Doctors Hated the No Surprises Act. Now Some Are Getting Rich Off of It.

Dan Gorenstein (DG): Many people cheered in 2020 when Congress passed a wildly popular bill to protect patients from big, out of the blue health care bills. 

Newsclip: A bipartisan compromise to ban many of the surprise medical bills / patients no longer need to worry about unexpected charges / one of the biggest consumer protection laws in the last couple decades.

Not everyone was pleased. With this lucrative billing practice cut off, some doctors expected steep pay cuts. 

That’s not exactly what happened. 

Margot Sanger-Katz (MSK): Gynecologists getting paid 600 times the average price for placing IUDs. One doctor got $330,000 for a procedure, that the average payment was somewhere in the neighborhood of $2,000. 

DG: Today, new reporting by the New York Times finds some doctors keep sending big bills, and keep getting paid. 

From the studio at the Leonard Davis Institute at the University of Pennsylvania, I’m Dan Gorenstein. This is Tradeoffs.

*****

DG: Look at us, like, we’re actually, we’re getting older. 

MSK: I know, it’s terrible.

DG: We are decidedly like middle aged human beings,

MSK: I’ve got the reading glasses now too. I can’t see my computer screen anymore.

DG: I called health care reporter Margot Sanger-Katz at The New York Times last week, who I’ve known most of my career. We both started out in local news in New Hampshire which feels like a lifetime ago.

DG: It’s been a while. It’s really nice to see you. I will be in town in May. Let’s get some popcorn.

MSK: Great. Sold. It’s like the greatest food.

DG: Margot and her colleague Sarah Kliff have just put out a classic health care story, one about well-meaning policy with pretty rough unintended consequences. 

Here’s the background. Congress passed this law in 2020 to stop what are called surprise medical bills. 

The name is sort of perfect. These bills often came as a rude surprise to patients with insurance. 

People would get hit with unexpected bills when they unwittingly saw a doctor who was outside their insurer’s approved list, so-called “out-of-network.”

One of the biggest problems was in an emergency. Patients in those moments would end up in the emergency room with no ability to choose their doctor, who was frequently out-of-network.

Ok, Margot so, you’ve covered surprise medical bills for about a decade. How big of a problem were they before this legislation passed?

MSK: So in any given year, if you went to the E.R. for almost anything, there was a pretty good chance that you were going to end up with one of these surprise bills. So this was the kind of thing that was really, um, kind of crushing for people. they would get these big bills, they would end up with medical debt. And these would often be people who thought they were doing everything right.

DG: And these bills, they weren’t small, right?

MSK: No, I mean, these would be bills for thousands or tens of thousands of dollars. You know, people would get bills from assistant surgeons who helped them with their surgery, or the anesthesiologist who placed an epidural during childbirth, who, you know, they didn’t choose. And then it also was happening a lot with the E.R. doctors themselves.

So the emergency room physicians, uh, the emergency room itself would be covered by insurance, but not the doctor that saw you in the emergency room. So I think people just felt like it was unfair and that they didn’t really have a lot of control.

DG: So the stories that we’re talking about is why Congress wanted to do something. But the question was what? And a major concern was what price should doctors get paid? And there was a big debate about how to do that. Can you walk us through what were the two camps in thinking about how the doctors should get paid?

MSK: Yeah. So, what one group of lawmakers wanted to do was say, well, let’s just figure out what are the doctors that are in network for this service? What do they get paid? We’ll look at this market and we’ll say, okay, here’s like an average amount.

And if the doctor treats someone and they’re in this surprise billing situation, we’ll just pay them that amount. So it’s kind of like just an average that’s based on what other doctors get.

Doctors in particular didn’t like this approach because they felt like it was unfair. They said, well, not every situation is average. And also maybe the insurance companies are kicking all the expensive people out of the networks in order to keep these averages low. And I really want to be able to make the case that I deserve a little bit of a higher price.  

DG: Ultimately, doctors won. They convinced Congress that the average price… it may not be good enough. 

So, Margot, walk us through what Congress decided to do instead. 

MSK: So, they still calculate this kind of average price. But they said, if you don’t think that’s good enough for you, you as a doctor can go to an arbitration system. That’s like someone a little bit like a judge, but not actually a judge. And you can make your case for why you think you should get paid more. And then the insurance company gets to make a counterargument

And each side is supposed to submit their bid for what they think is a reasonable price. And then the arbitrator, this is the judge like person, they have to decide whether the doctor or the insurer is being more reasonable. And whatever they pick, that goes. And that is the end of the story. 

DG: And that provision, rather than using the average price, and going to the arbitration system, what sometimes people will talk about, they’ll talk about similar to the baseball arbitration system, that was really sort of a big win for doctors, right?

MSK: Yeah, I mean, doctors really wanted this. I should say, you know, when this bill was being debated, doctors lobbied extremely hard.

So when Congress got really close to passing a bill where they would just get this average payment, all of a sudden, out of nowhere, there started being these television ads all around the country warning that if you that warning that members of Congress were going to take away your access to doctors and hospitals, there was something like $50 million that doctors and some of the private equity companies that finance doctors practices were spending to try to defeat this bill. And it worked.  

So doctors really wanted this. And, as I know, we’re about to talk to talk about, they were right to fight for this. I think this has really worked out to their benefit.

DG: So the law as passed was really hailed as a real win, particularly for patients, because the whole idea was to get them out of the middle. Right. Because every so many patients felt like they were, they were the collateral damage between the doctors and the insurance companies.

You and Sarah decided you and Sarah decided to, like, dig into the data on what has actually happened. And so, right, that culminates in a story with that that carries the catchy headline, a $440,000 breast reduction, how Doctors Cashed In on a Consumer Protection Law.

So you guys find that doctors have continued to charge very high prices. What were what were some of the most surprising… sorry, I had to do it at least once in this in this podcast episode… what were some of the most surprising findings?

MSK: So the main character in our story is this physician who practices in the New York metro area. He has offices in New York City, in the Hamptons, in New Jersey, and recently in Palm Beach, Florida, near the Mar-a-Lago resort. And his name is Dr. Norman Rowe.

We learned that he has trademarked the nickname Doctor Penis because he does penis enlargement procedures. But those procedures people pay for out of their pocket insurance has nothing to do with the penis procedures. 

But he has a different business. That is a big part of what he does, which is breast reduction surgeries. And breast reduction surgeries often are covered by insurance. Women who have really large breasts often end up with back and neck pain. And he basically figured out a kind of loophole in this law and that he was able to get arbitrators to pay him these extremely high prices .

So the sort of high water mark for him seems to have been $440,000 per surgery, which he received numerous times, which we can see in the public data and in a lawsuit that the insurer EmblemHealth brought against his practice.

DG: And the average going price is what?

MSK: Well, the insurer who brought this lawsuit against him, their average price is less than $10,000 for that procedure. 

He really is not the only one who has won some really eye popping amounts. We’ve found gynecologists getting paid 600 times the average price for placing IUDs, these contraceptive devices that people that women have in their uterus. One doctor got $330,000 for a procedure, that the average payment was somewhere in the neighborhood of $2,000.

There were lots and lots of examples of doctors who had successfully argued to the arbitrators not just that they deserved more than the average price, but that they deserved hundreds of times more than the average price

DG: So, Margot, you found these eye popping prices by Dr. Rowe and others, as you described, but are they the outliers? Like how common was this sort of arguably abusive practice? 

MSK: I do think in some ways they are the outliers. I mean, we were trying to highlight some of the most extreme examples that we saw. But I think that they are indications of how the system is working as opposed to just total anomalies. So here are some kind of summary statistics that really caught our eye. The number of claims being brought into the system is just enormous and growing very quickly.

So when the law was passed, federal officials thought about 17,000 of these disputes would be decided through arbitration every year.

But it turned out in the first half of last year alone, there were more than a million claims brought to arbitration. 

And the doctors aren’t just winning some of the time. The doctors are winning almost all of the time. In the last quarter, for which we have data, doctors won 88% of the cases. 

DG: And so when you talk about indications of perhaps a larger problem at play, it is that the arbiters are almost uniformly saying yes to the doctors, that that’s the that’s the like smoking gun.

MSK: I think the combination of the large and growing number of claims and the very, very high awards that doctors are, are getting suggest to me that doctors are winning almost no matter what they say. 

DG: When we come back, more on the arbitrators who set prices, what those higher prices mean for premiums, and where, if at all, Margot has seen pushback against these big bills. 

BREAK

DG: Welcome back. We’re talking with New York Times reporter Margot Sanger-Katz, about a consumer protection law that is turning out to be very lucrative for doctors. 

Margot, before the break, you described how this works when a doctor, an insurer, need to work out a price for an out-of-network patient. They end up in arbitration. Each proposes a price. The arbitrator picks one. That’s it. Decision is final. Congress set up this system to try to get a fair price all around. 

You and your colleague Sarah Kliff found doctors are consistently coming out winners, often with prices much, much higher than standard rates. 

So what do we know about who these arbitrators are and how they make their decisions?

MSK: About that, we actually don’t know very much. I am interested in learning more about these arbitrators. If you are an arbitrator and you want to talk to me about your job, please do. 

DG: What does the law say about what the arbitrator must consider?

MSK: So this actually has been the subject of litigation.

So what the law says is that the arbitrator should consider this average price that I talked about. it should also be allowed to consider some other factors. And those include how sick was the patient. Was this like a really complicated case? How experienced is the doctor. Do they have some special qualification? Are they doing some procedure that no one else can do? What are the characteristics of the market?

Biden officials basically told arbitrators initially focus on the average. That’s like the most important factor.

The doctors went to court and said, no, no, no. The law says consider all of them. Why is the Biden administration putting the thumb on the scale for this average payment? And they won that case in Texas. And so now there’s basically no guidance to the arbitrator about which of these factors is more or less important. And they can kind of weigh all of them however they feel they wish.

DG: Now, I know you spoke with a trade group that represents the arbitrators, but before I ask you about that, you said that you’re really curious about wanting to sort of better understand who these folks are. What’s, what’s the one question that’s burning you up right now? 

MSK: I’m just curious, like, how are they deciding what is reasonable? Like this was a system that was designed to get the two parties to find the middle. That’s what has happened in baseball arbitration. The reason they use the system is because you don’t want to put out a crazy high ball or low ball offer because the arbitrator will say, well, that’s crazy. I’ll just choose the other guy’s offer.

And so this whole system was designed to try to find a reasonable middle kind of number. And that’s not what’s happening. The doctors in many cases are saying $440,000 for a $10,000 surgery. Um, but they’re winning anyway. And so I think the incentives for the two sides to come close to one another have gotten broken. And I’m just wondering, like, why are the arbitrators finding that number to be more reasonable?

DG: And what did the trade group tell you that represents the arbitrators?

MSK: They said Congress set up the system this way, and they’re doing the best job that they can. And if Congress wants to change the system, like, great, they will follow the new rules, but they’re doing what they’re supposed to be doing. 

DG: You also reached out to physicians, including Dr. Rowe. 

His attorney declined to speak about an ongoing lawsuit. Still, he broadly defended his clients’ prices. 

The lawyer even told you the low prices proposed by insurers end up giving arbitrators something like “reverse sticker shock,” so they side with doctors. 

DG: Margot, I mean, are the courts an avenue for insurers to push back on this? I mean, I you know, you’ve made it clear, you know, the the awards are final. But is there a legal strategy here that the insurers are pursuing as a way to kind of change the larger rules of the game? 

MSK: They are certainly trying. there are about 20 lawsuits around the country that insurers have filed against different kinds of medical practitioners that they think are exploiting this process and behaving inappropriately in one way or another this is basically it was described to me by one expert as kind of an untested legal area. But so far, um, the insurance companies are losing in court.

DG: And so, if the courts prove to be sort of an unfruitful avenue for the insurers, do you think they’re going to go back to Washington for a solution? Also is there any interest from lawmakers in taking this up again?

MSK: So I think the answers to those questions are like almost in total opposition. I think the insurers very much would like Congress to go ahead and revisit this system. I think they’re losing. They’re losing a lot of money losing these cases. They feel like this is just not working out for them. Um, and they recognize that Congress has a lot of power to change the way the system works. 

But the appetite for fixing the problem in Congress is actually very limited. the consumer problem is fixed. I think the main reason why Congress was so interested in this issue is because it felt so unfair that regular people were getting screwed by the system.

Regular people are not getting these bills anymore. The bills are just going to the arbitrator, and then the bills are going to the insurance company. And of course, that filters down to all of us in the form of higher premiums or maybe higher deductibles. If the insurance companies and your employer are spending more and more money on health insurance like that does affect everyone, but not really in the same way. So I think the political pressure on Congress to solve a problem has kind of dissipated.

I also think this was a difficult law to pass. It was heavily lobbied. It’s sort of too technical for there to be a lot of political upside in fixing it, but they still could get hurt in the process because the doctors and the insurance companies will get mad at them and could try to hurt them politically.

DG: I mean, one of the reasons why I was really excited to talk to you about your work is because this is the kind of health care story that, from time to time, seems to sort of like grab the attention of sort of both the general public and insiders and, you know, the salacious headline again, right, $440,000 for a breast reduction.

Like it was like, what are we talking about? It’s one of those are you kidding me kind of moments, right? And so I’m really curious, what kind of reaction have you gotten to this story, both from the general public and also from members of Congress who I know, follow your work really closely.

MSK: I’ve heard from lots of people. It’s been a fun week. I’ve just been my email box is just, it’s just full of, you know, doctors saying, oh my gosh, like, I can’t believe my colleagues are doing this. It’s other doctors saying that you were really unfair to us. And you have to understand how hard it is to make a living in medicine.

I have not heard from the Hill, but I don’t think that that means that they haven’t been thinking about this and looking at this.

What was fun about covering the debate over this bill is it felt a little bit like the way Washington used to work. So much of what happens in Congress, right, is like totally partisan.

This isn’t really like that. This was a bipartisan process and they had hearings where experts came in and testified about this really important consumer issue. There was just a whole coalition of different people who were really working together in earnest to try to solve a real problem that was hurting people.

And it is like this cautionary tale that, like, even if you do this stuff in the right way, public policy is really hard and you can end up with unintended consequences. And there’s just not always an appetite to go back and do it again. 

DG: Final question. We’re in the early years of this new arbitration system, and already and already cases have grown far faster than anyone expected, as you explained. Where do you think we go next, Margot? Like based on your reporting, are there reasons to think that this is just the beginning of this trend?

MSK: If past results are any indication, I think this is on, on the rise.

In the early years, the doctors had to bring these cases themselves, and they didn’t really know how to do it. It was a new process. It was administratively complex. 

But what’s happened in the last year and a half is that new middlemen firms have come along and said, hey, I can do this for you. I can get you a lot of money.

Those firms are kind of new and they are relatively small, and they tend to be concentrated in just a couple of states so far. And I do not think that is going to continue to be the case. I think we are going to see this pattern of doctors bringing these cases to arbitration start to proliferate all around the country, as more and more of them get access to vendors who can help them do this.

DG: I know I said that was the last question, but usually that’s such a lie. Like, I was just with my mom last night and she’s on Medicare. And her premiums have climbed $200 a month. And the insurer said, this nothing about you or your care. This is just sort of like general costs going up. Ultimately a lot of us are going to indirectly through the premiums that we pay feel the pinch of this if it keeps growing. Don’t you think that’s ultimately going to put pressure on Congress to come back to this at some point?

MSK: It sure could. I agree with you. I think if this becomes a bigger and bigger problem, it’s going to affect more and more people’s budgets, more and more people’s insurance premiums, and there may be increasing political pressure for a fix. But I do think the fact that individual consumers are no longer being harmed in the same way has taken a lot of the pressure off of Congress to do something right away.

DG: Margot Sanger-Katz, thanks so much for taking the time to talk to us on Tradeoffs.

MSK: Thanks for having me back. This was fun.