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Eliminating Out-of-Network Billing at In-Network Hospitals Could Reduce Spending by $40B

Analysis  |  By Jack O'Brien  
   December 16, 2019

Researchers estimate that privately insured patients would see their annual physician payments fall by 13.4% if specialists were not allowed to bill out-of-network.

Annual healthcare spending for patients with employer-sponsored health insurance would drop by $40 billion if specialists were not allowed to bill out-of-network, according to a study published in Health Affairs Monday afternoon.

Researchers found that more than 11% of cases involving anesthesiology, pathology, or an assistant surgeon at in-network hospitals in 2015 were billed out-of-network. Nearly 6% of claims from a radiologist also resulted in an out-of-network charge. 

Health Affairs also found that for-profit hospitals had 4.6% more out-of-network providers compared to nonprofit hospitals and that areas with greater income inequality were more likely to have out-of-network providers. 

If specialists were not allowed to bill out-of-network, the study estimated that privately insured patients would see their physician payments fall by 13.4%, and annual healthcare spending would decrease by 3.4%, or $40 billion annually.

The issue of surprise billing has been a hotly debated topic in the healthcare industry, drawing attention from lawmakers in states like Texas and California, as well as on Capitol Hill. The study was released days after The Hill reported that a bipartisan plan to address surprise medical bills would not be included in a year-end government funding package.

The proposed deal aimed to lower out-of-pocket spending costs, end surprise billing, and introduce a mechanism for arbitration, as HealthLeaders Strategy Editor Steven Porter reported. The measure was supported by leaders in both the House of Representatives and Senate; both houses had separately passed bills to address surprise medical billing over the summer. 

Related: Payers, Providers Butt Heads on Surprise Billing Solutions

The Health Affairs research is in line with the findings of a Kaiser Family Foundation report released in June which found that one in six Americans received a surprise medical bill in 2017 despite having commercial health insurance coverage. 

The emergency department (ED) is a particularly vulnerable area for patients, the study found, as 20% of in-network visits involve care from an out-of-network physician. Researchers stated that ED physicians with the ability to bill out-of-network are paid "significantly higher" in-network rates compared to their counterparts who cannot bill out-of-network.  

Emergency care providers have been staunchly opposed to congressional proposals aimed at eliminating surprise medical bills. 

In September, The New York Times reported that Envision Healthcare and Team Health, two organizations that staff emergency rooms across the country, were major funders for a new mysterious dark money group producing commercials opposed to surprise billing legislation on Capitol Hill.

Related: 'Network Matching' Offers Surprise Billing Solution

Dr. Rebecca Parker, chief medical affairs officer at Envision Physician Services, a subsidiary of Envision Healthcare, and former president of American College of Emergency Physicians (ACEP), told HealthLeaders that hospitals would be at risk if Congress passed the proposed pieces of legislation dealing with surprise billing. 

One element included in both the House and Senate bills would set benchmark rates to the median in-network rates for a geographic area, spurring further opposition to the proposals. Envision told HealthLeaders that the company is only opposed to surprise billing proposals that utilize rate setting.

"[For] any hospital that is in that safety-net [space], barely making it, if those rates gets dramatically cut, the hospitals will have to supplement and hospitals will close," Parker said.

Editor's note: This article has been updated to clarify Envision Healthcare's stance on surprise medical billing legislation.

Jack O'Brien is the Content Team Lead and Finance Editor at HealthLeaders, an HCPro brand.

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