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Surprise! Out-of-network billing for emergency care in the United States

Cooper, Zack, Scott Morton, Fiona and Shekita, Nathan (2017) Surprise! Out-of-network billing for emergency care in the United States. CEP Discussion Papers (CEPDP1524). Centre for Economic Performance, London School of Economics and Political Science, London, UK.

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Abstract

Using insurance claims data capturing 8.9 million emergency episodes, we show that in 22% of cases, patients attended in-network hospitals, but were treated by out-of-network physicians. We find that out-of-network billing is concentrated in a small group of primarily for-profit hospitals. Within 50% of hospitals in our sample, fewer than 5% of patients saw out-of-network physicians. In contrast, at 15% of hospitals, more than 80% of patients saw out-of-network physicians. Out-of-network billing allows physicians to substantially increase their payment rates relative to what they would be paid for treating in-network patients and significantly improve their outside option when bargaining over in-network payments. Because patients cannot avoid out-of-network physicians during an emergency, physicians have an incentive to remain out-of-network and receive higher payment rates. Hospitals incur costs when out-of-network billing occurs within their facilities. We illustrate in a model and confirm empirically via analysis of two leading physician-outsourcing firms that physicians offer transfers to hospitals to offset the hospitals’ costs of allowing out-of-network billing to occur within their facilities. We find that a New York State law that introduced binding arbitration between physicians and insurers to settle surprise bills reduced out-of-network billing rates.

Item Type: Monograph (Discussion Paper)
Official URL: http://cep.lse.ac.uk/
Additional Information: © 2017 The Authors
Divisions: Centre for Economic Performance
Subjects: R Medicine > RA Public aspects of medicine > RA0421 Public health. Hygiene. Preventive Medicine
JEL classification: I - Health, Education, and Welfare > I1 - Health > I11 - Analysis of Health Care Markets
I - Health, Education, and Welfare > I1 - Health > I18 - Government Policy; Regulation; Public Health
L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L14 - Transactional Relationships; Contracts and Reputation; Networks
Sets: Research centres and groups > Centre for Economic Performance (CEP)
Date Deposited: 01 Feb 2018 15:11
Last Modified: 20 Feb 2019 04:04
Funders: Economic and Social Research Council
URI: http://eprints.lse.ac.uk/id/eprint/86621

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