Surprise! Out-of-network billing for emergency care in the United States

Zack Cooper, Fiona Scott Morton and Nathan Shekita

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Using insurance claims data capturing 8.9 million emergency episodes, we show that in 22% of cases, patients attended in-network hospitals, but were treated by out-of-network physicians. We find that out-of-network billing is concentrated in a small group of primarily for-profit hospitals. Within 50% of hospitals in our sample, fewer than 5% of patients saw out-of-network physicians. In contrast, at 15% of hospitals, more than 80% of patients saw out-of-network physicians. Out-of-network billing allows physicians to substantially increase their payment rates relative to what they would be paid for treating in-network patients and significantly improve their outside option when bargaining over in-network payments. Because patients cannot avoid out-of-network physicians during an emergency, physicians have an incentive to remain out-of-network and receive higher payment rates. Hospitals incur costs when out-of-network billing occurs within their facilities. We illustrate in a model and confirm empirically via analysis of two leading physician-outsourcing firms that physicians offer transfers to hospitals to offset the hospitals’ costs of allowing out-of-network billing to occur within their facilities. We find that a New York State law that introduced binding arbitration between physicians and insurers to settle surprise bills reduced out-of-network billing rates.

JEL-codes: I11 I18 L14 (search for similar items in EconPapers)
Date: 2017-12-01
New Economics Papers: this item is included in nep-hea
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Surprise! Out-of-Network Billing for Emergency Care in the United States (2020)
Working Paper: Surprise! Out-of-network billing for emergency care in the United States (2017)
Working Paper: Surprise! Out-of-Network Billing for Emergency Care in the United States (2017)
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