What Idaho Senate just did about mini-hospital firm accused of ‘excessive’ rates

Legislation targeting a for-profit micro-hospital company looking to expand in Meridian made its way to the Senate floor.

The bill, backed by Blue Cross of Idaho, the state’s largest health insurer, would require freestanding emergency rooms to be reimbursed at the same negotiated local market rates as in-network providers. It would also require such emergency rooms to disclose to patients if they do not participate in Medicare, Medicaid or Tricare programs.

It passed with a 24-11 vote and was sent to the House. During a debate Tuesday, some lawmakers quibbled over whether the bill would infringe on the free market.

The legislation aims to crack down on “excessive” reimbursement claims Blue Cross says Nutex Health, which added a hospital in Post Falls two years ago — its only one in Idaho — to its network of micro hospitals around the country. Nutex has plans to expand at the busy corner of Eagle and Overland roads.

The Post Falls hospital also previously said in a notice on its website that it did not accept Medicare, Medicaid or TriCare insurance, according to a screen capture of its website. That notice has since been removed.

Blue Cross testified that the bill doesn’t target other Idaho hospitals or health systems.

The insurer said during a Senate committee hearing that Nutex abuses the independent dispute resolution process, which was intended by the federal No Surprises Act to be a last resort in cases where providers and health insurers can’t agree on what should be paid for out-of-network care.

Blue Cross says Nutex refuses to contract with it and sends all its claims, about a few hundred a month, from the stand-alone Post Falls hospital through the arbitration process. The practice is an anomaly in Idaho, where Blue Cross contracts with every other emergency room in the state, and where it says few claims from other hospitals end up in the independent dispute resolution process.

Nutex founder and CEO Dr. Tom Vo told the Idaho Statesman that his company does send claims from its North Idaho hospital through the independent dispute resolution process, but only because Blue Cross won’t pay it a fair amount.

“Because of that, we have to take it to arbitration,” Vo said. “All we want is for them to pay what they pay all the other hospitals within our region, and they’re not doing that. If they offer us something very close to the median in-network rate, as regulated by the federal law, then we will be happy, even if it’s slightly less.”

But Bret Rumbeck, a spokesperson for Blue Cross, told the Statesman that the insurer made several efforts to bring Nutex’s Post Falls ER and Hospital into its network, offering claim reimbursements at the qualifying payment amount plus an additional 10%. The qualifying payment amount is the median in-network contracted rate an insurer pays for the same service in the same geographic area, and it is adjusted each year to the consumer price index. He said that offer was rejected.

Rumbeck said that on another occasion last year, Nutex countered with an offer, Blue Cross accepted it, and then Nutex reneged.

Blue Cross warned that Idaho insurers would have to take into consideration the excessive amounts paid to freestanding emergency rooms such as Nutex when setting insurance premiums and rates. Vo, meanwhile, rejected the labeling of his hospitals as freestanding emergency rooms.

“It’s categorically false,” Vo said. “We are a full-service hospital licensed by the Idaho Department of Health and Welfare.”

On Tuesday, Sen. Treg Bernt of Meridian, the bill’s sponsor, listed examples of what the Post Falls hospital has charged for out-of-network services compared with what other hospitals in Idaho charge for in-network services:

“These freestanding emergency rooms are gouging health insurers and, in turn, Idahoans,” Bernt said. “This (practice) will force the state of Idaho employee insurance plan to raise rates, along with other Idahoans that utilize Idaho insurers for their health insurance.”

Sen. Dan Foreman, a Republican from Moscow, chimed in, saying that while he’s typically in favor of letting the free market “do its thing,” it is sometimes necessary to step in.

“The free market can be manipulated,” he said. “And the government does have an oversight responsibility to protect the public from exploitation.”

Sen. Brian Lenney, R-Nampa, said the government shouldn’t intervene in disputes between insurance companies and health care providers. He noted that patients who go to Nutex “aren’t getting gouged” because the No Surprises Act prevents health insurers and providers from penalizing patients who inadvertently receive out-of-network care.

“I’m a free market guy myself, so I’m going to be a hard no and I urge everyone else to vote no on this as well,” Lenney said.

Immediately after, another lawmaker, Sen. Todd Lakey, informed the room that he’s “a free market guy as well,” but would instead be voting for the legislation.

“The problem here is that this is not the free market,” Lakey said. “We have somebody that’s abusing the intended process and running everything through it at exponentially increased costs, knowing that out-of-state arbitrators are going to side with them and enhance their profits. This legislation tries to bring it back to the free market.”

For one lawmaker, the bill hit closer to home. Sen. Ben Toews of Coeur d’Alene said Nutex’s emergency room in Post Falls served his wife just last year. Toews said they drove past another emergency room on the way to get there because the couple have had “horrible service” at other options in the area.

Aside from Nutex’s hospital, there are two hospitals in Post Falls: the small, physician-owned Northwest Specialty Hospital and the Northern Idaho Advanced Care Hospital, which provides long-term care for medically complex conditions. The city is just a 15-minute drive from Coeur d’Alene, home to Kootenai Health, a larger, community-owned hospital.

“The reality is that the free market works, and it creates better service,” Toews said. “My wife saw a doctor within probably 10 minutes. She got an MRI. It was the best service I’ve ever had in an ER room, by far.”

On its website, Nutex touts shorter wait times, larger rooms with baths and televisions, catered meals and one-on-one time with physicians, which it’s able to provide in part because all of its patients are essentially walk-ins. Vo, the company’s CEO, said ambulances usually route patients to larger hospitals, allowing it to focus its care on a smaller number of patients.

Bernt reiterated during the debate that he doesn’t believe the bill would stifle competition.

“I’m not saying that this freestanding ER does a bad job,” Bernt said. “Because it sounds like if you want to have caviar and a mimosa, then it probably would be a great place to go to the ER. But that’s not what we’re talking about.”

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