The Cost of Out-of-Network Bills

Pile of dollar bills Image by Pete Linforth from Pixabay

Out-of-network spending is increasingly a focus of health policy in the U.S. In recent years, patients across the country have reported receiving “surprise bills” from medical treatment they received from out-of-network providers, often unknowingly. These bills, which have been reported to be as high as tens of thousands of dollars, can come about when patients receive care from an out-of-network provider in an in-network hospital.

In Health Affairs, assistant professor of health care policy and medicine Zirui Song, MD, PhD, and colleagues from the Health Care Cost Institute and Yale School of Public Health found the share of total health care spending that was out-of-network slightly declined from 2008 to 2016. However, underneath this slight decline was a rapid increase in out-of-network spending for several distinct segments of the U.S. health care system.

Analyzing two of the nation’s largest commercial insurance databases, Song and colleagues found that out-of-network spending, as a percent of total spending, decreased from 7% in 2008-10 to 6% in 2014-16. The percent of spending out-of-network for emergency care, a focal point of policy discussions, also declined. However, laboratory services, pathology services, and hospitalist services—three lesser-discussed areas of the delivery system—saw sharp increases in out-of-network billing during this period. The share of laboratory spending out-of-network grew from 5.2% in 2008-10 to 11.5% in 2014-16, an average of 0.8 percentage-points per year. Although patients often go to in-network facilities, these services may still be billed as out-of-network, resulting in surprise bills for the patient.

Prices for health care services were higher out-of-network than in-network. To understand how provider charges—which exceed final prices—have evolved, the team separately found that out-of-network charges grew rapidly in recent years, likely exposing patients to larger balance bills. Specifically, out-of-network charges grew at more than twice the rate of out-of-network prices (or allowed amounts), meaning that after the insurer pays its portion, the patients were increasingly left with larger out-of-pocket costs. This difference between charges and prices can be the amount on a surprise bill.

Focusing on mental and behavioral health, Song and colleagues found that the segment of U.S. health care with the highest share of out-of-network spending is psychiatry and behavioral health care—with about 25-30% of its spending out-of-network stably across the years. Similar to the surges in out-of-network spending for certain pockets of the health care system above, a rapid rise in out-of-network spending was found in behavioral health facilities from about 10% to about 40% of spending in these places of care—driven in part by substance use disorder treatment facilities. In the midst of the opioid epidemic, these facilities may be charging higher out-of-network prices (a price explanation) or capacity constraints at in-network treatment centers may be driving patients to out-of-network facilities (a volume explanation).

Song and Nicole M. Benson, MD, instructor in Psychiatry at Harvard Medical School, further investigated out-of-network pricing and cost sharing for psychotherapy. From 2007-2017, the prices paid for psychotherapy by insurers and patients (cost-sharing) rose for out-of-network psychotherapy and declined for in-network psychotherapy. This was the case for both adults and children. Behavioral health providers in independent private practice can set their own prices and decide whether to negotiate with insurers. While the use of out-of-network psychotherapy was largely stable and the use of the less expensive in-network psychotherapy grew over the study period, the widening gap between out-of-network and in-network prices may limit access to behavioral health care, especially for lower-income or vulnerable populations who or whose insurers may not be able to afford out-of-network care.

Addressing surprise billing has been a focus of policymakers in recent years. Bipartisan bills in the U.S. Senate have been debated, and stopping surprise billing has been a part of campaign platforms in this election year. This set of studies by Song and colleagues can inform such efforts to protect patients and payers from surprise bills.