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LOOAL PROCESSING DIVISION 


PUBLICATION & REGULATIONS 


BRANCH As of: August 26, 2010 

Received: August 26, 2010 

Status: Posted 

Posted: August 26, 2010 

Tracking No.80b3b8d6 

PUBLIC 

SUBMISSION Comments Due: September 27, 2010 

Submission Type: Web 

Docket: IRS-2010-0015 

Requirements for Group Health Plans and Health Insurance Issuers under the Patient Protection 

and Affordable Care Act 

Comment On: IRS-2010-0015-0001 

Requirements for Group Health Plans and Health Insurance Issuers under the Patient Protection 

and Affordable Care Act: 

Document: IRS-2010-0015-001O 


Comment on FR Doc # 2010-15277 


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Submitter Information 

Name: John Vincent Drucker 


Address: 


460 Summit Avenue 

Mill VAlley, CA, 94941 


Phone: 415-378-9131 


Organization: None 


General Comment 

Re: Comment on 45 CFR 147.138(b)(3) 

Suggested changes: 

(1) As currently written, the proposed regulations could be construed to impose on plans an 

obligation to pay more than billed charges to emergency room professional and hospitals. "Or 

billed charges, if less" language should be added to these regulations --at end of section 147.138 

(b)(3) -- to clarify this is not intended by these new regulations .. 

(2) The proposed regulations require a plan to pay at least what Medicare would pay for 

emergency charges. The Medicare payment number should be increased by a factor that adjusts 

for the payment rate over-and-above Medicare rates that commercial payers are reimbursing 

physicians or hospitals. This adjustment-factor can be readily determined (at no cost to a plan or 

DOL) as such an adjustment-factor is currently being annually calculated and reported by 

MedPAC. 

(3) Additional consumer-protection safeguards should be added to minimize the balance billing 

obligations of consumers for the emergency services covered by these regulations. 

(i) If a plan uses secondary PPO networks, negotiations, or other arrangements to reduce the 

https:1 Ifdms.erulemaking.netlfdms-web-agency IcomponentisubmitterInfoCoverPage?Call=... 8/26/2010 
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amount owed for out-of-network emergency services, any such reduction from billed out-ofnetwork charges will first accrue to the benefit of reducing the consumer's balance billing 

obligation before the plan reduces its payment obligation; 

(ii) a plan will provide beneficiaries with the data-points it uses to calculate it's out-of-network 

payment obligation so that the beneficiary might use this data to negotiate a reduction in he'r/his 

balance billing obligation. 

(iii) (iii) If the balance billing obligation is for facility charges, hospitals will provide the 

beneficiary with an estimate of an amount that is "no more than the lowest amount charged to 

individuals who have insurance covering such care." (current data requirement for charity 

hospitals per Patient Protection and Affordable Care Act(Sec. 9007 (a)(5)(A) 

Attachments 

IRS-2010-001S-0010.1: Comment on FR Doc # 2010-15277 

https:/ Ifdms.erulemaking.netlfdms-web-agency IcomponentlsubmitterInfoCoverPage ?Call=... 8/26/2010 
Vincent Drucker 


460 Summit Avenue, Mill Valley, CA 94941 


415-378-9131 jvdrucker@yahoo.com 


Re: Comment on 45 CFR 147.l38(b)(3) -- (Patient Protection Regulations pertaining to requiring 

non-grandfathered plans to reimburse appropriately for out-of-network emergency charges) 

Suggested changes: 

(I) As currently written, the proposed regulations could be construed to impose on plans an 

obligation to pay more than billed charges to emergency room professional and hospitals. 

"Or billed charges, if less" language should be added to these regulations --at end of 

section 147. I 38(b)(3) -- to clarify this is not intended by these new regulations .. 

(2) The proposed regulations require a plan to pay at least what Medicare would pay for 

emergency charges. The Medicare payment number should be increased by a factor that 

adjusts for the payment rate over-and-above Medicare rates that commercial payers are 

reimbursing physicians or hospitals. This adjustment-factor can be readily determined (at 

no cost to a plan or DOL) as such an adjustment-factor is currently being annually 

calculated and reported by MedPAC. 

(3) Additional consumer-protection safeguards should be added to minimize the balance 

billing obligations of consumers for the emergency services covered by these regulations. 

(i) 	 If a plan uses secondary PPO networks, negotiations, or other arrangements to 

reduce the amount owed for out-of-network emergency services, any su~h 

reduction from billed out-of-network charges will first accrue to the benefit of 

reducing the consumer's balance billing obligation before the plan redu(:es its 

payment obligation; 

(ii) 	 a plan will provide beneficiaries with the data-points it uses to calculate it's outof-network payment obligation so that the beneficiary might use this da1a to 

negotiate a reduction in herlhis balance billing obligation. 

(iii) 	 If the balance billing obligation is for facility charges, hospitals will provide the 

beneficiary with an estimate of an amount that is "no more than the low4~st 

amount charged to individuals who have insurance covering such care." (current 

data requirement for charity hospitals pursuant to Patient Protection and 

Affordable Care Act(Sec. 9007 (a)(5)(A) 

Further Discussion Of The Suggested Changes 

(I) "Or billed charges, if less" language should be added to these regulations --at end of 

section 147.138(b)(3) -- to clarify the intention of these new regulations. 

Sometimes billed charges will be less than the payment amounts calculated pursuant to thi~se 

regulations. Although the examples in the proposed regulations do not show this occurring, it is 

most likely to be the case when payments are based on VCR data. 
The UCR rates used in Example 4 (page 37421, Federal Register, Vol. 75, No 123, Monday June 

28, 2010) are, in my professional opinion, I significantly understated. 

• 	 UCR rates for professional fees for emergency services are around 300% (3 times) what 

Medicare pays in many geographic areas (as such areas are defined by Medicare fbr 

purposes of its payment calculations). 

• 	 The median mark-up over costs ofhospital's emergency services is about 300% ac;cording 

to the most current Medicare cost report data submitted by hospitals for most geographic 

areas. The number is around 420% for the 80th percentile of emergency charges and 

maybe skewed even higher as UCR rates for hospital outpatient services are difficult to 

calculate in a way that is actuarially valid. 2 . 

(2) Paying physician over-and-above what Medicare pays by a calculated percentage and 

paying hospitals over-and-above what Medicare pays by a calculated percentage. 

MedP AC annually calculates the percentage over-and-above what Medicare pays that commercial 

payers are paying physicians and hospitals. These factors are annually reported in MedPAC's 

Annual Report to The Congress and/or MedPAC's mid-year Data Book. Using such an 

adjustment factor is consistent with the requirements ofthe Patient Protection and Affordable Care 

Act(Sec 2719A(b)(C)«II) that "if such (emergency) services are provided out-of-network, the 

cost-sharing requirements (expressed as copayment amount or coinsurance rate) is the same 

requirement that would apply ifsuch services were provided in-network." 

This requirement is, I believe, necessary inasmuch as the language in the proposed regulation 

147. 138(b)(3)(A) - allows payers an easily way to opt-out of having to use their median innetwork payments for comparable emergency services as a basis for determining their out··ofnetwork payment obligation. A plan can easily negotiate only bundled payment rates for their innetwork emergency services. Under the proposed regulatory language in 147. 138(b)(3)(A), this 

will automatically exempt the plan from having to include, in its calculation of its payment 

obligation, the median per-service amount it is paying to in-network providers for the same 

emergency services. 

(3 i) Having a plan's reduction in the total payment obligations for an on out-of-network 

emergency service accrue first to reduce any balance billing obligation of the patient before 

the plan reduces its payment obligation. 

I For more than 20 years I was professionally involved with physicians' ER billings, facilities' ER billings, ~,nd 

payers' reimbursement for ER services. This included: 

• CEO of a company that billed and collected for hospital-based providers, mainly ER physicians. 

• Co-founder and senior executive of a number of firms (including TRIM - predecessor of Quadramed- and 


Healthcare Plus Financial Management) that worked for hospitals nationally in areas that included ER 


documentation, ER cost-accounting, ER charge-setting and billing practices. 


• 	 Co-founder and CEO of a company (FairPay Solutions) that provided data for payers to use to determil1e their 

facility payment obligations pursuant to states' workers' compensation statutes and regulations. 

2 This is evidenced by the gyrations Medicare goes through each year to simply calculate the median national hospital 

outpatient charges for each hospital outpatient service. Medicare armually calculates the median charge for ~)ach 

service included in each APC hospital outpatient payment group. This is a legal requirement to assure that e~lch APC 

payment group does not include hospital services for which the median national hospital charge is either too-high or 

too-low for the service to be included in the specified APC payment group. Medicare's annual report on its median 

calculations by APC and CPT shows that less than 5% ofthe total hospital outpatient bills Medicare processes meet its 

stringent reguirements for valid data that can, according to its actuaries, be included in this annual analysis. 
It has been extensively documented, by both providers and in several court cases (involving 

Humana and United HealthCare in Utah) how plans use a variety of tactics (e.g. secondary 

"leased" networks, negotiations, etc.) to reduce the amount owed for out-of-network services. The 

Humana case shows, to their credit, that they had been using a secondary PPO network to reduce 

the balance billing payment obligation ofthe patient. In the United case in Utah the court ruled that 

United could use tactics to solely reduce the out-of-network payment it owes -- and stick patients 

with the maximum balance billing obligation -- unless the plan documents specified otherwise. 

I am proposing that additional consumer-protection language be added to the regulations to 

addresses this. The language would be along the following lines: 

"If a plan uses tactics that reduce the payment owed (by plan and beneficiary) for 

emergency services covered by these regulations, any savings from billed charges will first 

accrue to the benefit of reducing the patient's balance billing obligation." 

New Example 7: 


Same facts as example 5, except plan uses a secondary PPO network to reduce by 20% the~ total 


amount owed from $125 to $100. This costs the plan 10% of the $25 savings ($2.50) as a 


"licensing fee" to the secondary PPO network. 


Conclusion: The plan is responsible for paying $92.80,80% of$116. The beneficiary is 


responsible for paying $10.70, the sum of $1 00-92.80 plus $2.50. 


New Example 8 


Same facts as example 5, except plan uses negotiations to reduce by 40% the total amount owed 


from $125 to $75. This costs the plan 10% of the $50 savings ($5.00) as a "fee paid gto a 3rd party 


negotiations firm. 


Conclusion: The total amount owed is $75. The plan is responsible for paying $75 to the provider 


ofthe covered emergency services and $5.00 as its costs ofobtaining the discounted out-of­


network savings, since the total amount it pays is less than the $92.50 it would otherwise have 


been obligated to pay. The beneficiary pays nothing. 


New Example 9 

Same facts as Example 8 

Conclusion: The total amount owed is $75. But the plan only pays $42.80 to the provider 

($92.80 which is 80% of the $116 it is calculated it owes MINUS the $50.00 reduction from 

total billed charges it obtains by using the discount of a secondary network. The beneficiary 

is obligated to pay $58.20($150-$92.80). 

This would not be allowed under the revision I propose. But absent language in the 

regulations that addresses this, this will continue to be extensively done by plans to the 

detriment of consumers. 

(3 ii) Having a plan obligated to provide beneficiaries with the data points it used to calculate 

it's payment obligation for emergency services covered by these regulations. 

This will provide a beneficiary with data slhe will find useful to negotiate a reduction in herlhis 

balance billing obligation. Such a requirement would not be burdensome to a plan inasmw~h as (a) 

the plan will have already calculated relevant data points in order to appropriately pay for 

emergency services covered by these regulations; and (b) these data points can be readily added to 

the explanation-of--benefits a plan currently provides to a beneficiary. 
(3 iii) Ifthe balance bill owed is for facility charges, hospitals will provide beneficiary with an 


estimate of an amount that is "no more than the lowest amount charged to individuals who 


have insurance covering such care." 


For emergency services, the balance owed will be greatest for a facility's bill. The sums balanced· 


billed by a hospital facilities for its emergency services are likely to be 4·10 times more than the 


balances·billed by ER doctors. 


Adding this requirement to these regulations will give a beneficiary another data point from which 

slhe can negotiate a reduction in herlhis balance billing obligation for the hospital emergency 

services covered by these regulations. . 

This proposed consumer protection requirement will not impose any burden on non· propriety 

hospitals as they are already being required, pursuant to Patient Protection and Affordabll~ Care 

Act(Sec. 9007 (a)(S)(A), to provide this calculation to indigent patients. 

I do not believe such a requirement will be burdensome for proprietary hospitals as they already 

have (either in·house or via a contracted "revenue cycle management" firm) sophisticated systems 

for estimating this. The data in such systems today can easily provide this data·point at minimal 

cost to a proprietary hospital. 

Please contact me if you require additional details on any ofthe points I have raised. 

Respectfully submitted, 

J. Vincent Drucker 

Disclosure of Potential Conflicts of Interest 


I have no current source of revenue from any ofthe suggestions submitted above, as I am retired. 


My spouse has no sources of revenue from any ofthe suggestions submitted above. My spouse and 


I have no contracts that would allow us to have, in the future, any revenues from any ofthl;: 


suggestions submitted above. I have no children under 18 years of age or partners that would have 


any revenues from any ofthe suggestions submitted above.