EDITOR’S NOTE: The following op-ed is exclusively comprised of the opinions of the individual author, which are not necessarily shared by RACmonitor or Monitor Mondays.
Two recent articles from ProPublica (https://www.propublica.org/article/the-hidden-fee-costing-doctors-millions-every-year and https://www.propublica.org/article/why-doctors-spend-millions-on-fees-could-be-spent-on-health-care) published on Aug. 14 and 15 caused quite a stir in the physician and revenue cycle communities. Let’s start at the very beginning of the first article. “A powerful lobbyist convinced a federal agency that doctors can be forced to pay fees on money that health insurers owe them.” That’s how the article starts.
First, it’s fair to say that most lobbyists are powerful. If they weren’t, they wouldn’t be in the business very long. Some are more powerful than others, largely due to the size of the corporation or industry they serve. But all lobbyists have one thing in common: they lobby. They lobby for the interests of whoever hired them – usually a corporation, but it may also be a special-interest group. The interests of a lobbyist only align with those of other citizens to the extent that their employer’s interests align.
Before we consider corporate interests, we need to understand the nature of corporations. Fundamental to almost all for-profit corporations (and many not-for-profit corporations) is shareholder enrichment. This enrichment is the raison d’être for the corporation. In the case of some hospitals or insurance companies, the delivery of healthcare or sale of insurance products simply happens to be the mechanism through which shareholders are enriched. In essence, corporations are specifically designed to convert your money into someone else’s through a legal transaction. The larger the corporation, the more it will defend its ability to continue enriching shareholders. In many cases it will mount this defense using lobbyists to sway legislators or government agencies.
How did lobbying start, you might ask? Lobbying has long been believed to be an integral part of our First Amendment rights – that is, the “right of the people to petition their government.” The word began to appear in American print first in reference to Ohio politics in the 1830s. Before long, though, the term was used more expansively to include all those who talked to lawmakers on behalf of special interests (https://www.opensecrets.org/resources/learn/lobbying_timeline.php).
There does, however, exist a fine line between lobbying and bribery. The first known case of a lobbyist being convicted of bribery was in 1875, when Sam Ward, the undisputed “King of the Lobby,” was convicted of bribing congressmen. The Federal Regulation of Lobbying Act (1946) required domestic lobbyists (defined as anyone who spent at least half of their paid time directly lobbying the federal government) to register and file quarterly reports. There were few changes until 2007, with the passage of the Honest Leadership and Open Government Act (yes, just the title makes me snort, too). In response to the Abramoff scandal (2005), Congress passed the Act, requiring increased lobbying disclosure and imposed restrictions on “gifts” to members of Congress (it’s worth noting that in the Clarence Thomas era, no such restrictions exist for members of the U.S. Supreme Court; they have an “honor system”).
Since the 19th century, lobbying has continued to evolve. It’s common practice in Washington for a wide range of “inside-the-beltway” officials and employees to take jobs as lobbyists. This phenomenon is known as the revolving door. One famous example is that of former Senator Chris Dodd. After leaving Congress, Dodd became the CEO of the Motion Picture Association of America (MPAA), and thereby Hollywood’s chief lobbyist – but he remained unregistered. Other famous insiders-cum-lobbyists include Newt Gingrich and Michael Chertoff. Chertoff’s law firm “represented” manufacturers of those full-body scanners we all love at the airport. Chertoff, like many others, blur the lobbying line by calling themselves “consultants.” Currently, lobbyists are defined as those who spend more than 20 percent of their time lobbying. The distinction between lobbying, consulting, and representing remains blurry. But the bottom line is that lobbying isn’t illegal. It’s also not always in the “public” interest. It’s the job of government to protect the public.
If we think back to our fifth-grade civics classes, we recall that federal agencies are part of the Executive Branch of government. Many high-level positions, including Cabinet secretaries, are presidential appointments with Senate confirmation. Lower-level agency employees are simply applicants who happened to meet some government-defined job description, or occasionally had some kind of “pull” to get a job. Some of the employees are genuinely bright, highly skilled individuals with demonstrable dedication to the welfare of the American public.
As part of the Executive Branch, federal agencies are charged with executing the laws enacted by Congress in a manner consistent with the current administration’s philosophy and interpretation. We have seen recently that interpretations can differ widely. During the Obama Administration, the Centers for Medicare & Medicaid Services (CMS) planned a three-year phase-out of the inpatient-only list. After the election, the Trump Administration promptly reversed the decision and kept the list. This example is particularly pertinent, since it shows that executive agency actions are more theater than substance. Were we to delve into the reasons, we would likely find a byzantine trail of influence backed by wealthy or powerful lobbyists.
Federal agencies are required to act in a manner consistent with a 1946 law called the Administrative Procedure Act (APA), codified at 5 U.S.C. Subchapter II (https://www.archives.gov/federal-register/laws/administrative-procedure). The core pieces of the APA define agency rulemaking and administrative litigation. The APA clarifies rulemaking as the “agency process for formulating, amending, and repealing a rule.” Agency rules may be formal or informal, but all requirements are defined in the APA.
The APA should give the American public a degree of transparency into government operations. Further, as we all know from CMS rules, there should be a comment period. In each final rule, CMS virtually always discusses and addresses comments to the proposed rule (we know this as final rule with comment). CMS, like other agencies, is not required to change proposed rules or agree with commenters, but substantive rules generally must be posted. Similarly, substantive changes must also be posted with a comment period.
Once a rule is in place, the agency is charged with administration of the rule and adjudication of disputes arising out of the rule. In theory, the adjudication process should be equitable and fully transparent. In cases in which an agency changes the rule or a substantive interpretation due to pressure from, or influence due to, a lobbyist or other powerful extra-governmental entity, the agency may have acted illegally.
In cases of interpretation of existing rules, an agency may change its interpretation. If the change is the result of extra-governmental influence (a lobbyist), there are only two possibilities: either the agency was correct or the agency was wrong.
If the agency’s original interpretation was wrong, the lobbyist has allowed or caused the agency to adopt a proper “course correction.” The course correction is always for the benefit of a special interest. If that course correction coincidentally aligns with the goals of the public, then this intervention is in the public good. But it remains coincidental. The extent to which the corrected (and presumably correct) agency interpretation is detrimental to the public is an effect of regulation or statute, not strictly a lobbyist’s influence. Presumably, another lobbyist, citizen, legislator, administrative tribunal, or court would eventually correct the agency’s error.
If the agency’s original interpretation was “correct” but was changed due to extra-governmental influence, this is a different situation together. As noted above, lobbyists lobby. It’s what they do, and they do it in the interests of non-government special-interest groups. They may do it without regard to detrimental impact on other special-interest groups or the American public. But when a lobbyist convinces an agency to do the “wrong” thing, who is really at fault? Assuming the lobbyist isn’t soliciting or conspiring to commit some crime, then he or she is only performing a legal function. The lobbyist may be persuasive, but that’s not inconsistent with the nature of his or her job. If the lobbyist happens to have been a former agency employee or official, that may make him more persuasive, but not more “correct” when seeking agency change.
As noted above, it is each agency’s responsibility to execute the laws of the U.S. in a manner consistent with the administration’s overall goals and philosophy. If an agency does the wrong thing, does it matter if it’s due to some intrinsic failure or due to outside influence? Probably not. It certainly doesn’t matter to the public that might be harmed by agency action. To a large extent, the public has a right to expect agencies to “get it right.” The public has a right to expect agencies to execute their duties as required by law and administrative directives. If an agency “caves” to a lobbyist or the lobbyist’s lawyers and makes a “wrong” decision, who is more “wrong” – the agency, the lobbyist, or the lawyers? It’s the agency’s sole function to act in a responsible fashion. In essence, the agency’s job is to resist enticements from extra-governmental influence. If an agency makes a “wrong” decision based on such influence, then it’s an agency failure, not a lobbyist’s failure. Succumbing inappropriately to lobbyist pressure is nothing more than abject poltroonery bolstered by mendacity.
In the U.S., many contracts involve the exchange of goods or services between willing parties. Some contracts called adhesion contracts arise when parties are of disproportionate bargaining power, such that the party of weaker bargaining strength could not have negotiated effectively. Adhesion contracts are generally a standardized contract form that can be interpreted as “take it or leave it.” Everyday consumers experience these in the form of insurance, leases, utilities, mortgages, and other consumer credit or services. Under such conditions, the consumer has little to no ability to negotiate more favorable terms. Consumers may only obtain the desired product or service by acquiescing.
But every consumer can “leave it.” The Health Insurance Portability and Accountability Act (HIPAA) gave physicians and other healthcare providers the ability to receive payment electronically. The “middlemen” may have elaborate compensation schemes to process payments from insurers for providers. As you might guess, each of these “services” has a fee attached. Here’s where the complication arises. When considering whether to use one of these processing services, every provider should assess whether the value associated with electronic payments exceeds the cost of the transaction. Providers have been paid for centuries – frequently in cash or goods, but more recently by checks. The advent of electronic transfer brought some advantages for providers, but also some de novo woes. There are definitely new, not necessarily increased, costs.
But HIPAA does not require electronic payment to providers. Nor does HIPAA require the use of a third-party payment processing service. In fact, there is virtually no requirement for a provider to accept payment from anyone other than a patient, on a fee schedule agreed upon between the provider and the patient!
Providers enter into agreements with insurance companies in the hope of increasing the number of patients for which they may be compensated. In its simplest form, medicine is a business (the most regulated business, outside of nuclear power). But there is almost no requirement for providers to accept insurance of any kind. No provider is forced to accept any payment from any source through any specific modality. Every provider has a choice to enter into an agreement – or not.
On this background, we may now consider the bold claim that “a powerful lobbyist convinced a federal agency that doctors can be forced to pay fees on money that health insurers owe them.” We can see for a variety of reasons that the statement is not merely misleading, it’s vacuous. Based on the nature of lobbying, it’s probably also incomplete. The payment processing market is huge. Beside Zelis, there’s Optum, CORE, and offerings from several large banks. Of these, Zelis might be the smallest, with an estimated earnings before interest, taxes, depreciation and amortization (EBITDA) of about $450 million (according to an Axios report: https://www.axios.com/pro/health-tech-deals/2022/11/15/zelis-warms-to-large-scale-ma). It would be foolish to believe that any of these didn’t exert some pressure on CMS to allow uncontrolled payment processing fees. Seriously, does anyone believe that UnitedHealth Group would let such a revenue stream be compromised?
That brings us to Matthew Albright and Zelis. Make no mistake, this is not an apology. Nor is it an indictment. Zelis, backed by Parthenon Capital and Bain Capital, is just a corporation. It has limited shareholders, but venture-capital (VC) and private-equity (PE) backed organizations still have expectations of financial returns. Albright and Zelis did what any corporation would do if a government agency made changes that might adversely impact business and compromise revenue. But, as noted above, if CMS was wrong, then the changes Zelis brought about are consistent with regulation and government policy. Our concern should really be with CMS. On the other hand, if CMS yielded to Zelis pressure, the problem remains agency performance. It’s hard to imagine a government agency doing the wrong thing, but it may happen. In either case, Albright just happens to be a lightning rod and a convenient scapegoat.
We should examine Albright separately. Had he not been a CMS official, the story would have no legs. It would not have lasted a single news cycle. In fact, it probably wouldn’t have been written. Had Albright left government service and taken a job in another unrelated industry, but still notified CMS that it got the payment rules wrong (he should know; he drafted many of them) and CMS made the changes, again, it would not be news.
I suspect that other well-funded lobbyists from well-funded corporations also lobbied CMS regarding the payment rules. Those lobbyists simply had the insight to avoid creating a paper trail. Other corporations avoided putting a former CMS official at the “point of the spear,” so as to mitigate an appearance of impropriety and eliminate the titillation of alleged undue influence. Neither Zelis nor Albright did anything illegal.
I can’t say with certainty that CMS officials are similarly guilt-free.