Journal
HEALTH AFFAIRS
Volume 40, Issue 1, Pages 130-137Publisher
PROJECT HOPE
DOI: 10.1377/hlthaff.2020.00217
Keywords
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Funding
- Arnold Ventures
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The study found that New Jersey arbitration decisions closely track with the eightieth percentile of provider charges, with the median decision being 5.7 times prevailing in-network rates. Arbitrators may not necessarily choose winning offers based on proximity to this target, but the results suggest it is a strong anchor. Providers can impact negotiations with insurers through the arbitration process, potentially affecting in-network negotiated rates.
In 2018 New Jersey implemented a final-offer arbitration system to resolve payment disputes between insurers and out-of-network providers over surprise medical bills. Similar proposals are being considered by Congress and other states. In this article we examine how arbitration decisions compare with other relevant provider payment amounts by linking administrative data from New Jersey arbitration cases to Medicare and commercial insurance claims data. We find that decisions track closely with one of the metrics that arbitrators are shown-the eightieth percentile of provider charges-with the median decision being 5.7 times prevailing in-network rates for the same services. It is not a foregone conclusion that arbitrators will select winning offers based on proximity to this target, although our findings suggest that it is a strong anchor. The amount that providers can expect to receive through the arbitration process also affects their bargaining leverage with insurers, which could affect in-network negotiated rates more broadly. Therefore, basing arbitration decisions or a payment standard on unilaterally set provider-billed charges appears likely to increase health care costs relative to other surprise billing solutions and perversely incentivizes providers to inflate their charges over time.
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