Who is to Blame for Out-of-Network Balance Billing?

Hospitals increasingly outsource their emergency departments to emergency medicine staffing agencies. However, emergency staffing is different than temp agencies supplying nurses, physical therapists or radiology techs to meet staffing needs that vary one day to the next. Emergency Room (ER) physicians generate revenue for the hospital and also bill for their own services provided to patients in the ER. A National Bureau of Economic Research study explains why this is sometimes controversial. Using data from a large national insurer, the study finds the average charges billed to patients often  rises after an outside agency takes over staffing for the ER. In many cases, hospital admissions rise, as does up-coding charges to higher-paying codes.

After an emergency medicine agency takes over hospitals often enjoy higher fees and less hassle over staffing. However, patients complain outrageous fees, inflated bills and out-of-network balance billing that catches them by surprise. Complaints are streaming in across the country about high balances owed to out-of-network emergency physician even though patients made sure the hospital was in their network.

There is no easy way to ensure physicians who provide services at the hospital are in-network. Why would hospitals not require physicians staffing their ERs to affiliate with area insurers? Perhaps there’s an unstated agreement; the staffing firm games the system and refuses to join networks and the hospital allows the game to go on since it’s benefiting from increased revenue.

There are two opposing views on why physicians staffing hospital emergency rooms sometime refuse to affiliation with area insurers. Doctors complain insurers low-ball them with paltry reimbursement offers that are below market. Insurers argue emergency room staffing agencies take advantage of patients who are in no position to go elsewhere even though the prices are high. (In reality, the prices are unknown)

For some emergency room physicians joining a network would likely yield lower fees, since their patients cannot easily go elsewhere. Physicians who have not contracted with patients’ health plans are free to charge whatever they want. If the insurer doesn’t pay, the physician can often bill the patient for the inflated balance. One researcher compared this to kind of ambushing patients. It is no coincidence that out-of-network balance billing is more common among physician specialties whose members rarely meet with patients prior to providing care. These include radiology, pathology and anesthesiologists – and of course emergency physicians. Sometimes assistant surgeons are placed in this category.

Across the country more states are taking steps to limit patients’ exposure to surprise out-of-network bills. One solution is to require a “meeting of the minds” between doctor(s) and patients or hospitals and patients before a debt is collectable. A meeting of the minds is already the standard under contract law.

Devon Herrick, PhD, is a health economist and former hospital accountant.

 

Comments (35)

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  1. Paul Nelson says:

    Obviously, the outside professional contract creates a one sided monopoly for the ED group. In addition, they can function without integrated alignment with the parent system: governance at the whim of professional assets.

    • Devon Herrick says:

      Apparently some staffing agencies are worse than others about this. The trouble is: when one group figures out a way to game the system, other groups feel compelled to follow suit. If your buddy is knocking down $500K it’s tempting to copy him when you’re scraping by on $300K. There’s nothing wrong with either salary — assuming they’re earned in a competitive market.

  2. Barry Carol says:

    I wonder how the radiologists, anesthesiologists, pathologists, ER doctors and assistant surgeons would feel if they were on the receiving end of these bills for care that had to be delivered under emergency conditions and there was, by definition, no opportunity for price shopping. Patients don’t “buy” this care because they want to but because they have to. It’s not the same as buying an iPhone where prices are transparent in any case.

    I don’t think the meeting of the minds idea is workable when some patients may not even be conscious when they arrive at the ER or they may already have advanced Alzheimer’s or dementia or not be able to speak even if they are conscious. Under the circumstances, a legislative solution is an appropriate response to this problem / issue in my opinion.

    At the same time, doctors and hospitals are entitled to fair and reasonable compensation for their work and their care. The question, of course, is what’s fair and reasonable? Again, my own proposed number is 125% of Medicare.

    • Devon Herrick says:

      I believe it is tempting to think the “market value” for one’s services are higher than they actually are when you can benefit from “I have you over a barrel”.

      I don’t want price controls on doctors’ salaries. But it would not bother me to have hospitals put pressure on them by requiring a contract or negotiating what they will pay for ER docs’ services in return for staffing. That would be closer to an actual market price since it would be negotiated in an environment that was not under emergency conditions.

      • Allan says:

        Yes. I say that as well. The idea of setting prices leads to what we see today. My dermatologist that works 9-5 without night or hospital calls is probably earning $1-$2Million to the greatest extent based on Medicare rates. The Gerontologist also on a fee schedule based mostly on Medicare is earning 1/5th to 1/10th that amount with a much longer work week and perhaps night call and weekends. Not only that, but he has to deal with the daily stresses of life and death decisions.

        That is Barry’s world. In a free market system that difference in payment would fall dramatically and might even reverse. Total expenditures for services for the two would likely fall even if the gerontologist was earning more than before.

        • Barry Carol says:

          So why haven’t the hospitals fixed the ER doc surprise billing problem long before now? I’m willing to give the market a reasonable chance to fix the problem but if we have a sustained market failure, which we apparently have, a legislative solution is probably necessary as opposed to just letting the status quo go on indefinitely.

          • Devon Herrick says:

            The analysis found it is not widespread across all hospitals. However, certain staffing companies have taken (new) client hospitals from 0% out-of-network to 100% overnight. As you well know, hospitals are loath to rock the boat when it comes to doctors, since only a doctor can admit a patient or order medical care. But it may also be that hospitals benefit from the higher level of care. A doctor who say you don’t need an MRI and doesn’t admit patients is costing the hospital a fortune.

            • Barry Carol says:

              Too many doctors who order too many unnecessary tests and admit too many patients who don’t need to be admitted are more likely to land the hospital in the non-preferred tier of most or all of the commercial insurers it does business with.

              Patients who don’t feel sick enough to be admitted are not going to be very happy either though they can sign themselves out at their own risk as I did once.

          • Allan says:

            Your type of policy is why hospitals don’t and can’t fix the problem.

            You want a free market controlled by government which is NOT a free market. You want third party payer based upon the tax deduction which incentivizes spending and doesn’t match the insurer to the patient’s needs.

            You want the ACA which prevents all providers and patients from dealing with one another so that all sides must game the system and no one is in the free market.

            Every year government has implemented more controls and simultaneously almost always the prices rise once again.

            You look at laws independently. See a problem create a new law. You don’t look at laws based upon principles. Your lack of principled policy that has been used by government is what has gotten us into this situation.

            • Barry Carol says:

              So abolish all government rules, tell everyone they’re on their own and let the free market reign. Government is always the problem so just get it the hell out of the way. If that’s such a great idea, why hasn’t anyone else thought of it?

              • Allan says:

                It’s been thought of for generations. In fact before government took so much control over healthcare it was much less expensive. Then the socialists took over and instead of making things better they made things worse.

                No one has said that the most needy should die in the streets. You just want to make sure your golf buddies can afford membership in their clubs. They are not the ones that need help. The majority of Americans can handle their own healthcare problems. It is only the few that require long term assistance and the nation has the capability of helping them and perhaps partially helping another group higher on the ladder.

    • Steve Sisko says:

      I agree that something in the range if 120-140% of Medicare is fair. I got into healthcare IT back in 1993 working for the original Radiology Benefits Management company as their sole IT guy. Chicago area radiologists wanted 300-400% of MA and we considered it a huge success if they agreed to 200%. Not many did.

  3. Jimbino says:

    If you enter the ER unconscious or even under duress, our traditional contract law says that you can maintain that no contract for care existed, in which case, the payment due may justly be determined on a “quantum meruit” basis.

    There is never a need for gummint intervention as long as you can get a fair jury trial. In fact, most juries nowadays may well be inclined to decide in favor of the abused patient.

    Especially if insurance is involved; that’s why the patient’s lawyer is prohibited from introducing insurance involvement into evidence but often manages to do it anyway by clever subterfuge.

    • Barry Carol says:

      Of course there is the small matter of legal fees, how much they are and who is responsible for paying them. If the amount in dispute is not large, it would be hard to find a lawyer to take the case. Or even if the patient can pay the attorney, his fee may exceed the amount in dispute.

      • Allan says:

        You are an obstructionist. You always have another reason that government has to be involved and control the situation where healthcare is concerned. One doesn’t need government involvement, rather one needs judicial instruction since judges come from the ranks of lawyers whose sole purpose is to make judicial proceedings more expensive.

        Once these problems end up in court, time and time again, suddenly the bills will reflect real charges and the courts for the most part won’t be needed.

        If one has a minor sprain to their ankle because a private concern was negligent government is not involved, the judicial system is. Very frequently a settlement is made because everyone knows that that the judges will decide the settlement based upon quantum merit. If it is not settled one goes to small claims court without an attorney or non small claims court with or without an attorney.

        Why Barry thinks that the health sector can’t work the same way is because he wants cradle to grave socialist coverage to meet his emotional needs, not his intellectual needs which seem to lean in the opposite direction.

        • Barry Carol says:

          Interestingly, tort claims which include auto accident suits, medical malpractice claims and product liability suits declined by 80% since 1993! Reasons include actions taken by numerous states to make filing a suit more difficult including, in the case of medical malpractice claims, putting relatively low caps on non-economic damages. Yet in healthcare, costs continue to rise albeit more slowly since 2009, and problems related to surprise bills from doctors who turn out to be out of network are worse than ever.

          The article regarding the sharp decline in tort claims can be found here:

          http://www.abajournal.com/news/article/tort_suits_in_state_courts_are_down_sharply_as_contract_claims_grow

          Contract disputes, by contrast, continue to increase so the total number of claims of all types brought in state courts remained flat at 15 million since 1993.

          • Allan says:

            So, how does what you state above show you are not an obstructionist?

            How has that answered your thesis that slight modifications of the judicial procedures can’t help to control prices where the contract between the patient and the physician was invalid or unconscionable?

  4. Z Woof says:

    Don’t limit your Out-Of-Network comments to an in network hospital and Non-Network doc. Ask John McCain because if he was on Obamacare the MAYO Clinic in Phoenix is a Non-Network provider and the ONLY insurance company on Obamacare is a Centene company that pays NOTHING!

    The entire balance is due by the cancer patient.

    But, if you have a mental problem they have you covered.

    Centene is one of those Medicaid Billionaire success stories. Welfare in America turns the people with government contracts into billionaires.

    Centene = $40 billion – Stock price 12/08 $7 NOW $84

  5. Bart I says:

    Interesting write-up on the subject:
    https://careandcost.com/2017/05/20/21-things-to-know-about-balance-billing/
    I wonder which area of government intervention Allan believes to be primarily responsible for this phenomenon.

    • Devon Herrick says:

      Obamacare requires insurers to accept unprofitable customers. One way insurers try to rein in costs is by negotiating steep discount with narrow networks. The docs don’t like the lower fees and won’t join networks. The hospitals who have non-network doctors are not penalized in any way for not requiring transparency of their medical staff. Some doctors undoubtedly game the system. I don’t like the idea of government setting physician fees. I also don’t like gaming. As we’ve discussed before, I would make it to where all parties want to talk – by making it much harder to collect fees if the party has not discussed price.

      • Barry Carol says:

        An attempt to provide a reasonable estimate of member out of pocket costs for care that can be scheduled in advance met massive resistance from both doctors and hospitals in Ohio. Lobbyists for both groups claim that only 10% of healthcare is even shoppable because it’s not possible to easily compare physician and hospital quality. If these doctors and hospitals claim it’s so difficult and burdensome to provide cost estimates even for care that can be scheduled in advance, how the heck are they supposed to do it for care that has to be delivered under emergency conditions?

        Numerous states have now addressed the issue of surprise bills from out of network doctors usually resulting from hospital based care. I support their efforts to protect patients. If doctors and hospitals really wanted to address this issue on their own, they would agree to reasonable ceilings relative to Medicare on how much they bill out of network patients.

        • Allan says:

          “10% of healthcare is even shoppable because it’s not possible to easily compare physician and hospital quality.”

          What is your response? Price fixing so that the world renown cardiologist who wrote the textbook gets paid the same price as the general practitioner that graduated yesterday at the worst medical school and lowest in his class.

          You sure have made quality healthcare more shoppable. Why should anyone put in the time and effort in just to become the best when his compensation remains the same as the worst. Welcome to the logic of BarryCare.

          Ridiculous!

    • Allan says:

      ” this phenomenon” Bart, instead of using pronouns I would have preferred you to state exactly what ‘this phenomenon’ is. There are many ways to interpret the question.

      Most likely the answer involves direct and indirect price fixing.

  6. Bob Hertz says:

    We are starting to see some relief on this painful issue.

    Gov Rick Scott of Florida singed HB 221, which states that consumers cannot be charged more than the equivalent of in-network charges if the patient had no real choice.

    Under New York law, consumers have the same rights in emergencies. Patients can complete an assignment that apparently absolves them of extra financial responsibility and allows the provider to pursue payment from the health insurance plan.
    (I have not seen this form yet.)

    To me, the goal would be to extend a Medicare-like protection to the entire country. Under Medicare, a patient is not liable for any charge that exceeds 115% of the Medicare fee schedule. If a claim is totally denied, the patient is not liable. The assumption is that the provider should have known what they were doing.

    If this were Germany, the health plans would set up a working committee and the AMA equivalent would set up a working committee, and the committees would hammer out a national fee schedule for all the specialties. I see no downside in this, though it may not happen in my lifetime.

    • Allan says:

      “The assumption is that the provider should have known what they were doing.”

      Why do you say that? The provider may know what he is doing, but does Medicare know what they are doing? In the past when one could call Medicare to ask questions Medicare frequently provided the wrong answers. Medicare has created rules that have been called unconstitutional by the federal courts. Medicare refusals to pay have been reversed frequently.

      Why do you place the onus on the physician when Medicare is unable to provide reliable guidance in advance? Why do you want your physician to deny you care that he thinks is appropriate but is afraid Medicare might disagree?

    • Allan says:

      “the committees would hammer out a national fee schedule for all the specialties. I see no downside in this”

      You don’t see a downside when the most well renowned cardiologist in the world is paid the same fee as the GP that just graduated from medical school?

    • Bart I says:

      A world-renowned cardiologist on staff in an ER?

      • Allan says:

        Pay attention. The comment was: “a patient is not liable for any charge that exceeds 115% of the Medicare fee schedule.” You do know what the word “any” means, right?

        What are you trying to prove?

        Further do you really believe the best cardiologists never see patients admitted through the ER?

  7. Payer Slayer says:

    In theme with wise words from Frank Cohen… Do you think Medicare reimbursement is fair? If not, then why would you base reimbursement on a percentage of something unfair?

    I’d also add, if you need healthy people to pay into insurance to help compensate for those that are sick, apply the same logic…you can’t establish that all payers reimburse at a fee schedule that is unsustainable for private medical practices.

    Also, health insurers need regulated. They can’t keep denying and cutting reimbursement and ditching plans while making soaring profits.

    Not all practices should be blamed for out of network billing. There is plenty of blame to go all around.

  8. Bob Hertz says:

    As usual Allan you raise some good points.

    I am aware that Medicare can be arbitrary and even foolish in their claims-paying practices. That is one reason I am very skeptical of the claim by single-payer advocates that universal Medicare will save a ton of money. Do they really think that Medicare has no administrative costs?

    As for the national fee schedules, I honestly do not know how they work in Europe as regards the relative
    qualifications of each doctor. All I know is that everything I read about Europe seems to indicate a quicker and less adversarial claims process than in the USA.

    I still like the idea of limiting a patient’s liability when the provider and the insurer disagree. Whether the patient’s liability should be zero (as it is with Medicare in most scenarios) or some modest amount, that would seem to be a matter of discussion.

    • Allan says:

      Bob, limiting a patient’s liability is primarily a responsibility of the patient, not anyone else’s. That is what insurance is for.

      In a lot of other countries people seem more accepting of what they are given. We could easily cut costs which limits everyone’s liability. Don’t offer the most expensive treatment, create lines, global budgets that leave some patients in the cold, poor quality etc. Which cost cutter would you prefer?

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