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

Zack Cooper, Fiona Scott Morton and Nathan Shekita

CEP Discussion Papers from Centre for Economic Performance, LSE

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.

Keywords: health care; emergency care; US; hospital; politics (search for similar items in EconPapers)
JEL-codes: I11 I13 I18 L14 (search for similar items in EconPapers)
Date: 2017-12-18
New Economics Papers: this item is included in nep-hea and nep-ias
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Citations: View citations in EconPapers (3)

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Related works:
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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Persistent link: https://EconPapers.repec.org/RePEc:cep:cepdps:dp1524

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