrary to what Congress intended.

King v. Burwell, U.S. Supreme Court No. 14-114, decided June 25, 2015.

In another major challenge to the Patient Protection and Affordable Care Act (“ACA”), the federal health reform law, the U.S. Supreme Court, on a 6-3 vote, upheld the Internal Revenue Service’s regulation extending federal tax credit support provided under the ACA to all qualified individuals enrolled in a marketplace Exchange regardless of whether the State elected to operate its own Exchange or exercised its option to have the federal government do so.

The Court’s decision rests on its interpretation of the law’s language rather than on constitutional grounds. Chief Justice Roberts, writing for the majority, said the challenged language is ambiguous; however, reading that language within the context of the ACA’s overall statutory framework compels an interpretation extending availability of the law’s tax credits to all qualified individuals purchasing coverage through an Exchange whether state-operated or federally-facilitated. The limited reading furthered by the petitioners “would destabilize the individual insurance market in any State with a Federal Exchange, and likely create the very ‘death spirals’ that Congress intended the Act to avoid.”

The limited reading furthered by the petitioners “would destabilize the individual insurance market in any State with a Federal Exchange, and likely create the very ‘death spirals’ that Congress intended the Act to avoid.”

The petitioners in King v. Burwell specifically pointed to ACA language making tax credits available to low and moderate income individuals purchasing health insurance coverage through an “Exchange established by the State.” The government argued in response that each State is required by the ACA “to establish” a marketplace Exchange and may do so, as allowed by the ACA, by either operating its own Exchange or defaulting to operation by the federal government. Facts before the Court showed that in 2014, 16 states operated their own Exchanges while 34 were federally facilitated. Of the 7.3 million individuals who purchased health insurance coverage through an Exchange, 5.4 million did so through federally-facilitated Exchanges and approximately 87% of those individuals were eligible for tax credits.

Petitioners’ arguments about the plain meaning of the challenged language are strong, the Court said, when viewed in isolation, but other language in the law, as highlighted by the Court, supports tax credit availability to qualified individuals purchasing insurance coverage on an Exchange regardless of operational source. Its task is to establish meaning within context. “A fair reading of legislation demands a fair understanding of the legislative plan.”

The Court noted that Congress based the ACA on three major reforms:

1) guaranteed issue and community rating requirements; 2) mandated individual insurance coverage at the risk of tax penalty; and 3) tax credits for individuals with household incomes between 100%-400% of federal poverty. Denying tax credits, a fundamental aspect of the ACA’s reform strategy, to individuals in federally-facilitated Exchange states would lead to substantially different operations and outcomes under this law in some states than in others, an implausible reading of what Congress intended. The Court referenced a study predicting that denying tax credits in federally-facilitated Exchange states would result in premium increases of 47% and enrollment decreases of 70% while another study predicted premium increases of 35% and enrollment decreases of 69%; collateral impacts also would result in insurance markets outside an Exchange. “[Tax] credits are necessary for the Federal Exchanges to function like their State Exchange counterparts, and to avoid the type of calamitous result that Congress plainly meant to avoid.”

The Court’s ruling is important to Iowa.

Iowa’s Exchange is federally-facilitated. Technically, Iowa operates a partnership Exchange, relying upon the participant enrollment technology of the federal government while retaining plan management and consumer assistance functions through the Iowa Insurance Division. Of the 45,000 Iowans on Iowa’s marketplace exchange in 2015, more than 33,000 were eligible for tax credit support.

The Senate passed H.R. 2, the Medicare Access and CHIP Reauthorization Act (MACRA), on a vote of 92-8. Iowa’s Senators Joni Ernst and Charles Grassley voted in favor of the bill. The Senate considered amendments to the bill as passed by the House, but none were adopted. The H.R. 2 now goes to the President who has said he will sign the bill.

The bill immediately repeals the SGR and, of interest to Iowa physicians, extends the 1.0 Work GPCI floor through 2017. Physicians will receive an annual update of 0.5% for the next five (5) years, with the first update slated for July 1, 2015, and annual 0.5% updates effective on January 1 in each year 2016-2109. A fuller explanation of the bill is available from an earlier posting: click here to read.

CMS had placed a 10-day hold on submitted claims for services provided on April 1 and after which otherwise would have been paid at a rate reflecting the 21% SGR cut and loss of the 1.0 Work GPCI floor, both of which were effective as of April 1. Those claims, however, now can be paid at the same rate as in effect on March 31. Any claims that may have been paid at a rate reflecting the 21% SGR cut will be reprocessed by CMS and do not require further action by providers who submitted the claims.

BIPARTISAN HOUSE VOTE TO REPEAL THE SGR – 0.5% PHYSICIAN INCREASE EACH YEAR THROUGH 2019 — EXTENSION OF THE 1.0 WORK GPCI FLOOR THROUGH 2017 – NO ICD-10 DELAY

Senate to Vote When It Returns – CMS Issues Payment Advisory

The House of Representatives took what the House of Medicine rightfully can call a historic vote late in the evening of March 26 to really, truly repeal the SGR and to provide the nation’s physicians with minimal but predictable 0.5% Medicare physician payment increases beginning July 1, 2015, and continuing for each year through calendar year 2019.

H.R. 2, the Medicare Access and CHIP Reauthorization Act (MACRA), passed the House on a strong bipartisan vote of 392-37. Iowa’s congressional delegation split. Iowa Representatives David Loebsack and David Young voted in favor of the bill; Representatives Rod Blum and Steve King voted against it.

H.R.2 moved to the Senate on the heels of the congressional April recess. The Senate took no action but Senate leadership indicated the likelihood of passage of SGR repeal upon the Senate’s April 13 return. It is not clear whether the Senate will support all other provisions now in H.R. 2 or seek to amend the bill. The President has indicated his support for permanent SGR repeal.

The 21% SGR payment reduction will go into effect on April 1. CMS issued a payment advisory on March 24 in light of the looming April 1 date, clarifying that all claims for services rendered on or before March 31 would not be affected if the SGR went into effect on April 1; those claims would be paid under the physician fee schedule now in effect. Under current payment processes, CMS would not pay claims for services rendered on or after April 1 until 14 calendar days after electronic receipt or 29 calendar days after paper receipt of such claims. In light of the Senate’s decision to not take a vote on H.R. 2 prior to recess, CMS has advised Medicare carriers to hold claims for services provided on or after April 1 for 10 days to avoid any need to make payment adjustments in this interim time period. The Iowa Medical Society’s website (www.iowamedical.org) provides billing guidance to its physician members for services provided on April 1 and onward until repeal legislation is finally approved.

H.R. 2, the MACRA bill, is a “bill within a bill,” incorporating Medicare physician payment reform provisions set forth in H.R. 1470, a bipartisan, bicameral committee bill, and including provisions of its own addressing Medicare extenders and payment offsets. Key provisions of H.R. 1470/H.R. 2 include the following:

  • Immediate and permanent SGR repeal.
  • A positive 0.5% annual physician Medicare payment update, with the first update to occur on July 1, 2015, and then in each of calendar years 2016-2019. MedPAC must submit reports to Congress in 2019 evaluating the impact of the 2015-19 updates on beneficiary access and quality care and making recommendations on further updates. Medicare rates in effect in 2019 would be maintained through 2025, shifting focus to payment increases through incentives for achieving identified quality program goals.
  • Consolidation of three current Medicare quality reporting programs – the Physician Quality Reporting System (PQRS), the Value-Based Modifier (VBM), and Meaningful Use for EHRs (EHR MU) – into a simplified, merit-based incentive payment system (MIPS), effective in calendar year 2019. Eligible professionals, including physicians and several other health professionals, will be measured on four areas of performance: quality; resource use; EHR meaningful use; and clinical practice improvement. Public reporting of results is addressed.
  • A 5% incentive payment to those physicians who participate in alternative payment models and meet certain performance thresholds.
  • The 1.0 Work GPCI floor is extended through December 2017, a provision of benefit to Medicare Part B payment localities like Iowa with labor costs set by CMS at lower than the national average.
  • The therapy cap exceptions process is extended through December 2017, allowing patients who exceed Medicare’s annual per-patient therapy expenditure limit to ask for an exception based on medical necessity.
  • Funding for Community Health Centers (CHC) and National Health Service Corps Fund (NHSC) and Teaching Health Centers is extended through fiscal year 2017.
  • The Children’s Health Insurance Program (CHIP) program and funding for it is extended through fiscal year 2017. While CHIP has been authorized through 2019, current funding for CHIP is slated to end at the close of the 2015 fiscal year. H.R. 2 also extends funding support for several CHIP-related programs.
  • Guidelines or standards developed and/or implemented under any Federal health care provision, including Medicare, cannot be construed on their own as standards or duties of care owed by a health care professional to a patient in any medical malpractice action or claim. This provision is not meant to preempt any state or common law governing medical malpractice actions or claims.
  • Electronic health records must be interoperable by 2018.
  • The Government Accounting Office (GAO) shall issue a report on barriers to expanded use of telemedicine and remote patient monitoring.
  • Funding offsets to meet the $140 billion estimated costs of this legislation require, among other things, that effective with new plans sold in 2020, beneficiaries new to Medicare must have the same deductible under their private Medigap insurance policies as they have under Medicare Part B; currently that amount is $147 per year. In addition, beginning in 2018, bump-up Part B and Part D premium amounts that Medicare beneficiaries with higher annual incomes now must pay would be increased. Too, a scheduled one-time 3.2% hospital payment increase in fiscal year 2018 would instead by phased-in at 0.5% increases each year over 6 years beginning in fiscal year 2018.

H.R. 2 does not extend the October 1, 2015 effective date for implementation of ICD-10. The ICD-10 Coalition, with membership including the American Hospital Association (AHA), American’s Health Insurance Plans (AHIP), the American Health Information Management Association (AHIMA), and the BlueCross and Blue Shield Association (BCBSA) – hailed the lack of extension, claiming that ICD-10 coding will assure the availability of data needed to accurately assess quality and value.

Further details about H.R. 2 and incorporated provisions of H.R. 1470 can be found in summaries prepared by staff of the House Committees on Energy and Commerce and Ways and Means.

http://energycommerce.house.gov/sites/republicans.energycommerce.house.gov/files/114/Analysis/20150324-HR2-SectionbySection.pdf

The text of the bill is available at http://www.gpo.gov/fdsys/pkg/BILLS-114hr2ih/pdf/BILLS-114hr2ih.pdf

.05% PHYSICIAN INCREASE EACH YEAR THROUGH 2019

EXTENSION OF THE 1.0 WORK GPCI FLOOR THROUGH 2017

NO ICD-10 DELAY
Senate to Vote When It Returns – CMS Issues Payment Advisory

The House of Representatives took what the House of Medicine rightfully can call a historic vote late in the evening of March 26 to really, truly repeal the SGR and to provide the nation’s physicians with minimal but predictable 0.5% Medicare physician payment increases beginning July 1, 2015, and continuing for each year through calendar year 2019.

H.R. 2, the Medicare Access and CHIP Reauthorization Act (MACRA), passed the House on a strong bipartisan vote of 392-37. Iowa’s congressional delegation split. Representatives David Loebsack and David Young voted in favor of the bill, Representatives Rod Blum and Steve King voted against it.

H.R.2 moved to the Senate on the heels of the congressional April recess. The Senate took no action but Senate leadership indicated the likelihood of passage of SGR repeal upon the Senate’s April 13 return. It is not clear whether the Senate will support all other provisions now in H.R. 2 or seek to amend the bill. The President has indicated his support for permanent SGR repeal.

The 21% SGR payment reduction will go into effect on April 1. CMS issued a payment advisory on March 24 in light of the looming April 1 date, clarifying that all claims for services rendered on or before March 31 would not be affected if the SGR went into effect on April 1; those claims would be paid under the physician fee schedule now in effect. Under current payment processes, CMS would not pay claims for services rendered on or after April 1 until 14 calendar days after electronic receipt or 29 calendar days after paper receipt of such claims. In light of the Senate’s decision to not take a vote on H.R. 2 prior to recess, CMS has advised Medicare carriers to hold claims for services provided on or after April 1 for 10 days to avoid any need to make payment adjustments in this interim time period. The Iowa Medical Society’s website (www.iowamedical.org) provides billing guidance to its physician members for services provided on April 1 and onward until repeal legislation is finally approved.

H.R. 2, the MACRA bill, is a “bill within a bill,” incorporating Medicare physician payment reform provisions set forth in H.R. 1470, a bipartisan, bicameral committee bill, and including provisions of its own addressing Medicare extenders and payment offsets. Key provisions of H.R. 1470/H.R. 2 include the following –

• Immediate and permanent SGR repeal.

• A positive 0.5% annual physician Medicare payment update, with the first update to occur on July 1, 2015, and then in each of calendar years 2016-2019. MedPAC must submit reports to Congress in 2019 evaluating the impact of the 2015-19 updates on beneficiary access and quality care and making recommendations on further updates. Medicare rates in effect in 2019 would be maintained through 2025, shifting focus to payment increases through incentives for achieving identified quality program goals.

• Consolidation of three current Medicare quality reporting programs – the Physician Quality Reporting System (PQRS), the Value-Based Modifier (VBM), and Meaningful Use for EHRs (EHR MU) – into a simplified, merit-based incentive payment system (MIPS), effective in calendar year 2019. Eligible professionals, including physicians and several other health professionals, will be measured on four areas of performance: quality; resource use; EHR meaningful use; and clinical practice improvement. Public reporting of results is addressed.

• A 5% incentive payment to those physicians who participate in alternative payment models and meet certain performance thresholds.

• The 1.0 Work GPCI floor is extended through December 2017, a provision of benefit to Medicare Part B payment localities like Iowa with labor costs set by CMS at lower than the national average.

• The therapy cap exceptions process is extended through December 2017, allowing patients who exceed Medicare’s annual per-patient therapy expenditure limit to ask for an exception based on medical necessity.

• Funding for Community Health Centers (CHC) and National Health Service Corps Fund (NHSC) and Teaching Health Centers is extended through fiscal year 2017.

• The Children’s Health Insurance Program (CHIP) program and funding for it is extended through fiscal year 2017. While CHIP has been authorized through 2019, current funding for CHIP is slated to end at the close of the 2015 fiscal year. H.R. 2 also extends funding support for several CHIP-related programs.

• Guidelines or standards developed and/or implemented under any Federal health care provision, including Medicare, cannot be construed on their own as standards or duties of care owed by a health care professional to a patient in any medical malpractice action or claim. This provision is not meant to preempt any state or common law governing medical malpractice actions or claims.

• Electronic health records must be interoperable by 2018.

• The Government Accounting Office (GAO) shall issue a report on barriers to expanded use of telemedicine and remote patient monitoring.

• Funding offsets to meet the $140 billion estimated costs of this legislation require, among other things, that effective with new plans sold in 2020, beneficiaries new to Medicare must have the same deductible under their private Medigap insurance policies as they have under Medicare Part B; currently that amount is $147 per year. In addition, beginning in 2018, bump-up Part B and Part D premium amounts that Medicare beneficiaries with higher annual incomes now must pay would be increased. Too, a scheduled one-time 3.2% hospital payment increase in fiscal year 2018 would instead be phased in over 6 years beginning in fiscal year 2018.

H.R. 2 does not extend the October 1, 2015 effective date for implementation of ICD-10. The ICD-10 Coalition, with membership including the American Hospital Association (AHA), American’s Health Insurance Plans (AHIP), the American Health Information Management Association (AHIMA), and the BlueCross and Blue Shield Association (BCBSA) – hailed the lack of extension, claiming that ICD-10 coding will assure the availability of data needed to accurately assess quality and value.

Further details about H.R. 2 and incorporated provisions of H.R. 1470 can be found in summaries prepared by staff of the House Committees on Energy and Commerce and Ways and Means.

http://energycommerce.house.gov/sites/republicans.energycommerce.house.gov/files/114/Analysis/20150324-HR2-SectionbySection.pdf

The text of the bill is available at http://www.gpo.gov/fdsys/pkg/BILLS-114hr2ih/pdf/BILLS-114hr2ih.pdf.

MONOPSONY AS A VIABLE THEORY, BUT REQUIRING THE RIGHT FACTS

Mueller v. Wellmark, Inc., Iowa Supreme Court No. 13-1872 (filed February 27, 2015)

Physicians long have been in tough negotiation positions with large, often dominant commercial health insurers. In its 13th edition report, “Competition in Health Insurance – A Comprehensive Study of U.S. Markets,” the AMA found, based on 2012 data, that 72% of the nation’s metropolitan commercial health insurance markets are highly concentrated as measured against federal antitrust guidelines. Concentration raises a red flag on the ability of a market to compete.  In 41% of those metropolitan markets, a single commercial health insurer had at least a 50% market share. Seventeen states, including Iowa, had a single health insurer with a statewide commercial market share of 50% or more. Such marketplace dynamics sometimes lead the nation’s physicians to conclude they have little choice but to accept what commercial insurers offer to them.

Federal and state antitrust laws are designed to protect consumers from certain harmful behaviors of market players. A decision entered by the Iowa Supreme Court at the end of February of this year examined whether Wellmark BlueCard® and Wellmark third party administrator agreements amounted to per se price fixing prohibited by the Iowa Competition Law. In this case, the Court was not called upon to discuss Wellmark’s dominance in Iowa’s commercial health insurance market; per se price fixing, if established, violates the antitrust laws regardless of market power. Nonetheless, the Court’s discussion in this case is instructive for physicians and other providers who contract with dominant commercial health insurers like Wellmark.

In Mueller v. Wellmark, plaintiff chiropractors challenged Wellmark Blue Cross and Blue Shield of Iowa (Wellmark) and its HMO, Wellmark Health Plan of Iowa (WHPI), of conspiring to set prices paid to its contracted providers of health care services with out-of-state Blue Cross Blue Shield Association (BCBSA) affiliates through the BlueCard® program and with in-state self-funded employers administered by Wellmark and utilizing Wellmark’s provider networks. BCBSA affiliates, through the BlueCard® program, pay Iowa claims at Wellmark rates even if the affiliate’s reimbursement rates for the same services when provided to the affiliate’s insureds are higher or lower. In the same vein, self-funded employers who enter into an administrative contract with Wellmark that includes use of Wellmark’s provider network to reimburse providers consistent with Wellmark’s fee schedule.

The plaintiffs alleged that these Wellmark agreements amounted to per se price fixing in violation of Iowa’s Competition Law, Iowa Code chapter 553. A per se price fixing agreement is considered so pernicious and predictable in its anticompetitive effect that no marketplace justification can support the pricing arrangement. If a plaintiff successfully establishes per se price fixing, the antitrust laws are violated and damages are due.

The district court, in its examination of this issue, concluded that the facts surrounding these agreements did not support a finding of per se antitrust price fixing. The Iowa Supreme Court agreed. In making its findings and arriving at its conclusions, the Court addressed “monopsony” arguments important to commercial health insurance reimbursement arrangements with contracted providers.

Pricing challenges under the antitrust laws most commonly address the ability of market players to increase prices charged to consumers in the sale of their product; this scenario raises antitrust “monopoly” concerns.  On the other hand, pricing challenges by providers who contract with commercial health insurers relate to the ability of insurers to lower prices for services purchased from providers; this scenario raises antitrust “monopsony” concerns, an arena infrequently addressed by the regulators and the courts.

The Iowa Supreme Court acknowledged that monopsony-like arrangements to lower reimbursement rates to medical providers can pose competitive threats – i.e., resultant “suboptimal output, reduced quality, allocative inefficiencies, and (given the reductions in output) higher prices for consumers in the long run.” Nonetheless, the Court rested its decision in this case on other grounds. Wellmark’s agreements, the Court said, were not per se price fixing as much as they were joint ventures.

The Court explained that self-funded employers have not agreed with Wellmark to fix prices, rather they have purchased a package of claims-administration services which include Wellmark’s negotiated pricing structure. The resultant marketplace impact of these agreements for consumers is self-funded insurance options through employers who, themselves, lack the resources needed to establish a comprehensive provider fee schedule. Similarly, the BlueCard® program allows Wellmark to offer a 50-state product that meets the needs of its insureds without having to maintain a provider network and rate structure in each of these states where it has relatively few claims; BlueCard® agreements are not meant to fix prices, rather they seek to achieve economies of scale to the benefit of consumers.

The per se price fixing issue before the Court was a narrow one. As such, the Court’s conclusion also is narrow. Importantly, the Court went on to explain that an examination of the antitrust implications of these agreements – which, the Court said, are widespread in the health insurance marketplace – calls for a “rule of reason” analysis to assure consideration of both their procompetitive and their anticompetitive effects. The issue before the Court did not allow a rule-of-reason examination nor had facts been presented to support a rule-of-reason analysis.

The underlying impact of these challenged agreements for Iowa providers is a greater number of players in the commercial health insurance market place utilizing a market-dominant commercial insurer’s provider fee schedule, for ill or for good. According to the AMA’s report cited above, Wellmark controls 50% of the Iowa statewide commercial health insurance market, placing our state’s commercial health insurance marketplace as the 17th most concentrated among the 50 statewide and DC markets. In the Iowa PPO market alone, Wellmark has a 79% share. While the Court in this case was not faced with a rule-of-reason issue, the Court noted in closing: “We are not today foreclosing a rule of reason claim against Wellmark if it were shown that the anticompetitive consequences of its practices exceeded their procompetitive benefits.”

The plaintiffs’ per se price fixing claims against Wellmark were not successful here. The Court’s reasoning in rejecting the per se approach was well supported in law and fact. A beneficial outcome of the decision, however, is the Court’s recognition of antitrust monopsony theories and likely elements of a viable monopsony challenge by providers of medical services against market dominant commercial insurers.

Mounting such a challenge requires credible marketplace facts and, ultimately, compelling evidence of negative marketplace impacts upon consumers. Defining geographic and product markets demands expertise, time, and great expense. In the end, practices that may be anticompetitive and harmful to providers may, nonetheless, be procompetitive and beneficial to consumers, the ultimate beneficiaries of the antitrust laws. Antitrust challenges by providers of medical services present no easy task, indeed.

HOSPITAL CHARGING STRUCTURE SURVIVES CHALLENGES IN THE IOWA COURTS

Butts et al. v. Iowa Health System and Central Iowa Hospital Corp., Iowa Court of Appeals, No. 13-1034 (filed March 11, 2015)

Complaints about hospital and medical costs and bills are legion. This week the Iowa Court of Appeals decided a case challenging hospital billing practices and their impact on uninsured, private paying patients. While Iowa Court of Appeals decisions cannot be cited as legal authority unless or until approved for publication by the Iowa Supreme Court, the Appeals Court’s discussion and conclusions in this case may be instructive.

Plaintiffs were uninsured, private paying patients who had received hospital care at Iowa Methodist Medical Center (IMMC) in Des Moines. The plaintiffs filed their action against Iowa Health System (IHS) and the Central Iowa Hospital Corporation; IMMC (as well as Iowa Lutheran Hospital and Methodist West) is operated by the Central Iowa Hospital Corporation which, in turn, is an IHS subsidiary. As private pay or self-pay patients, the plaintiffs were billed directly for the care and medical services they received at IMMC; two of the patients paid their bills in full, one made no payments, and the fourth continued to make regularly scheduled payments.

The crux of the plaintiffs’ complaint was what they called the hospital’s “two-tiered pricing scheme,” resulting in what they alleged were unreasonable rates charged to uninsured patients in comparison to charges for services received by patients who are insured. The plaintiffs, among other things, claimed hospital breach of contract and violations of Iowa’s Consumer Fraud Act.

The plaintiffs had filed a motion asking the district court to convert their case into a class action lawsuit. They defined the class to include all Iowa residents from year 2000 to the present who were billed (or against whom collection efforts were made) for hospital services by or on behalf of any hospital or facility owned, operated, or managed by IHS or Central Iowa Hospital Corporation and who were uninsured at the time they were patients in the hospital. The district court determined that the class was overly broad and denied the plaintiffs’ motion for failure to satisfy legal requirements for class certification. The Iowa Court of Appeals agreed, particularly noting that the reasonableness or unreasonableness of a billing charge received by an uninsured patient must be measured against facts peculiar to each such patient, including the services they received and actual charges imposed upon them. “The management of the proposed class suit would pose unusual difficulties and would be impractical and inefficient, thereby rendering the class vehicle inappropriate.”

Moving on to the plaintiffs’ allegations, the Court of Appeals first looked to the facts. Each hospital in the IHS system utilizes a hospital-specific “Chargemaster” computer file containing rate information for that hospital’s procedures, services, supplies, and medications. Patients are billed or charged based upon the hospital-specific Chargemaster rates, but not all patients pay the same amount for the same service. Many health insurers negotiate amounts they will pay; government programs like Medicare and Medicaid have fee schedules establishing amounts they will pay for each hospital service; and uninsured patients sometimes qualify for and receive financial assistance and other discounts. IHS’ Des Moines hospitals showed that from 2000-2010, their charges to self-paying patients totaled $202 million, of which those uninsured patients paid $17 million due to discounts, write-offs, and uncollected debt.

To support their breach of contract claim, the plaintiffs looked to an agreement each had signed stipulating that they would pay for their medical care according to the hospital’s “regular rates and terms.” This terminology, they claimed, constitutes an indefinite, open-ended pricing term requiring determinations of reasonableness by the court. Neither the district court nor the Court of Appeals agreed. “As a general rule, where there is an agreement to pay for medical services in accord with the hospital’s regular rates and terms, the contract is not indefinite,” the Appeals Court concluded. Earlier, in its findings of fact, the Court noted that patients can, and sometimes do, request hospital Chargemaster rate information.

The Court of Appeals, like the district court, also found no merit to the plaintiffs’ allegations of hospital violation of Iowa’s Consumer Fraud Act, Iowa Code chapter 714H. That law sets forth processes for filing private causes of action for consumer fraud. However, as the Court found, section 714H.4 specifically excludes hospital services from its reach.

In closing, the Court of Appeals cited with favor to statements made by a federal court in deciding a case similar to this one. “This action seeks judicial intervention in a political morass,” the federal court said. It is not for the courts to determine what a reasonable charge is for each hospital service. “For a court to presume to address these problems would be rushing in where angels fear to tread.” In these types of cases, plaintiffs are asking the courts “put simply, to solve the problems of the American health care system, problems that the political branches of both the federal and state governments and the efforts of the private sector have, thus far, been unable to resolve.”

Plaintiffs in this case could seek further review by the Iowa Supreme Court. The decisions of the district court and the Iowa Court of Appeals, however, leave little reason to suspect that different factual findings and conclusions of law would be reached by the Iowa Supreme Court.  Nonetheless, more yet may come from the Iowa courts on this matter.