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The Keckley Report

The No Surprise Act Means Plenty of Surprises

By January 3, 2022March 1st, 2023No Comments

Effective last Sunday, the No Surprises Act (NSA) passed by Congress in December 2020, became law. It protects consumers against surprise bills from out-of-network hospitals and physicians which apply to 10 million patient encounters including 1 in 5 emergency room visits and 1 in 6 in-network hospitalizations.

How it Works

Patients are required to pay in-network copays, deductibles for emergency care in a hospital, a freestanding ER or urgent care center, air ambulance service and elective care at in-network hospitals or surgery centers where clinicians may be out-of-network. Put another way, balance billing is prohibited for out of network charges submitted by a provider at a qualifying in network facility; and for essentially all emergency services, though some exceptions still exist (like ground ambulance).

In network rates cover not only direct emergency care services and the like, but also indirect services farther down the continuum of care considered as the “post stabilization” period. In essence, a patient coming through the ER can’t be billed at out of network rates just because they were transferred to a different care department (or even another facility), and their condition remained unstable.

Note that the NSA has broad payor coverage- all the way from small to large group health plans, self-insured markets, and plans grandfathered in under the ACA. But the NSA does not apply to FFS Medicare, Medicare Advantage or Managed Medicaid plans.

And as discussed further below, patients can technically waive their right to balance billing protections under the NSA so long as they are furnished with and consent to a notice from a nonparticipating provider.

Claims Processing

The NSA requires hospitals, physicians and insurers to agree on these ‘in-network rates’ while holding the patient harmless. Out-of-network doctors must inform their patients about what their care might cost and may ask patients to sign a form that waives their protections. And patients can direct complaints online or through a 1-800 number.

A provider sends a bill to the health plan based on the patient’s insurance status. Health plans must respond with the in-network cost-sharing amount for that claim within 30 days based on their median network reimbursement rate. If the parties disagree, a federal arbitration process is triggered.

NSA specifies that the arbiter “must select the offer closest” to the median in-network rate unless other information “clearly demonstrates” the median in-network rate isn’t appropriate. Provider groups like the American Hospital Association, American Medical Association and others are suing the government. arguing the median in-network rate goes against Congress’ intent in passing the law by disregarding other factors that should be considered. Health insurers and consumer rights groups support the provision as it aligns with their reimbursement methodology and consumer protections.


NSA is certain to open a new can of worms for doctors and hospitals at a consequential time for both.
The omicron variant is taxing the system especially in unvaccinated populations and young children heretofore ineligible. Pandemic purgatory seems inevitable.

Public Anxiety about the Economy and Healthcare is Increasing

Per Axios’ polling, the issues that “matter most to you right now” are jobs and the economy (31%), democracy (17%) and healthcare (16%). Overall, 50% expect 2022 to be a bad year for the U.S. economy and 33% think their household finances will he hurt. Healthcare bills are problematic: per Kaiser Family Foundation, 46% of adults report struggling to afford out-of-pocket healthcare costs vs. 26% in March 2019. They’re forgoing prescriptions (29%), physician office visits (24%), mental health services (17%) and hospital services (13%) due to cost. People are worried.

Private Investor-Funded Competition for Hospitals and Physicians is Well Positioned

Investors had a good year in 2021: the S&P 500 ended the year up 30.1%, the Nasdaq gained 26.2% and the Dow Jones was up 21.7%. But investments in healthcare services outperformed all three—up 30.7%. And while the combination of uncertainty about the omicron variant, higher inflation and scheduled interest-rate increases by the Fed means is noted, investors are sitting on $900 billion to invest and alternatives to traditional hospitals and medical practices that feature lower costs and better user experiences are prime targets. They have plenty of dry powder.

Enforcement of the NSA will be Tricky, at Best

Complicating matters further is the question of enforcement- even though it’s federal law and the federal government regulates most private health plans, they in theory need the support from the states, which we can assume won’t happen unanimously, especially in state regulated markets. Certain services (like the post stabilization period), certain payor and plan types (fully vs self-insured; HMO vs PPO), as well as existing state balance billing laws will heavily influence the NSA’s enforcement.

The NSA is simply the latest regulatory can of worms akin to last year’s Price Transparency Rule that required hospitals to post prices and costs for 300 shoppable services. Both were birthed in the Trump administration and carried forward by the Biden administration. Both are popular with voters. Both expose hospitals and physicians to unwelcome. Both require delicate messaging to explain pushback based on principle rather than income protection alone.

NSA requires hospitals, physicians and insurers to negotiate directly. And it requires processes be implemented to provide accurate consumers price estimates. Neither of which is easy or straightforward.

So the irony continues- a law meant to get rid of surprises will undoubtedly create new ones along the way.

But it’s a step in the right direction- and hopefully it’s a net positive for consumers.



“No Surprises Act”; CMS

“The Fed is set to hike interest rates in 2022. Here’s what that means for US stocks”; December 21, 2021; Business Insider

“The $900 Billion Cash Pile Inflating Startup Valuations” Wall Street Journal Dec. 27, 2021; Wall Street Journal

“Axios|Momentive Poll: 2021 year-end results”; December 2021; Axios|Momentive

“Americans’ Challenges with Health Care Costs”; December 14, 2021; Kaiser Family Foundation


Recent Provider Deals


  • Well Dot, Inc. an LOHAS/Wellness centered digital health platform, raised $70M in its December 2021 Series B round in a deal led by VC group Valeas Capital Partners. Existing investors General Catalyst, Hellman & Friedman and other undisclosed investors also participated in the round. The deal comes after its Series A round of $50M which closed in March 2021, bringing total disclosed funds raised to $120M for the year and gives the company a post money valuation of ~$170M.

  • Uplift– a NYC based telemental health focused digital app- raised $8M last month in its seed round, bringing the company’s post valuation to ~$24M. Investors included a handful of VC funds like Redesign Health and B Capital Group and other angels. The mental health platform bills itself as offering clinical therapy services, starting at $20/session.

Health Systems

  • December 22, 2021: In a deal originally announced in November 2021, Tenet Healthcare and its subsidiary United Surgical Partners International have officially completed the acquisition of ambulatory surgery center developer SurgCenter Development 86-ASCs for $1.1 billion.

  • December 23, 2021: LifePoint Health and Kindred Health closed their transaction December 23 and forming a new company, ScionHealth, consisting of 61 of Kindred’s long-term acute care hospitals, 18 of LifePoint’s community hospitals with $3.5 billion revenue. LifePoint will operate 65 community hospitals, 30 behavioral health and rehab hospitals, 170 outpatient and post-acute facilities with $9 billion revenue.

Investment Banks Forecast 2022 Stock Market, Healthcare Growth Expected

Out of the ten investment banks, eight predict stock-market gains in 2022: Bank of Montreal, Wells Fargo, Credit Suisse, Goldman Sachs, JPMorgan, Royal Bank of Canada, Jefferies, and UBS. Meanwhile, only two predicted losses: Bank of America and Morgan Stanley. The 2022 year-end S&P 500 forecasts ranged from 4,400 (a 5% loss from Tuesday’s close of 4,649) to 5,300 (a 14% gain). Notably, healthcare is overweighted by Goldman Sachs, JP Morgan, Bank of America, and Morgan Stanley.

“2022 stock market outlook: The top strategists at Goldman Sachs, JPMorgan, and more share their predictions for the S&P 500 next year, and how you should invest your money” Insider December 23, 2021; Business Insider

Investors Hold $900B for Deals Going into 2022

Special-purpose acquisition companies raised $24 billion in October and November, roughly doubling their clip from each of the previous three months, per Dealogic data. In December, three SPACs a day were created– below the first quarter’s record pace, it brings the total amount held by the hundreds of SPACs seeking private companies to take public in the next two years to $160 billion. Of the nearly 200 companies that have gone public through SPAC deals this year, about 75% have share prices below the SPAC’s listing price; at least 40 companies have lost more than 50% of their value.

The cash committed to venture-capital firms and private-equity firms focused on rapidly growing companies but not yet spent also is ballooning. So-called dry powder hit about $440 billion for venture capitalists and roughly $310 billion for growth-focused PE firms earlier this month, according to Preqin.

“The $900 Billion Cash Pile Inflating Startup Valuations” Wall Street Journal Dec. 27, 2021; Wall Street Journal

Altarum: November Healthcare Price Increase 2.3%–lower than CPI, PPI

Per Altarum’s latest update:

  • The overall Health Care Price Index (HCPI) increased by 2.3% year over year in November 2021, –slightly faster rate than October 2021 and the fastest growth seen since March 2021 but below economy-wide inflation (consumer price index (CPI) +6.8% and producer price index (PPI) +9.6%.

  • Physician and clinical services price growth remains fastest among underlying healthcare components, at 3.6% in November, followed closely by hospital services price growth at 2.5%. Retail prescription drug prices were the only major component to decline in November, falling -0.3% year over year.

“December 2021 Health Sector Economic Indicators Briefs”; December 23, 2021; Altarum

Poll: Mental Health Access has Improved

Morning Consult polling December 2-6, 2021, found that roughly half of adults say mental health services are easy to access near where they live. Findings:

  • 30% of adults under 35 said mental health services are difficult to access near where they live, the highest level across age groups vs. 12% of adults 65 or older.

  • Most adults say access to the mental health has gotten easier (33%) or remained the same (31%) in the past five years vs. 14% of adults who it’s less accessible.

“Just 1 in 2 Adults Say It’s Easy to Access Mental Health Care Where They Live”; December 22, 2021; Morning Consult

Study: Hospital Cash and Negotiated Prices Vary Widely, Non-Transparent

On January 1, 2021, the Centers for Medicare and Medicaid Services (CMS) implemented the Hospital Price Transparency Final Rule to promote price competition and improve hospital care affordability.1 Finding:

  • for 70 CMS specified services, only 922 hospitals (on average across the survey period) disclosed both their cash and commercial negotiated price as of July 2021.

  • more expensive services were less likely to be disclosed, suggesting disclosures were strategically selected.

  • Some hospitals set their cash at or below their commercial negotiated price.

Jiang et al “Comparison of US Hospital Cash Prices and Commercial Negotiated Prices for 70 Services”; December 21, 2021; JAMA Network Open

Study: Hospital Prices and Total Cost of Care Unrelated

Researchers analyzed commercial claims from 2018 at US hospitals for shoppable health care services for which price disclosure is required by CMS. Findings:

  • Independent health care entities were involved in 7.6% to 42.4% of evaluation and management encounters, 15.9% to 22.2% of laboratory and pathology services, 64.9% to 87.2% of radiology services, and more than 80% of most medicine and surgery services.

  • The median (IQR) reimbursement of independent practitioners ranged from $61 to $412 for evaluation and management, $5 to $7 for laboratory and pathology, $26 to $210 for radiology, and $47 to $9545 for medicine and surgery.

  • The reimbursement for services billed by the hospital was not strongly correlated with the reimbursement of independent clinicians.

Horny et al, “Concordance of Disclosed Hospital Prices With Total Reimbursements for Hospital-Based Care Among Commercially Insured Patients in the US”; December 13, 2021; JAMA Network Open

Wall Street Journal: Majority of Hospitals Ignore Price Transparency Rule

No hospitals have been penalized as of late December, according to the Centers for Medicare and Medicaid Services, which is responsible for enforcing the rules. The maximum penalty this year for violators is $109,500 per hospital, and the penalty increases to as much as $2 million in January.

The agency has issued approximately 335 warnings for violations and is giving hospitals information and technical help to increase compliance as of early December, a CMS spokesperson said. Regulators also requested that 98 hospitals submit plans for how and when they would comply.

More than 1,000 hospitals did comply. The Journal’s analyses of this data have revealed wide disparities in prices, with higher prices often charged to the uninsured or those with limited insurance, who might be least able to pay for care. Per Turquoise Health pricing-transparency data, 51% of hospitals have released significant amounts of negotiated rates.

“Hospitals Still Not Fully Complying With Federal Price-Disclosure Rules”; December 30, 2021; Wall Street Journal

Poll: Expectations for 2022 Mixed

  • 51% of U.S. adults say they’re fearful for what the year 2022 holds in store for both the U.S. and the world (54%).

  • 30% say they’re more fearful about what 2022 holds in store for themselves.

  • 35% said they’d like to hear less about COVID-19 in 2022.

  • 50% expect 2022 to be a bad year for the U.S. economy with 17% predicting it will be a “very bad year” for the economy.

  • Issues that “matter most to you right now”: jobs and the economy (31%), democracy (17%) and healthcare (16%).

“Axios|Momentive Poll: 2021 year-end results”; December 2021; Axios|Momentive

KFF: Out of Pocket Costs Problematic to Half of the Population Including those with Health Insurance

Per the Kaiser Family Foundation survey conducted in September and October released late last month:

  • 46% of adults report struggling to afford out-of-pocket healthcare costs compared to 26% in March 2019.

  • Americans are forgoing physician office visits (24%), mental health services (17%) and hospital services (13%) due to costs. Deferral of hospital services was higher for respondents from households with income under $40,000 (18%), as well as for Black (20%) and Hispanic (21%) respondents.

  • 29% of respondents said that within the past year, they had not taken medicine as prescribed because of cost.

“Americans’ Challenges with Health Care Costs” Kaiser Family Foundation December 14, 2021; Kaiser Family Foundation


CMS Office of the Actuary: 2020 Health Expenditures Increased 9.7% in 2020

In 2020, US health care spending increased 9.7% to reach $4.1 trillion in 2020– faster rate than the 4.3% increase in 2019 due to a 36.0% increase in for Covid-related federal expenditures. Excluding federal spending, national health expenditures increased by 1.9% in 2020, compared with 4.3% in 2019. Key findings in 2020:

  • The gross domestic product declined 2.2% and the share of the economy devoted to health care spending reached 19.7%.

  • Commercial health insurance coverage declined 1.7 million: 2.3 million lost employer-sponsored insurance and 0.6 million gained coverage through the Affordable Care Act marketplaces.

  • Medicaid enrollment increased 3.7 million (5.1%) –its largest increase since 2015.

  • 31.2 million were without insurance in 2020, down 1.9% from 31.8 million in 2019.

  • Hospital spending increased 6.3% in 2019 to 6.4% in 2020.

  • Hospital inpatient days (-4.8%) and discharges (-9.8%) were down.

  • As measured by the Producer Price Index, hospital prices increased by 3.2% in 2020, compared with 2% in 2019.

  • Spending for physician and clinical services increased from 4.2% in 2019 to 5.4% in 2020.

  • Spending for retail prescription drugs dropped from 4.3% to 3%.

“National Health Care Spending In 2020: Growth Driven By Federal Spending In Response To The COVID-19 Pandemic”; December 15, 2021; Health Affairs

FDA Approves 60 New Drugs in 2021

In 2021, the FDA approved 60 drugs including three Covid vaccines that have received emergency authorization. The total is just shy of the previous year when the agency approved 61 new drugs and biological products. In addition to cancer drugs, last year saw approvals include regenerative medicines, treatments for congenital athymia, several neurological disorder drugs and rare disease approvals.

“Novel Drug Approvals for 2021”; December 28, 2021; FDA


COVID Trackers, CDC Guidance & Other Resources

FDA Approves Covid Drugs in December

In December, the FDA approved two pills for those infected with the Covid-19 virus:

  • On December 22, the FDA cleared the Pfizer pill, Paxlovid, also for people to take at home to try to stay out of the hospital.

  • On December 23, the FDA approved a Covid-19 pill from Merck & Co. and partner Ridgeback Biotherapeutics LP that permits doctors to prescribe the drug, molnupiravir, to adults at high risk of severe disease shortly after they develop mild to moderate symptoms.

Merck’s drug was found to be 30% effective in reducing the risk of hospitalization and death in a key study, while Pfizer said Paxlovid was 89% effective at reducing risk of hospitalization and death in a key study.

Bernal et al “Molnupiravir for Oral Treatment of Covid-19 in Non-hospitalized Patients”; December 16, 2021; NEJM