Let’s solve this problem by throwing more money at me: ER Surprise Bill edition

The American College of Emergency Physicians came out with their surprise bill “solution” framework earlier this week.  It is audacious in its solution.  I want to poke at the proposal a bit from the point of view of total cost and incentive structure.

TLDR: Give us more money and take away all of our headaches

Right now an emergency room visit will generate at least two claims.  Many ER bills can have more than two claims.  The first claim type is the facility charges.  This gets paid to the hospital.  It covers the ER triage nurse, supplies, materials, and room opportunity cost.  This proposal does not address the facility bill.  The second claim type is a professional claim.  This pays for the ER doctor’s time and expertise.  The professional bill is tied to the diagnosis and procedures performed.  This proposal only addresses professional claims.

The split in billing types creates plenty of space for surprise out of network bills.  Zach Cooper and Fiona Scott Morton up at Yale looked at the business strategy of out of network billing for ER care.  Hospitals can and will contract with ER staffing companies whose business model is to be out of network for almost all insurers and charge very high fees that are then argued down.

This proposal is supposed to address that problem but it mainly improves ER physician cash flow while increasing the odds of ER providers staying out of networks.

Let’s look into those mechanics below the fold:

  • Insurers will directly pay any coinsurance, copay, and deductible for emergency care to the provider.

Right now, an ER visit charge (in-network and out of network) will have two payment streams for a physician. The first stream is from the insurance company. That usually comes via an electronic funds transfer and it is the net of the allowed amount minus patient responsibility. The second stream is patient responsibility which is applicable co-insurance plus co-pay plus deductible. Co-pays are often collected at the point of service while co-insurance and deductibles can’t be collected until after the claim is adjudicated as those payments are based on the final agreed upon amount. The physician group collecting money from patients takes effort and money as well as time. There is a decay between the collectable amount and the total amount actually collected.

This would change the physician billing system. They would submit one bill to the insurer and get paid in a timely manner with no decay and far lower administrative costs on their side. They shift significant costs to the insurer as the insurer now has to chase their covered members for non-regular bills on a non-regular cycle. This will increase administrative costs which will count against the insurer’s Medical Loss Ratio (MLR) allowable amount.

  • Required payments will be made within 30 days of claim submission. Failure to do so will trigger civil
    monetary penalties (CMPs) of $500 per day.

The ER phsyicians want to get paid on a net 30 day cycle after claims submission. This dramatically improves the quality of their accounts receivable while getting them out of chasing money.

So far this is a cash flow management bonanza which also gets any ire of patients at high cost sharing that is predicated on high final rates directed at insurers instead of at the physicians.

The rest of the proposal is about how to find the price.

  • When provider-insurer disputes arise over reimbursement for out-of-network emergency services, the following will be used to resolve them:
  • o The payment amount will be determined under any state law that takes a comparable approach
    to this proposal.;
  • o For claims under $750 (amount to be adjusted for inflation), the balance will be paid in full. For
    inflation-adjusted amounts over $750, the insurer will pay an interim payment directly to the
  • ….
  • Either party may trigger the alternative dispute resolution (ADR) process described below within 30
    days of the provider receiving the interim payment.

If the professional claim is under $750, the insurer pays immediately and in full. The incentive here is to have a consulting firm optimize billing practices so every charged amount for low effort claims is $749.99. This is a revenue gold mine given current practices.

The alternative dispute method is arbitration. They would use “baseball style” arbitration where the insurer submits the interim paid amount and the physician group would submit the billed amount. The arbitrator would choose one of the two payment levels as the “reasonable” level. The physician group is guaranteed at least $750 in all scenarios.

The arbitrator would be bound by two key financial anchors:

o 80th percentile of charges for comparable services in the same geographical area, as determined
by a transparent and wholly independent Medical Claims Database (such as FAIR Health),
o 150% of the average in-network rate for comparable services in the same geographical area as
determined by a transparent and wholly independent Medical Claims Database (such as FAIR

150% of average in-network rates within a market region is a damn good reason for no one covered by this policy to be in network. Or even more cynically, if a provider group has a dominant market position of supplying ER physicians, contracting a single doc at a single facility with low ER utilization at an ungodly high level would be an obvious game to play to inflate the regional benchmark.

This is an invitation to strip mine insurers and patients. Insurers won’t mind too much as they can pass along the added costs as premiums. It sounds like a solution until one realizes that the problem it is trying to solve is not high prices of out of network emergency physician bills but a three fold problem as seen from the point of view of the emergency physician trade group:

  • Congress will be yelling at us so this is “something”
  • Increases our revenue
  • Reduces our revenue cycle management costs

I’m impressed by the cynicism.

17 replies
  1. 1
    ChrisS says:

    I can see why the GOP is all about giving Americans the choice to purchase their own medical care because the price for services rendered and billing is so clear. It can’t help but drive down prices through competition!

  2. 2
    Cheap Jim says:

    Is there a good reason the doctors don’t just work for the hospital?

  3. 3
    Betty Cracker says:

    @ChrisS: Ha! Good one. :)

  4. 4
    texasdoc says:

    I dealt with this just recently after a bicycle accident. It turns out that the providers where you have no choice–EMS, ER physicians, and anesthesiologists–are out of network for any insurer. The prices charged are unreasonable for the services provided, and even if your insurance pays them as if they were in-network, they bill for the balance–usually at least 3 times what your insurance paid. And, boy, do they want their money! You can argue with them and sometimes get them to reduce their bill a bit, but it’s exhausting to have to do that for almost every provider in the chain of those who saw you. To add insult to injury, what you pay over the insurance payment for OON providers does not count towards your deductible. It’s a very cynical business model, and one that should not be allowed to continue.

  5. 5
    Kelly says:

    Oregon banned surprise balance billing March 1 2018. Beyond informing the consumer the bill requires there be a reasonable alternative to the out of network service at a in network hospital. Passed our legislature with one Republican vote.


  6. 6
    Rick says:

    @Cheap Jim: Hospitals are buying up physician practices at a pretty good clip now so private practitioners are becoming fewer and fewer. It’s called ‘Vertical Integration’ and will raise, not lower, prices.

  7. 7
    J R in WV says:


    Are you hopped up from your trip>?

    SO many posts suddenly about health care.

    I know, you talked about it with others in the field, and have a ton of ideas and thoughts and things you learned — I’m just kidding.

    My buddy was an ER doc in a practice at a large Trauma 1 center, he made an unbelievable butt ton of money, but his work was extremely difficult and draining. He retired and now works in mitigation of addiction problems. Still good work, saving people (a few anyway) but way way less stressful and draining.

  8. 8
    kindness says:

    It’s absurd. If a health care provider contracts with a hospital that should include all the physicians in the hospital, not only some of them. The contracts these hospitals have with their physician groups needs to be addressed.

    Balance billing is illegal in California but they still try to do it all the time.

  9. 9
    The Moar You Know says:

    Dealt with this after a recent ER visit: the facility is network. The docs had formed an association which was not, one that was extremely aggressive (moreso than any medical biller I’ve previously experienced) as regards collections. So I got a several thousand dollar bill, with a 30-day “pay it now, no grace period, or it goes on your credit report” notice. Ugly. I was surprised to say the least. I paid. Have to keep a clean credit record for my job.

    Our CEO here at DefenseCorp (not a real company) had the same thing happen to her, same facility, at the same time. And she knew about my situation. Game changer: she had worked previously for Blue Cross for a decade. She merely called and then emailed our insurer, UHC, and said “the doctors at facility X are in violation of the terms of your contract, and I’d sure hate to go to the California Insurance Commissioner about this”, and sent them both our bills with a statement that simply told them where they could remit payment.

    I got a check in five days. They knew damn well what they were doing was illegal. They just thought they wouldn’t get caught.

    Having a CEO who is a health insurance expert and who will take time out of their day to go to war with an insurer for a single employee is not a solution. The number of people who know the system that well, who to call, what to claim, where to apply leverage is probably less than 100. The practice needs to be outlawed and I’m VERY surprised that CA hasn’t done that already. If Newsom wants something to do where he can bloviate in front of a camera and get that sweet publicity hit he loves so damn much, he can start on this.

  10. 10
    The Moar You Know says:

    If a health care provider contracts with a hospital that should include all the physicians in the hospital, not only some of them.

    @kindness: It does in CA. Apparently that’s just not enough money for everyone!

  11. 11
    kindness says:

    @The Moar You Know: Yea and no. I work for Kaiser here in N. Cal and we are constantly hearing from members about ER physicians and Anesthesiologists who are sending 100% billing. Kaiser ends up paying that 100% (minus copays). What ends up happening is we black list the facility and refuse to send anyone there. But when someone hits that facility’s ER on their own, rinse and repeat.

  12. 12
    BobS says:

    @J R in WV: Emergency medicine is “difficult and draining” (as are many jobs, like teaching, firefighting, waiting tables, etc), but not “extremely”- I’d save that word for jobs that are actually are, i.e. jobs that are not only mentally but physically demanding, with poorer working conditions, and much lower compensation (relative to the mid-six figure income an ER doc can expect to make), resulting in the added stress of frequently living paycheck to paycheck (something that approximately 0% of doctors experience).
    Most ER physicians are able to work well into their 60’s (some even part-time into their 70’s) with little to moderate wear and tear on their body from the work (unforgiving hospital floors are tough on the feet and backs of everyone who works there, from docs to nurses to transporters to janitors). Of the many, many ER docs I know, none have experienced a work related injury that compromised their ability to make a living- injuries suffered on the ski slopes are much more common than those experienced at work.
    Again, not to entirely diminish the stress of the job, but most ER shifts are not beginning-to-end wall-to-wall life & limb threatening emergencies, and anyone who tells you they are (even at a Level 1 trauma center) is bullshitting you.

  13. 13
    Paul W. says:

    @Kelly: Bundling Kelly’s comment and kindness as well – should we be incentivizing/mandating that hospitals that are in network having at least one in network option and that consumers should be informed if they are not? Even further, making sure that hospitals that are in network have MDs who are also in network.

    Can we release MDs from hopping around in different networks and making this so difficult, perhaps by making payments more universal?

  14. 14
    thebewilderness says:

    Hospitals pad their bills as a matter of course.
    I just received notice that Medicare paid for facilities and services that I actually used as well as a procedure room that the hospital staff insisted that I enter to sign a piece of paper.

  15. 15
    texasdoc says:

    @The Moar You Know: So your boss’ knowledge/experience made it possible for her to clear your and her surprise bills–but that change the practices of that physician group? I’ll bet not. And they count on the vast majority of their patients not knowing how to appeal/argue. The state should still be notified about it.

  16. 16
    Bob Hertz says:

    We need relatively simple laws that state, “Where a patient cannot give informed financial consent, the maximum bill will be “Medicare plus 25%”.

    Any higher bill would be an unfair trade practice and could result in sanctions or even loss of medical license.

    We need this on a national level, but maybe we have to start in the states.

    Several states have current laws on balance billing, but they all have loopholes. In CA, the Zuckerberg hospital was able to get away with billing $23,000 for a bicycle accident. (see Vox)

  17. 17
    Scott says:

    I’ve always been curious what would happen if you went to an ER that was in-network and announced (while bleeding on their floor) that if you treat me you agree to in-network rates (captured on phone) by all providers and that you refuse treatment by a non network provider. What would be the result?

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