Surprise out-of-network bills are common

One In Five Inpatient Emergency Department Cases May Lead To Surprise Bills

By Christopher Garmon and Benjamin Chartock
Health Affairs, December 14, 2016


A surprise medical bill is a bill from an out-of-network provider that was not expected by the patient or that came from an out-of-network provider not chosen by the patient. In 2014, 20 percent of hospital inpatient admissions that originated in the emergency department (ED), 14 percent of outpatient visits to the ED, and 9 percent of elective inpatient admissions likely led to a surprise medical bill.

From the Discussion

We found that roughly one in five inpatient ED admissions and roughly one in seven outpatient ED visits were likely to result in a surprise medical bill. So were almost one in ten elective inpatient admissions. These results are consistent with past surveys that found that, while most patients receive care from in-network providers, those who receive out-of-network care are often surprised by the bills for that care.

Our data were sampled from patients with employer-sponsored health insurance, who account for 56 percent of the nonelderly population. Many Marketplace plans have narrow hospital and physician networks, and many Marketplace customers are unaware of the network configurations of offered plans. Thus, surprise medical bills may be more common for patients with Marketplace plans than for patients with employer-sponsored insurance.

We found that admissions of patients with more severe diagnoses were more likely to result in surprise medical bills. This is troubling because one objective of insurance is to offer proportionately more protection in situations that are extreme and costly. However, our results suggest that prolonged exposure to relatively high numbers of physicians and services increases the likelihood that a patient will receive a surprise medical bill.



By Don McCanne, M.D.

There has been considerable publicity about insured patients facing unexpected medical bills in hospitals and emergency departments because some care was provided by out-of-network professionals even though the facility was within the insurer’s network. This report adds to our knowledge by quantifying the extent of this problem.

The study was of patients with employer-sponsored plans, so this is a problem independent of the implementation of the Affordable Care Act, though the authors note that the plans in the ACA exchanges (Marketplace) have narrower hospital and physician networks and thus patients may be even more prone to receiving unexpected medical bills.

Further, patients with more severe diagnoses receive more care from a greater number of physicians and thus are even more likely to receive surprise medical bills. This defeats one important goal of insurance which is to provide greater protection for individuals who require more costly care.

This is clearly unfair to patients who fulfilled their responsibility to obtain health insurance, and used facilities that were in the insurers’ networks.

To correct this injustice, states are beginning to require that out-of-network providers accept from the patient only copayments or coinsurance that the patient would have paid if the provider had been in the network. Thus the patient who dutifully obtained insurance is not harmed.

The out-of-network provider must then turn to the insurer to receive payment. Does the insurer have the right to limit payment to what contracted providers receive? If so, the private insurers would have no reason to contract with physicians who hold out for higher rates. The insurers then become a private sector administrator of price controls, which is even worse than government price controls since the government has a responsibility to consider some degree of fairness in its price setting. Although this may set rates for out-of-network providers in a covered facility, it does not do anything about high prices charged by these providers in circumstances where the patient is not captive. Another possibility is that the out-of-network provider may be granted the ability to negotiate higher rates from the insurer as long as the patient does not have to pay any more. With the insurer paying more, that would be reflected in higher insurance premiums that the patient or employer would have to pay. Besides, there is some fundamental unfairness with an insurer being able to keep a professional out of its network yet demand low payment rates for which the professional never contracted.

The problem with this solution for out-of-network balance billing is that the assumption is made that the correction must be made within the confines of our dysfunctional, fragmented financing system that has only been perpetuated by the Affordable Care Act. That complicates the solution when it really is this financing infrastructure that needs to be repaired, or actually replaced. With a well designed single payer national health program - an improved Medicare for all - the patients simply receive care, and appropriate payments are made directly to the professionals and institutions by the public payer. The patient is never caught in a trap with surprise bills.