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3 October 20237 minute read

Senate HELP Committee advances legislation to eliminate “anti-competitive” contract provisions and facility fees for certain healthcare services

On Thursday, September 21, 2023, the US Senate Committee on Health, Education, Labor and Pensions (HELP Committee) voted to advance the Bipartisan Primary Care and Health Workforce Act (S.2840) out of committee by a vote of 14-7.  

The legislation seeks to reauthorize and fund a variety of health-related programs, including the Teaching Health Center Graduate Medical Education program, community health centers, and the National Health Service Corps.  It additionally seeks to provide training, grants, and retention support for the healthcare workforce, with a specific – but not exclusive – focus on primary care.

Among other provisions, the legislation also includes a section titled, “Reducing Health Care Costs for Patients,” that seeks to (1) ban certain “anti-competitive” terms in health plan contracts with providers and other organizations, (2) impose “honest” billing requirements with respect to off-campus outpatient departments of providers, and (3) ban facility fees for certain healthcare services. The policies included in this title of the bill are intended to offset, or pay for, the expansion of services enumerated in the rest of the bill. 

In this alert, we take a concise look at the legislation and its provisions.

Banning “anti-competitive” terms in facility and insurance contracts

The first of these potential changes seeks to ban what the bill sponsors refer to as “anti-competitive” terms in facility and insurance contracts.  The bill sponsors view those terms as limiting access to higher-quality and lower-cost care.  This provision of S.2840 would prohibit any group health plan (GHP) or health insurance issuer (issuer) offering group or individual health insurance coverage from contracting with a provider, provider network, provider association, or other service provider offering access to a provider network (collectively, service providers), if that contract, directly or indirectly, would do any of the following:

  • Restrict the GHP or issuer from directing or steering enrollees to other healthcare providers or offering incentives to encourage enrollees to utilize specific healthcare providers.

  • Require the GHP or issuer to enter into additional contracts with the provider’s affiliates as a condition of entering into contract with such provider.

  • Require the GHP or issuer to agree to payment rates or other terms for any affiliate that was not a party to the provider contact.

  • Restrict other GHPs or issuers that are not parties to the contract from paying lower rates for items or services than the contracting GHP or issuer pays for such items or services (ie, a most-favored-nation clause).

This ban is subject to some potentially broad exceptions, such as for certain health maintenance organizations and certain “value-based network arrangements,” including other similar network arrangements as determined by the Secretary through regulation.  Because this legislation would mandate regulations to be issued within one year of its enactment, we would expect such exceptions to be more clearly defined in the future.  Nevertheless, as currently drafted, the exceptions indicate that certain provider contracts would continue to be permitted to include terms covered by the ban.

Self-insured GHPs are subject to an additional requirement, under which the GHP would not be able to contract with any service providers or any third-party administrator if the contract, directly or indirectly, requires the GHP to be bound by restrictive contracting terms between the service provider and third-party administrator that the GHP is not party to, unless certain disclosure requirements are met.

In addition to the express exceptions, the legislation includes a “rule of construction” that may further limit the reach of the ban.  That rule states that the legislation should not be construed as limiting network design or cost or quality initiatives by a GHP or issuer, including accountable care organizations, exclusive provider organizations, networks that tier providers by cost or quality or steer enrollees to centers of excellence, or other pay-for-performance programs.

The legislation would require annual attestations to be submitted by the GHPs and insurers that such plan or issuer is in compliance with the requirements.  Specific attestation requirements are to be clarified in regulations. The legislation would also establish limited grandfathering protections and set forth various effective dates for new and existing contracts.

Many of the prohibited “anti-competitive” terms outlined in the legislation are common in insurance contracts and would, therefore, require revisions to existing arrangements. Further, certain of these provisions proposed to be banned allow health systems to extend their negotiating power to cover affiliated and subsidiary medical clinics and other facilities, increasing reimbursement to such affiliates.  Without the ability for parent organizations to negotiate on behalf of all affiliates, not only will wholly and partially owned clinics and facilities be subject to lower reimbursement, but they would need to expend the costs and resources to enter into their own contracts.

Separate national provider identifier for off-campus provider-based locations

The legislation also seeks to impose what the bill sponsors have deemed to be “honest” billing requirements.  A GHP or issuer would be prohibited from paying a claim for items and services furnished on or after January 1, 2026 at an off-campus outpatient department of a provider unless the claim includes a separate, unique health identifier (ie, a national provider identifier) for the department where the items and services were furnished.  

Additionally, for any items or services furnished on or after January 1, 2026 at an off-campus outpatient department of a provider, no claim may be submitted or otherwise billed to a member, nor any member held liable, unless the identifier has been obtained, and the items and services are billed using that identifier.  

“Off-campus” is defined based on current provider-based status regulations at 42 CFR 413.65(a)(2). Any facility that bills for off-campus outpatient department claims in violation of the unique identifier requirement may be assessed a civil monetary penalty, which amount shall be determined based on relative bed count for the provider.

This legislation would place additional restrictions on provider-based billing, which the Centers for Medicare and Medicaid Services (CMS) has been steadily limiting since 2016, at least with respect to off-campus provider-based locations. Should this provision be signed into law, it would flag any such off-campus outpatient department claims and direct payors to implement site-neutral payments with respect to items and services rendered in such departments. 

Banning facility fees for certain services

The legislation would ban facility fee charges (regardless of how they may be labeled) for “applicable items and services” furnished on or after January 1, 2026. “Applicable items and services” as defined under the legislation are limited to certain evaluation and management services, certain outpatient behavioral health services, and any items or services furnished via telehealth.  The ban would prohibit a healthcare provider or facility from charging a facility fee to a GHP, an issuer, an enrolled member covered by the GHP or issuer, or any other patient who is not covered by a GHP, issuer, or federal healthcare program.

For years, critics of vertical integration and consolidation have argued that the promised cost efficiencies and quality improvements have not come to fruition and, instead, have resulted in higher costs for insurers, government programs, and patients. While the bill sponsors are likely aiming to address these concerns, the proposed changes could substantially impact relationships between physician practices, health systems, and payors.  For the past couple of decades, physician practices have moved toward health system acquisition or other consolidation and alignment to lessen administrative burdens and help offset the costs of caring for Medicare and Medicaid populations given the lower reimbursement from these federal programs. 

Should this legislation be passed as currently drafted, both health systems and physician practices may not have as much interest in such consolidation.  In such case, providers and other stakeholders may need to begin considering other ways to ensure the efficient practice of medicine.  Further, as hospitals seek to rebound following the COVID-19 pandemic, these restrictions will likely increase financial pressures.

For more information about the legislation, please contact your DLA Piper relationship partner, the authors of this alert, or any member of our Healthcare industry group.