Everything should have gone according to plan. Weeks before an expected surgery, the patient had taken the time to make sure that his hospital was in-network and that his out-of-pocket cost would be within his tight budget. He had set aside the money, taken off time for recovery, and prepared for his surgery. He felt so well-prepared that when he finally receives his bill after the procedure, his jaw drops — the number that he sees is several thousand over the expected amount. 


Sure that there must be a mistake, the patient calls the hospital’s billing office to question the bill. To his shock, the administrators affirm that the number he sees is correct. They explain that even though he went to an in-network care facility, the anesthesiologist and surgeon who treated him were both technically out-of-network providers — and thus significantly more expensive. 


Unfortunately, this scenario isn’t uncommon, though it is counterintuitive. Shouldn’t people in an in-network hospital fall under the same in-network status? As it turns out, no — because hospitals and physicians negotiate separate rates and participation agreements with health insurance, patients may receive care from an out-of-network doctor even when they go to facilities that accept their insurance. This administrative disconnect can cause some providers to bill their patients for the amount that their insurance won’t cover, leading to inflated medical bills like the one described above. 


Last December, Health Affairs published a report that explored the commonality of this surprise billing trend by analyzing 2015 data from a large commercial insurer. The findings were troubling; researchers noted that at in-network hospitals, 12.3 percent of pathologist consultations, 11.8 percent of anesthesiology care, 11.3 percent of cases involving an assistant surgeon, and 5.6 percent of radiologist claims were billed out of network. Out-of-network billing tended to occur more frequently at hospitals in consolidated insurance and hospital networks. 


“When physicians whom patients cannot avoid can work out of network from in-network hospitals, it exposes patients to significant financial risk and raises physicians’ in-network payments,” the researchers wrote. This trend, they concluded, not only places patients at-risk of paying for out-of-network care but also allowed in-network specialists to negotiate for artificially-inflated rates. 


All told, the study’s leaders estimated that removing specialists’ abilities to send out-of-network bills would lower physician payments for privately-insured patients by as much as 13.4 percent and reduce health care spending for patients on employer-sponsored plans by 3.4 percent. The latter number might not seem like much at a glance, but the study authors equate it to approximately $40 billion in annual savings. 


Unfortunately, the problem that this recent study highlights is not new. Out-of-network billing has been a problem on the rise for years. In August, another study reported that the proportion of inpatient hospital admissions to in-network hospitals that result in out-of-network billing rose from 26.3 percent in 2010 to an incredible 42.8 percent in 2016. The bills, too, have been expanding. As one writer for Reuters summarized the research, “Patients’ tabs for these out-of-network bills have climbed too, from an average of $220 to $628 for ER visits and an average of $804 to $2,040 for inpatient hospital admissions.” 


Is there a way for patients, themselves, to directly avoid this? Unfortunately, doing so would be difficult unless someone was willing to painstakingly check every person who might treat them — and even then, something might change and expose them to billing risk. Moreover, such a strategy isn’t feasible on a large scale given that research has repeatedly demonstrated that patients rarely use price-checking or price-comparison tools when seeking out medical care. 


It falls to care organizations and the healthcare sector as a whole to address the problem of disjointed and unfairly-inflated billing practices. At the very least, hospitals should make an effort to tell patients when the providers they see fall outside their network coverage. However, even that solution isn’t a real solution, given that it would add additional weight to the already-expansive administrative burden that most facilities face daily. 


The only way to truly solve the surprise billing problem would be to switch from our current fee-for-service system to value-based care and align physician incentives to support better patient outcomes. If we do so, providers of all specialties could work with hospitals and outpatient care centers to improve patient health — and also remove the need to negotiate rates for each item on a provider’s menu of services.