July 26, 2017

Working paper: Hospitals contracting with 2 ED staffing firms have higher rates of out-of-network billing

Daily Briefing

    The rate of out-of-network billing for ED patients covered by one national insurer increased substantially at hospitals that contracted with one of two national physician staffing firms, according to a working paper from the National Bureau of Economic Research—but one of the staffing firms called the findings "fundamentally flawed and dated."

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    According to the study, conducted by researchers at Yale University, out-of-network billing can result in "surprise billing" for patients, particularly those seeking ED care at an in-network hospital who unknowingly are treated by an out-of-network physician.

    Study details

    For the study, researchers used data from a single national insurer to assess nearly nine million visits to EDs operated by a variety of companies between 2011 and 2015. According to the New York Times' "Upshot," the insurer allowed the researchers access to the data so long as the insurer remained unidentified.

    Overall, the data covered nearly $28 billion in ED spending, according to the researchers.

    The researchers also assessed the effect of a 2014 New York state law aimed at addressing so-called "surprise" medical billing. Under the law, patients do not have to pay more for ED care from an out-of-network physician than they would have had to pay for in-network care.

    Key findings

    The researchers found that between 2011 and 2015, "22 percent of patients who attended an in-network ED were treated by an out-of-network physician." The researchers found 50 percent of hospitals had out-of-network billing rates of less than 5 percent—while 15 percent of hospitals had out-of-network billing rates of more than 80 percent. Overall, according to the researchers, the rate of out-of-network billing was substantially higher at for-profit hospitals than at not-for-profit hospitals. 

    When the researchers dug in on the data for out-of-network billing, they found that when hospitals contracted with one of two national ED physicians staffing firms—EmCare and TeamHealth—the rates of out-of-network billing increased significantly.

    For instance, the researchers found that when EmCare contracted with hospitals that had low rates of out-of-network billing, the rate increased by between 81 and 90 percentage points and average physician payments increased by 117 percent. Overall, hospitals that contracted with EmCare had an average out-of-network billing rate of 62 percent.

    Further, the researchers found that when hospitals contracted with EmCare:

    • Facility payments increased by 11 percent, driven partly by a 5 percent increase in imaging rates and a 23 percent increase in the rate at which doctors admitted ED patients to the hospital; and
    • Physicians were 43 percent more likely to bill for ED care using the highest-acuity and highest-paying billing code.

    Meanwhile, the researchers found that when hospitals contracted with TeamHealth:

  • Billing for out-of-network care increased by 33 percentage points;
  • Physician payment rates increased by 68 percent; and
  • The number of overall cases treated at contracted hospitals' EDs increased by 30 percent.
  • However, the researchers did not find any increase at TeamHealth-affiliated hospitals in the rate of imaging studies conducted, the rate of ED patients admitted to the hospital, or the rate of physicians billing for ED care at the highest-paying billing code.

    In addition, the researchers found that the New York law cut the rate of out-of-network billing by 34 percent and curbed the likelihood that a patient would receive care from an out-of-network provider. 

    Recommendations from researchers

    According to the researchers, "The fundamental problem in this setting is that there is a missing contract between the physician and the insurer." They explained that while most states have established a regulated payment rate to address that "missing contract," that rate generally isn't "equal to a market price."

    The researchers recommended that instead of "allowing physicians and facilities to separately negotiate contracts with insurers, an alternative policy approach would be for states to require hospitals to sell an ED service bundle that includes both physician and facility services." In states with such an approach, the researchers write, "hospitals would negotiate ED payment rates with insurers and reach competitively set prices that reflect the cost of both the physician and the facility," while patients "using an in-network ED would be treated by in-network physicians."

    Reaction

    In a statement, officials for EmCare called the study "fundamentally flawed and dated." The company said while surprise billing is "a source of dissatisfaction for all payors, providers, and patients in our current health care system," the issue wasn't tied to any one staffing company.

    Further, EmCare officials said the company had already made a public pledge to negotiate contracts with insurers for most of its physicians within the next two years. According to "The Upshot," the study's findings suggest that EmCare had not signed contracts with the insurer that provided the data for the researchers, and was therefore charging higher prices.

    In early February, when EmCare announced it intended to make insurer agreements for most of its physicians, the company also said it was working with insurers, hospitals, lawmakers, and other stakeholders to ensure patients access needed care "without creating undue financial burden."

    EmCare also critiqued the study's findings in regard to one hospital with which the company contracted. Prior to working with EmCare, the hospital's physicians had charged $467 for patients needing the highest-level billing code; after contracting with EmCare, EmCare's physicians charged $1,649 for such patients. EmCare said when it contracts with a hospital, it enables the facility to care for sicker patients—and that the increase in such patients at the hospital explained why providers were using most costly billing codes  (Creswell et al., "The Upshot," New York Times, 7/24; Cooper et al., NBER working paper, July 2017).

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