Cover: Three Essays In Health Policy and Economics

Three Essays In Health Policy and Economics

Surprise Out-of-Network Medical Bills and Out-of-Network Health Care Provider Payment in the United States

Published Jul 16, 2020

by Erin Lindsey Duffy

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Patients treated at in-network facilities can involuntarily receive services from out-of-network professionals, which may result in a "surprise bill." As of June 2019, fewer than half of states protect patients from surprise out-of-network medical bills, and there are no federal policies enacted to protect patients. Moreover, payment for out-of-network medical services contribute to rising health care costs in the United States. This dissertation is comprised of three essays addressing surprise out-of-network medical bills and out-of-network health care provider payment.

The first essay quantifies the prevalence and magnitude of potential surprise medical bills in ambulatory surgery centers (ASCs) and describes the characteristics of providers and health plans involved. This observational study of commercial claims identifies possible surprise out-of-network bills in one-in-twelve ASC episodes. These potential bills average $1,100 per episode and are predominately generated by anesthesiologists, registered nurse anesthetists, and independent laboratories. These findings indicate that consumer protection policies are needed to address surprise out-of-network billing in ASCs.

The second essay examines the early effects of California's recent policy addressing surprise medical billing (AB-72) on the dynamics among physician, hospital, and insurer stakeholders. This case study identifies that an out-of-network payment standard set at payer-specific local average commercial negotiated rates has changed the negotiation dynamics between hospital-based physicians and payers. Leverage has shifted in favor of payers, and physicians reported that this experience of decreased leverage is exacerbating provider consolidation. Thus, this study finds that out-of-network payment limits can influence payer-provider bargaining.

The third essay projects the potential impacts of an out-of-network hospital payment limit on negotiated in-network payments by private health plans. This study estimates the effects of three proposed out-of-network payment limits for hospital care — 80% of billed charges, average private prices, and 125% of Medicare — on negotiated in-network prices and total payments for hospital care in 2017. The results suggest that a strict out-of-network payment limit set at 125% of Medicare could achieve reductions in hospital payments similar to more drastic reforms, such as Medicare for All and public plan buy-in programs.

This dissertation demonstrates that policies to address surprise out-of-network billing must be comprehensive in the scope of services, settings, and patient populations they cover to effectively protect patients. It also demonstrates that policies to address out-of-network billing impact the underlying contracting dynamics of the health care market and can influence the amount paid to providers both out-of-network and in-network.

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This document was submitted as a dissertation in June 2019 in partial fulfillment of the requirements of the doctoral degree in public policy analysis at the Pardee RAND Graduate School. The faculty committee that supervised and approved the dissertation consisted of Chapin White (Chair), Deborah Freund, Peter Mendel, and Erin Trish.

This publication is part of the RAND dissertation series. Pardee RAND dissertations are produced by graduate fellows of the Pardee RAND Graduate School, the world's leading producer of Ph.D.'s in policy analysis. The dissertations are supervised, reviewed, and approved by a Pardee RAND faculty committee overseeing each dissertation.

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