• Update on Out-of-Network Provider Balance Billing

    Balance billing – which occurs when out-of-network (OON) physicians, hospitals, and other health care providers bill patients for the difference between a billed charge and a health plan’s allowed amount – has long been a problem for both patients and health plans. Patients are sometimes billed large amounts (in addition to required coinsurance and deductibles) for emergency care or for services the patient did not know were out of network. 

    Zachary Dyckman, a health economist and Analysis Group affiliate, has helped health plans evaluate and design provider payment systems, and has also served as an expert witness in related class action and other litigation relating to payment rates for OON providers. Here, he discusses some current trends and recent litigation related to provider balance billing and related litigation.


    Zachary Dyckman

    Affiliate Zachary Dyckman 

    How does this practice affect health plans? 

    For health plans, patient balance billing can cause member dissatisfaction and complaints. Of course, health plans could routinely pay billed charges, essentially list prices, for OON services and thereby seek to alleviate these problems. However, paying billed charges for OON services can be very costly, as billed charges generally are not constrained by regulation or by competitive market forces. Moreover, paying high rates for OON services would encourage in-network providers to withdraw from the health plan’s network, weakening the network and increasing the incidence of balance billing. 

    Have perceptions changed concerning who is responsible for balance billing problems faced by patients? 

    Until recently, legislative and regulatory authorities, as well as the media, have focused on the difficulties facing patients who were exposed to unexpectedly large bills from OON providers, typically blaming health plans for not paying these bills. For example, New York State Attorney General Andrew Cuomo was highly critical of health plans in 2009 for exposing members to provider balance billing when announcing settlements related to an allegedly defective Ingenix provider-billed charge database. In his comments, Mr. Cuomo made no reference to the sometimes highly aggressive pricing by OON providers.

    Within the past couple of years, there have been several articles in the media that focus on these unreasonably high provider-billed charges. These articles note examples of some hospitals charging patients 1,000 percent or more of their costs, and some physicians seeking very high charges as well, such as an out-of-network assistant surgeon seeking $4,000 more than the amount accepted by an in-network primary surgeon.

    How are health plans changing their payment approach for OON provider claims?

    Since before and continuing after the 2009 Ingenix suit settlements, several major health plans have changed their OON provider payment methodology for some of their benefit plans from rates based on billed charges to rates that more closely reflect actual market transaction prices. Under these methodologies, OON provider fees may be set at a percentage (e.g., 100 percent or 125 percent) of Medicare fees or at fee levels accepted by the plan’s in-network providers.

    What trends can we expect in litigation involving OON providers seeking full billed charges from patients and health plans?

    In recent years, we have seen several types of litigation related to payment for OON services, including:

    • Patient and provider class action suits alleging that health plan benefit payments for OON services are unreasonably low or not consistent with benefit descriptions included in members’ health benefit brochures
    • Hospital-based physician suits in which physicians are seeking billed charges from health plans for emergency care or other provided services
    • Class action suits filed by patients against hospitals challenging the reasonableness of hospital-billed charges being billed to uninsured patients or patients for whom the hospital is OON
    • Health plan suits against in-network physicians or OON ambulatory surgical centers (ASCs) in situations where in-network physicians refer patients to OON ASCs in which they have a financial interest

    For these types of cases, a central issue often concerns the reasonableness of prices for OON services. It is important to make a clear distinction between billed charges and market transaction prices, and for the court to understand the health care cost and health insurance affordability implications if the health plan is required to pay above-market rates for OON services. It is also useful to demonstrate that for most services in most locations, the overwhelming proportion of medical services are provided by in-network providers. Finally, to the extent feasible, transaction prices should be identified for the specific services at issue, in the relevant geographic market. ■