Three weeks before a new ban on surprise medical billing is set to start, hospital and doctor groups have filed suit to block part of it.
The suit, from the American Medical Association, the American Hospital Association and a handful of individual hospitals and providers, argues that regulators in the Biden administration have misread the law’s language — and that their faulty interpretation will harm medical providers.
The lawsuit does not seek to gut the law’s consumer protections, but could influence contract negotiations between insurers and health care providers. If successful, the lawsuit could influence which doctors and hospitals choose to go in network with insurers, and could lead to higher insurance premiums.
Other parties, including consumer groups, employers, insurance companies and members of Congress who wrote the law, have supported the regulation.
The bipartisan law, which passed after years of study and negotiation in Congress, is meant to prevent patients from getting a surprise bill from a doctor who doesn’t take their insurance when they visit a hospital that does accept it. It addresses a significant problem in the health system: Nearly 20 percent of patients who visit an emergency room are treated by an out-of-network provider, according to several studies. High shares of patients are also vulnerable to such bills when they are treated by anesthesiologists, pathologists or radiologists whom they did not select.
The legislation, which bans surprise bills starting Jan. 1, prevents such doctors from billing patients directly. When the doctor and the insurance company can’t agree on a fair price, the law establishes an arbitration system in which the parties can seek a decision from a neutral expert.
The law specifies that the arbiter should look to a typical price paid to doctors covered by insurance — the median in-network price. And the arbiter is expected to consider other factors, such as the doctor’s experience, the number of other providers nearby, and the severity of the patient’s illness. In their lawsuit, the medical providers say the Biden administration’s instructions for arbiters lean too heavily on the typical price; they think the arbiter should be free to weigh all of the different factors equally.
“The departments have no authority to discard Congress’s judgment that training and experience are important considerations in determining the appropriate payment rate, even if they disagree with it,” the lawsuit says.
Doctors and hospitals lobbied furiously when Congress was considering the legislation, helping to scuttle an earlier bill that would have required the typical price without allowing an arbitration process. A dark money group funded by large physician practices spent tens of millions of dollars on television ads and direct mail to voters, encouraging them to tell their legislators not to support the bill.
When the final version of the legislation was passed with the arbitration option added, it was applauded by both insurers and medical providers.
As regulators at the Department of Health and Human Services, the Treasury Department and the Department of Labor have worked on the rules, industry lobbying on all the details has continued.
In a comment supporting the regulation, the Business Group on Health, which represents large employers, called the rule “a thoughtful and balanced approach to the interests of the various stakeholders.” In its supportive comments, the American Heart Association said the rule “will produce reliable and consistent results that do not have an inflationary impact on health care costs.”
The Congressional Budget Office noted that the solution was likely to lower payments to doctors who worked in specialties where surprise billing was widespread.
People involved in the fight over surprise billing said they were not surprised about the lawsuit. “There’s a lot of money at stake here, and it’s not at all surprising that the provider groups would sue in order to hold onto some of the payments they are receiving today,” said Matthew Fiedler, a fellow at the Brookings Institution.
According to the lawsuit, the regulation will discourage insurers from reaching agreements with doctors and hospitals, and will instead push them to seek lower payments through routine use of arbitration.
The suit includes affidavits from two hospital executives who say they are confident the regulations will cause insurers to cancel contracts or demand that hospitals lower their fees. The lawsuit asks a court to eliminate the instructions about the weighing of factors. Consumer protections would remain in effect if they won.
Mr. Fiedler offered a contrasting view from the doctors, saying a less predictable arbitration process could lead to fewer clinicians who are in network, as more of them rely on arbiters to settle payment disputes.
Some members of Congress who worked on the legislation have offered similar criticisms of the regulation, saying it was not what they intended when the wrote the bill. But other key authors have endorsed the regulatory approach.
In order to win the suit, the medical providers will need to show that the Biden administration was “arbitrary” or “capricious” in its interpretation of the law or that it lacked statutory authority, a high standard. The language of the legislation says arbiters should consider the various factors, but does not specify how they should be weighed.