Sudden Medical Bills Surprising, But No Fun

The surprise medical bill — or balance billing, in which a patient is billed for amounts not covered by insurance — has become part of health care in the United States, whether it’s for out-of-network charges or being underinsured and having gaps in one’s coverage. A 2016 Kaiser Family Foundation study found that a third of nonelderly adults having trouble paying medical bills faced unexpected out-of-network charges.

Stories abound of people caught unaware by high prices for medical procedures that they thought were covered by insurance. Many patients become desperate. The crowdsourcing platform GoFundMe has raised $5 billion since 2010, and a third of that money went to pleas from people for help to cover medical costs. The site sees 250,000 medical-expense campaigns every year.

Besides being fodder for news reports, balance billing has also caught the attention of legislators at the state and local level. People are demanding solutions and politicians are listening — and investigating, filing legislation, or passing laws in Virginia, Utah, Arizona, New York and in the U.S. Senate.

One Problem, Many Causes

Multiple factors contribute to the balance billing problem: the cost of health care, byzantine payment arrangements, existing legal requirements and patient ignorance. Any full solution will have to address them all.

Costs are important because the specific amount of a surprise bill can make the difference between a mild annoyance and something that can upend an individual’s or family’s financial stability. When it comes to the costs, fingers point everywhere. The highest unexpected costs are often physicians’ charges, so practitioners come under immediate scrutiny. But many say that focus is unfair.

“If you look over the last 20 years, physician charges and payments have gone up at or below inflation,” says Sherif Zaafran, an anesthesiologist, president of U.S. Anesthesia Partners Southwest Division, and board chair for Physicians for Fair Coverage, a nonprofit organization of physician groups.

And yet, health care costs rise at roughly three times the rate of inflation. One of the significant drivers, according to consulting firm PwC, also known as PricewaterhouseCoopers, is industry consolidation. Higher provider concentration gives hospitals and large network providers greater negotiation power to set rates, even if the increases aren’t necessarily passed along to the physicians.

Then there is cost shifting. Low pay on Medicare patients and uncompensated treatment for those who don’t have insurance and cannot afford to pay puts providers and institutions in a difficult position. They must consider these low-cost or free services as additional overhead. Those additional expenses are then distributed across all other patient bills.

Drug prices also have jumped at an alarming rate, particularly for ones that have been on the market for years and then suddenly increased in price many times.

Even with the high costs, patients might find them easier to accept and manage, except they have no idea in advance what they will have to pay. That speaks to cost complexity.

Can You Afford It?

There is an old saying that if you have to ask the price, you can’t afford it. In health care, if you have to ask, it often seems like no one can tell you.

Pricing falls “victim” to “our complicated system and the many, many stakeholders that we have as part of our health care fabric,” says Barbara Zabawa, a clinical assistant professor at the University of Wisconsin at Milwaukee. “You have different types of producers that go into the delivery of services. You have the physicians, the hospitals themselves, the suppliers of supplies, the employees of the hospitals, drug managers. And at each of those intersections of delivery of services, you have negotiations of price or payment.”

The complexity is why the recent Trump administration requirement that hospitals make their standard prices available is of limited help. “They published their internal references that don’t connect with anything,” says Valerie Barckhoff, principal and health care advisory services practice lead at CPA and professional services firm Windham Brannon. “Or they published clinical gibberish that consumers won’t understand.”

Even if patients were to scroll through potentially thousands of price records and recognize which apply to their case, there would be no way to know how much that person would owe with a given insurer and health plan. And what of the charges from a physician who is not part of the insurance network? Their prices would not be on the hospital’s list at all.

The clinical process itself adds one more layer of complexity. “Plan coverage is designed for certain types of visits,” says Adhi Sharma, MD, chief medical officer at South Nassau Communities Hospital in Oceanside, New York. Someone could walk in for a checkup, which would be a wellness visit that is covered by an insurance plan. “But if I tell my doctor I have a headache every day, it turns the wellness visit into a sickness visit,” Sharma says. The diagnostic code changes, and the patient might suddenly have a copay or deductible to meet.

Institutions and practitioners cannot compare notes on compensation from different insurers to better understand pricing and improve their negotiation strategies. “For physicians or the hospitals to discuss what they’re paid could be collusion and violations of antitrust laws,” Zabawa says. “That makes it even more difficult to make these negotiated discounts transparent.” Institutions and individual practitioners are concerned, rightfully, over landing in a pool of legal pain.

There is another type of potential legal problem that many providers don’t realize. “Contract law very specifically says if you do not disclose the price at the time of delivery, care or contracting, the only thing you’re entitled to is the average price,” says Barak Richman, a professor of law at Duke University and an expert in contracts.

Lawsuits involving patients who would not pay the prices in balance billing bill already have appeared in Colorado, Virginia and New York. At times, courts have found in favor of the patient or directed that a charge not disclosed at the time could not exceed average costs, as Richman noted.

Some Practical Solutions

Addressing the problem of balance billing will require initiatives on a number of fronts. One aspect must be communication with patients. Insurance plans are complex, and people often don’t realize what is covered and what is not. “If you make it easier for patients to understand their out-of-pocket [costs], you can make it easier to collect,” Barckhoff says. That requires not just a one-time delivery of a document from the insurance company explaining benefits, but ongoing support and clear communications.

Legislation will likely be another aspect. A bipartisan set of U.S. senators filed a bill last year that addressed various scenarios. Patients would be required to pay only the cost-sharing amounts under their insurance for emergency care, even if out-of-network. Nonemergency services following the initial treatment would give a patient at an out-of-network facility the option to move within network. Nonemergency services provided by an out-of-network provider at an in-network facility could not cause a patient to pay more than the in-network cost sharing. The provider then would be paid either the median of in-network treatment costs or 125 percent of the average for the service in that geographic area, whichever is higher.

Sharma says New York state has had such a law since 2015 and that it has worked well. “If you are an out-of-network provider, you had to give a disclosure to the patient they had to sign,” he says. “That reduced the amount of surprise bill, so to speak, because you were never surprised. On the emergency side, where we saw most of the surprise billing, [the law] eliminated it because the insurance companies were required to treat the providers as an in-network provider.”

The industry will have to reassess coverage networks. Insurance companies have reduced their coverage networks, according to a report prepared for Physicians for Fair Coverage by consulting firm Avalere Health. “Narrow networks, where an insurance company strictly limits providers it considers in-network, are increasingly the only options available,” according to the report. The narrow selection increases the chance of physicians attending being out-of-network. The patient doesn’t realize until the bill arrives. Surprise.

With more providers in the networks, there is a greater chance that an in-network doctor will be available with payment expectations already set. If insurance companies don’t expand networks on their own, state governments might. In October, the Texas Department of Insurance fined Humana $700,000 for having an “inadequate number of anesthesiologists” in three counties.

But perhaps the most important step will be to overhaul how billing and scheduling are done. In the past, Barckhoff oversaw the revenue cycle for 2,000 physicians. Often, they forgot to obtain the necessary authorizations for treatment. “That’s when you start the nightmare of ‘You didn’t have prior authorization or go through the right steps,’ ” she says. “I don’t think they do it on purpose. They’re so frustrated with the process. A lot of times, you end up writing it off because they’ve got you. We didn’t go through the procedure that we agreed with them.”

The hardest part might be the technological work needed to connect providers and insurers in such a way that someone’s specific costs could be known and shared with the patient at the outset of a procedure. The effort, costs, and time commitment would be significant. But the benefits might more than make up for it.

“I think it will have a positive ROI,” Barckhoff says. “If you make it easier for patients to understand their out-of-pocket [costs], you can make it easier to collect. And we’re terrible at collecting from patients. Every day you don’t start [changing the systems] is a day lost of helping the patients.” And helping the providers and institutions.