Out-of-network—In trouble?

A guest post by Daniel R. Malcom, PharmD, BCPS, BCCCP

It’s 11:30pm and everyone in your house has settled in for the night. Suddenly, your spouse develops crushing chest pain and begins sweating profusely and vomiting. You recognize these could be the signs of a cardiac event, and grab your things to drive to the emergency department (ED). But you live in a big city. Which ED do you visit?

You decide on the one that’s closest to your home, and you also remember that this one is considered “in-network,” as was discussed at your last open enrollment meeting from the human resources (HR) division at your job. You arrive to the ED, and your spouse is immediately seen by the treatment team. The cardiac issue turned out to be a blocked artery, which is addressed with an emergent cardiac catheterization. The procedure is successful and the whole hospital stay lasts less than 72 hours. A few weeks later, however, you receive a bill in the mail from the ED provider’s physician group, noting that they attempted to bill your insurance but the physician group is not considered “in-network” for your health insurance plan. But the explanation of benefits (EOB) document from your health insurance that you received a few days earlier stated that the facility was “in-network” and all of the charges were covered. How can this be?

While this was an example, cases such as this happen every day around the country. It may be familiar for patients seeking non-emergency health care to use their health plan’s resources and directory to determine if a facility or provider is considered “in-network,” and therefore would cost the least as related to out-of-pocket expense. Even with the most careful forethought, however, such as inquiring about your nearest hospital’s “in-network” status, so-called “surprise” medical bills can occur. When a person visits the ED and is seen by a provider, that provider can bill the patient for services rendered separate from the hospital or health-system. Providers can negotiate with insurance companies separately and may not be “in-network,” even if the hospital they work for is considered a part of the insurance company’s network.

A recent article from the New England Journal of Medicine1 highlights this issue in more detail and provides a nationwide snapshot of the scope of the problem. While the Affordable Care Act (ACA) has decreased the number of uninsured persons in the country, data from the Kaiser Family Foundation show that 20% of insured Americans still struggle with health care costs. In a perfect economic system, consumers would be provided with sufficient information (cost, quality-of-care, etc.) to make a decision about what provider to see. Providers would compete for patients by lowering costs or improving quality. However, an emergent situation (meaning less time and availability for decision-making) and layers of billing complexity (facility, ED physician, any specialists involved) disrupt the ability of the economic system to work. Patients are not given a choice of what provider sees them (and bills them), even if the patient never visually sees the provider (such as a radiologist reading an x-ray). “Surprise” bills can range to several thousand dollars each, or even higher, and patients are left with few options after the services have been rendered.

The authors analyzed data from a major national health insurance provider (not named in the paper) covering tens of millions of Americans. Individual hospitals registered with the American Hospital Association were grouped by hospital referral region (HRRs) for analysis. An HRR represents the area around a central location (typically a larger city) to which outside hospitals refer patients for more specialized care, such as neurosurgery or cardiovascular procedures. They collected data for ED visits from January 2014 to September 2015, including HRRs with ≥500 visits during that time period. Overall, more than 2.2 million ED visits were analyzed, with data from 96.1% (294/306) of the HRRs. These visits encompassed all 50 states and captured over $7 billion in spending.

Of the visits analyzed, nearly all (99.35%) occurred at facilities considered “in-network,” while 22% included out-of-network providers. Using the HRR framework, a geographic imbalance was also discovered. McAllen, Texas (also the subject of multiple pieces related to healthcare spending by Atul Gawande, M.D.) had one of the highest rates of out-of-network billing at 89%, while South Bend, Indiana had a rate near zero. Payment also varied between in-network and out-of-network providers, with in-network ED providers billing an average of 297% of Medicare rates (a standard way of evaluating payment models) and out-of-network providers charging an average of 798% of Medicare rates. So-called “balance billing” is also a concern, when out-of-network providers are allowed to bill a patient for the difference between the amount billed to insurance and the amount paid by the insurer. In the data set analyzed by the authors, an average “balance bill” was $622.55, but the maximum amount was $19,603.30—no small change, considering that all the patients in the analysis were insured and nearly 100% visited “in-network” facilities.

Some states have begun to attempt to address this problem through legislation, New York having one of the more innovative in which providers and payers negotiate payments for out-of-network services in a mediation process. While this is a start, it does not apply to all situations and does not save the patient from the hassle and turmoil of the process, as well as all of the lost productivity spent seeking redress.

The authors suggest that states require health insurers to bundle ED care with provider fees. This would mean that hospitals would negotiate with provider groups to determine reimbursement rates, and the hospital would subsequently “purchase” the provider services on behalf of patients. Hospitals would then “sell” the combined provider and facility services to health plans. While this proposal could help to solve the problem, considerable change would need to occur at the state level across the country through both regulatory and legislative action. Change of any type, particularly related to reimbursement, is typically hard-fought with seldom sweeping alterations. The piecemeal system we currently have is a result of this. Unfortunately, the real losers in this battle are the patients—both in money and time spent dealing with “surprise” bills.



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Daniel Malcom

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