Not long ago, a friend tore a ligament in his knee while running and needed surgery. He found a good surgeon covered by his insurance who operated at a hospital that was within his network. The surgery went well, and my friend paid about $1,000 in copays and deductibles, and although the amount was a financial strain, he expected and had planned for it.
Six weeks later, while still working on his rehabilitation, he received a bill that he first assumed was an error — for nearly $28,000 from a physician whose name he didn’t recognize. After some sleuthing, he realized that this was the anesthesiologist who had managed his surgery. The anesthesiologist had been out-of-network. My friend was responsible for $12,000, which would be very financially difficult. He appealed to the anesthesiology practice to lower the bill, to no avail.
This horrifying story is not unusual. Indeed, “surprise billing” has become so common that, by some estimates, it has affected over half of all American adults.
The most common form of surprise billing comes from emergency rooms. Imagine you are in a car accident and taken to the emergency room by ambulance. The ER may be in-network — but the ER physician may not be. The consequence for you? A hefty medical bill where you may be responsible for a large part.
This deception is morally repugnant. It undermines the physician-patient relationship that is at the heart of our profession. It is a corruption of our system.
Most people, quite reasonably, think that if the hospital is in-network, everyone working there will be too. Some physician groups are exploiting this vulnerability, burdening patients with thousands of dollars in medical debt as a result. How do they do it? By choosing not to negotiate with insurance companies — and therefore charging whatever they want, out-of-network. But $28,000 for a couple of hours of anesthesia care during surgery? Sure! Five thousand dollars for a short ER stay? Why not?
Actually, here’s why not. This deception is morally repugnant. It undermines the physician-patient relationship that is at the heart of our profession. It is a corruption of our system.
Surprise billing is normally the practice of companies that employ physicians rather than of individual physicians themselves. These companies will often approach hospitals with a compelling case: We will staff your hospital around the clock. In return, you pay us nothing. We will directly bill the insurer. But many of these physician companies then choose not to negotiate with insurers, sending every patient an out-of-network bill. About 20 percent of patients in an in-network hospital are seen by an out-of-network ER doctor. The practice is more common in some states than others: Out-of-network charges apply to about 38 percent of ER visits in Texas but only about 3 percent of visits in Minnesota. And it’s most common in a subset of hospitals, with 15 percent of hospitals accounting for over 80 percent of total out-of-network billing.
Thirteen states have enacted laws to address this growing problem, and legislators have considered several solutions. One approach is an arbitration process, where a neutral third party resolves payment disputes on a case-by-case basis. While this seems like a good option, it often turns out badly.
New York implemented an arbitration law in 2014, requiring the insurer and the provider each to submit their “best offer” and forcing the arbiter to choose between them. A recent report suggests that it may have made the situation worse. The state’s guidelines suggest that arbiters settle around the 80th percentile of billed charges, but billed charges are often inflated. With artificially high charges as the baseline for arbitration, more physicians are tempted to go out-of-network, inflating their billed charges, and getting large payouts from the arbitrator. Why negotiate with an insurer when you can get 80 percent of whatever charge you want to bill?
A better option is to cap how much providers charge for out-of-network services. A cap that bars the most outrageous bills would be a good start, providing motivation for physician companies to negotiate in good faith with insurers. Experts often suggest capping the rate at some multiple of Medicare rates (50 percent higher, or even twice as high). Of course, Medicare is itself a relatively generous payer — and most physicians could get by on Medicare rates alone. Some lobbyists for these physician companies have argued that doctors cannot provide services at Medicare rates, but that’s absurd — ER physicians care for Medicare patients all the time. And the median salary of an ER physician is $336,000 per year. And the median physician rarely sends a “surprise” out-of-network bill — only a small minority do. So eliminating out-of-network billing would largely reduce the pay of doctors who make much more than the median.
Surprise bills are not an accident — but rather an intentional exploitation of weaknesses in our health care system. These physician groups will argue that insurers aren’t negotiating in good faith, and while sometimes that’s true, the primary culprit of this deception has been physician companies whose business model is to exploit patients when they are most vulnerable — in an emergency or under anesthesia. Many of us practicing physicians find the behavior outrageous. We all took an oath to “do no harm.” To financially ruin our patients when they are sick shows a moral rot in our community. If we don’t voluntarily stop this practice, Congress will eventually stop us. And shame on us for making Congress do what we should do on our own.
Ashish K. Jha is a professor of health policy at the Harvard T.H. Chan School of Public Health and director of the Harvard Global Health Institute.
Correction: An earlier version of this piece misspelled the name of author Ashish K. Jha.