Publications: New Illinois Consumer Protection Statute May Impact Hospitals' Relationships with Facility-Based Physicians and Groups

On June 1, 2011 a new Illinois consumer protection statute is scheduled to take effect that could impact relationships between hospitals and certain providers rendering services at their facilities. Public Act 96-1523 (the "Act") amends the Illinois Insurance Code to provide that a health plan beneficiary (hereinafter "insured") that utilizes an in-network hospital or ambulatory surgery center for radiology, anesthesiology, pathology, neonatology, or emergency department services shall incur no greater out-of-pocket costs for the services of an out-of-network facility-based physician or group than the insured would have incurred with an in-network physician or group for covered services. For example, if a hospital that is in-network with respect to a particular insurance plan contracts with out-of-network anesthesiologists to staff its anesthesiology department, the Act will apply.

If an insured elects to assign his or her benefits to the out-of-network physician or group, the physician or group (i.e., the house-based physician or group providing professional services) is prohibited from billing the insured except for any applicable deductible, copayment, or coinsurance amount that would apply if the insured utilized an in-network physician or provider for covered services. If an insured decides not to assign his or her benefits to the physician/group, such physician/group may bill the insured for services rendered.

When an insured assigns his or her benefits, the physician/group may bill the insurer or health plan for the services rendered. The insurer or health plan, however, is not necessarily obligated to pay the billed amount. The insurer or health plan has the option to either pay the billed amount or to negotiate reimbursement with the out-of-network facility-based provider. If an insurer or health plan attempts to negotiate the billed amount, the parties have thirty days to resolve the dispute. If the parties cannot agree on reimbursement after thirty days, either party may initiate binding arbitration to determine the payment for services provided on a per-bill basis.

In addition to possibly imposing the cost of arbitration on the physician/group and health plans, this Act fundamentally alters the nature of some relationships between facility-based physicians/groups and the hospital or surgery center. If the facility-based physicians/groups see declining reimbursement, they may reach out to the facilities to make up for the shortfall so as to ensure that payments are reasonable. State and Federal self-referral and fraud and abuse laws, as well as tax exemption requirements for exempt hospitals, heavily regulate the substance of agreements between physicians/groups and facilities and any change should be vetted to ensure continued compliance with those laws.

The Illinois Society of Pathologists and the College of American Pathologists have been actively lobbying against this law. Currently, there are two bills pending in the Illinois Legislature that would delay the effective date of the Act to July 1, 2012. Since the current session of the Illinois General Assembly is scheduled to come to a close in the near future, it is difficult to predict whether these bills will be signed into law before the Act takes effect on June 1.

The full text of the Act can be found under the Related Files link on the left.

Should you have any questions or need assistance with facility-provider relationships, please contact a member of the Ungaretti & Harris Healthcare Group.