Health care legislative committee adopts final report, targets prior authorizations

By Whitney Downard | Indiana Capital Chronicle

For The Republic

INDIANAPOLIS — The interim Health Care Cost Oversight Task Force unanimously agreed on a final report Monday detailing its recommended legislative proposals for the upcoming session, including a closer look at prior authorization denials, physician reimbursements and mergers between health care providers.

"The seven recommendations we're looking at today continue Indiana's focus on transparency in the health care space," said Chair Sen. Chris Garten, R-Charlestown. "… Today's recommendations build on (past) work by increasing transparency for other stakeholders in the health care space.

"Everything we're talking about is focused squarely on driving down costs for Hoosiers. I'm proud of the work this task force has done and even prouder to know that it's still just a start," Garten concluded.

Prior authorization

The bulk of the committee meeting focused on virtual testimony on prior authorizations from Nathan Kaufman, of Kaufman Strategic Advisors in California, who concluded his remarks minutes before the committee voted.

Prior authorizations are a process that require doctors to seek approval for certain services from insurers to ensure payment.

Prior authorizations were designed as a way for health care providers to ensure insurance coverage and payment for various products or services. The process has evolved and become a time-consuming burden for providers — with nearly all doctors in an American Medical Association Survey analysis reporting delays due to the practice and one-third reporting "serious adverse events" due to prior authorizations (PAs). On average, doctors spend roughly 14 hours per week completing PAs.

Kaufman said that low Medicaid reimbursements to doctors combined with PAs drove many private practice physicians to merge or consolidate with larger conglomerations, reducing market forces that keep prices low but freeing doctors up from the onerous task of wrestling with insurance companies.

"A key element of the physicians leaving (private practice) is their inability to negotiate prices because they don't have the leverage … and you combine that with the 14 hours a week of non-productive time in their office to address prior authorizations and denials — you just can't make the math work," Kaufman said. "I'm a big advocate of private practice. Physicians are much happier in private practice than they are being employed by an institution or a corporation."

However, he continued to say it wasn't something that could be completely eliminated and he favored reforms to increase transparency and incorporate a neutral, third-party review.

"Standardization is my aspiration. There's been estimates that standardizing the process could save 15% on health care… the amount of dollars that are going into this rebutting of denials in the health system are huge," Kaufman said. "(Standardization) would probably require more than just state regulation but without it — when faced with an issue of a significant number of denials and the overhead associated with that versus providing a full range of services to a community — we're seeing health systems having to make trade-offs. And Unfortunately, the trade-offs in many cases are services that have to be eliminated in order to keep funding the rest of the operation."

For example, Kaufman said insurers could be required to do peer-to-peer reviews and denial management — meaning surgeons would be paired with a surgeon rather than a physician in another speciality. Another regulation could include being able to compare denials across health insurers and health care services.

"There are some plans that have good oversight and there's some plans where it's abusive," Kaufman said. "So you have to look at it systematically."

Content of the final report

Over four meetings, committee members heard from two dozen experts across the spectrum and wrestled with high costs for health care services in the state. The final report summarizing the hours of testimony included seven recommendations for legislative action:

* Specifying that employers have full ownership and control over health claims data related to their covered lives.

* Maintaining that employers can audit health claims and provider payment but third-party administrators, insurers or pharmacy benefits managers (PBMs) "shall not" charge a fee for such an audit.

* Prohibiting "spread pricing" by PBMs where a managed care organization is charged more for a drug than what the PBM pays a pharmacy.

* Requiring health care entities seeking to merge and acquire another entity provide notice to legislative leadership.

* The General Assembly "should" consider applying this notice requirement only to companies above a certain revenue or market share.

* Increasing transparency for prior authorizations and denials. Specifically, examining ways to standardize the process, establishing a penalty for inappropriate denials or delays and requiring insurers to provide explanations for those denials.

* Requiring PBMs, third-party administrators, employee benefit consultants and insurance brokers to act as fiduciaries.

* Establishing a report for Indiana's physician reimbursement rates and professional services fees for the commercial market compared to a statewide average benchmark.

In her comments, Sen. Jean Breaux decried what she saw as the lack of input from major insurance providers, who provided testimony under one lump presentation for their association rather than individually.

"They are a huge factor in how much is being denied. I think in order for us to be effective at what we're trying to accomplish, we have to hear from those players," Breaux, D-Indianapolis, said.

Garten noted that some of the proposed legislation in the final report will impact how insurers operate but all of it was just "a start."

"It was open, they could have come (and) they chose to send a lobbyist on their behalf," Garten said. "I do commend the hospital systems — some of them showed up; some of them did testify — and I will say that you are not the only legislator that has noticed that folks in that insurance space were absent."

— The Indiana Capital Chronicle covers the state legislature and state government. For more, visit indianacapitalchronicle.com.