Surprise, out-of-network charges billed to privately insured Americans who received inpatient care at in-network hospitals more than doubled between 2010 and 2016, according to a study by researchers at the Stanford University School of Medicine.

Many have heard the stories of patients hit with massive, unexpected medical bills after an emergency-room visit or routine surgery, even if that hospital is in their insurance network. News organizations, including Vox.com, have reported on the problem, and both houses of Congress will continue debating draft legislation to tackle unexpected bills after members return from summer recess.

Yet there has been little data-driven research about the financial consequences of out-of-network billing on patients.

 “Our paper is one of the first to spell out just how big the problem really is,” said Eric Sun, MD, PhD, an assistant professor of anesthesiology.

 he paper was published Aug. 12 by JAMA Internal Medicine. Sun is the lead author. The senior author is Laurence Baker, PhD, professor of health research and policy and core faculty member at Stanford Health Policy.

Co-author Michelle Mello, PhD, JD, professor of law and of health research and policy, said news coverage has tended to focus on the real horror stories: patients who got surprise bills for tens or hundreds of thousands of dollars.

“Our study asked what a typical patient who goes to a hospital they’re supposed to go to can expect,” said Mello, who is also a core faculty member at Stanford Health Policy. “And what we found was that although typical out-of-network bills are lower than the horror stories, they’re still high enough to create enormous stress for families — and they’re also really common.”

The authors pointed to a recent survey that found 4 in 10 Americans would not be able to pay an unexpected expense of $400 without selling something or borrowing money. 

Yet the average amount of balance bills sent to patients in the study exceeded that: $2,040 for inpatient admissions and $628 for emergency visits in 2016. Further, 10% of the patients in the study faced an average of  $4,112 for inpatient admissions and $1,364 for ED visits.

Why is this happening?

Mello said there are two potential explanations behind the significant rise in out-of-network bills: insurers may be excluding more physicians from their provider networks, even when they essentially have no choice but to include the hospital; and hospitals may be increasingly tempted to make use of physician staffing groups that have market power and can resist pressure to come in-network at lower rates. 

Balance billing may also occur because insurers pay doctors too little to practice at one given hospital, so to make ends meet, they bill patients directly for additional amounts, Sun said.

“It certainly may be the case that consolidation among insurers has resulted in reduced payments to physicians, and that out-of-network billing is a way to compensate for this,” he said.

The classic example, Sun said, of how surprise billing works can be found at community hospitals that are not run by a multispecialty organization, such as Stanford Health Care or Kaiser Permanente. In that community hospital, everyone is in business for themselves. So, for example, when a patient comes to the emergency department and needs an operation, even if the patient’s chosen surgeon is in-network, all the specialists helping the patient through the surgery may not be. It is often difficult for patients who are in- or out-of-network to walk away if he or she doesn’t like the arrangement, particularly in emergencies.

“The bottom line is this: In a lot of situations, patients can’t choose the doctor, and the doctors can’t choose the patient,” Sun said. “It’s an especially big problem for hospital-based physicians, such as emergency room physicians, anesthesiologists, and radiologists.”

Even if a patient schedules a procedure, such as knee-replacement surgery or the delivery of a baby, accidents or the unknown often occur.

“What if something goes horribly wrong and you have to go to the ICU?” Sun said. “Now everyone seeing you, from the cardiologist or a neurologist, could be out-of-network.”

Crunching the numbers

The researchers examined 5.5 million inpatient admissions and 13.6 million emergency room admissions between 2010 and 2016, using data from the Clinformatics Data Mart, which comprises private health insurance claims from all 50 states from a large commercial insurer. The individuals in the database represent about 19% of all American who have commercial health insurance.

The researchers found the percentage of emergency department visits resulting in one or more out-of-network bills increased from 32.3% to 42.8% and that the average amount billed nearly tripled from $220 to $628. A whopping 85.6% of ambulance rides to emergency departments resulted in an out-of-network bill..

The proportion of inpatient admissions with out-of-network bills increased by almost 60% over that period, from 26.3% to 42%, with the average out-of-network bill more than doubling from $804 to $2,040.

The study found out-of-network billing was common among ambulance services and hospital-based physicians — such as emergency physicians, radiologists and anesthesiologists — providing care at in-network hospitals. “In some circumstances, patients could easily assume that the entire hospital team is in-network and thus the balance billing may come as a surprise,” the authors wrote. “Further, in these contexts, patients may have limited ability to choose.”

The authors note that the findings support current efforts in Congress and the states to limit balance billing in contexts where surprise is likely to be involved. They also note that patients may succeed in getting out-of-network bills reduced in some circumstances.

Still, Mello added: “This is not the way to run a health-care system. Avoiding outrageous bills shouldn’t require a PhD in health policy.” 

The other co-author of the study is Jasmin Moshfegh, a graduate student in the Health Policy PhD program.