Stop me if you’ve heard this one before. A person falls ill. They go to the emergency room, maybe even to the operating room. Unbeknownst to them, they get care from someone who is outside of their insurance network. Weeks later, they receive a bill for tens of thousands of dollars.
Over the past decade, these stories of “surprise” medical bills have become more common. A recent study from Stanford University showed that 43 percent of emergency room visits in 2016 resulted in unexpected bills that were not covered by insurance, up from 32 percent in 2010. Now, in the midst of a global pandemic, the practice is poised to inflict even more pain.
Currently, many patients who suspect that they are infected with the novel coronavirus that causes Covid-19 are routed through a convoluted web of providers. At various points in their care trajectory, they are susceptible to receiving out-of-network care — and the staggering bills that often follow. (To get a sense of the scale, one uninsured Boston-area woman received a bill for almost $35,000 after visiting the emergency room to obtain coronavirus testing and help managing her symptoms.) Others may worry that their coronavirus tests will be sent to out-of-network labs. Worse, public health officials are concerned that the fear of surprise bills will prevent patients with infections from seeking care, furthering the spread of the virus.
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The topic of local news articles, national op-eds, scholarly papers, and congressional hearings, surprise billing has become emblematic of everything that is wrong with the American health care system. Insurance companies blame doctors and hospitals. Doctors and hospitals blame insurance companies. And patients consistently lose out. How did we end up here?
The arguable birthplace of surprise billing in the United States is surprising in its own right: a Mrs. Winner’s Chicken & Biscuits in Knoxville, Tennessee. It was here in the late 1970s that Drs. Lynn Massingale and Randal Dabbs sketched out the blueprint of an organization that would, 30 years later, play a key role in popularizing surprise billing. Their organization, now known as TeamHealth, was among the first physician staffing companies, third-party companies that recruit physicians to staff and manage emergency departments. And it grew aggressively.
By providing an alternative to the model in which doctors are directly employed by hospitals, TeamHealth gave doctors the autonomy they desired over their time, benefits, and reimbursement rates, while freeing up hospitals from the responsibility to cover the doctors with malpractice and health insurance. The strategy caught on, and today, health care staffing has grown into a multibillion-dollar industry in the U.S. Many physicians have even left their hospitals and created their own physician staffing companies, only to sell their services back to their former employers.
But the burgeoning physician staffing industry came with a dark side. Over the past decade, soaring health care costs and restrictions put in place by the 2010 Affordable Care Act led many insurers to cut costs by narrowing their provider networks and excluding physicians who demand higher prices. Physician staffing companies realized that they had a potent bargaining chip to push back against these changes: the ability to bill a patient directly, at whatever rate they deemed fit.
And that they did. One study found that hospitals that contracted with EmCare, a large physician staffing company based in Dallas, saw their out-of-network billing rates increase by between 82 and 90 percent. And the problem wasn’t just with out-of-network bills. Staffing companies used the threat of surprise billing to negotiate higher in-network rates with insurance companies.
Today, as hospitals are stretched thin and face dire staffing shortages during the coronavirus pandemic, surprise bills will likely be highly lucrative for staffing firms. The companies will have enormous bargaining power in negotiations with insurance companies. If they use it selfishly, they could bankrupt not only patients but our health care system — and further the spread of Covid-19 in the process.
This May, after years of hearing constituents complain about surprise bills — and after a legislative proposal was defeated by staffing company lobbyists in 2019 — Congress will attempt yet again to pass a bill to end the practice entirely. The two proposals currently being considered by House legislators seek to limit the cost of out-of-network bills, either through negotiations between the hospital and the insurer, or by pegging billing rates to median in-network insurance rates. Other strategies being proposed by policy scholars suggest limiting the prevalence of the out-of-network claims themselves — either by requiring physicians from third-party companies to abide by the same insurance policies adopted by the hospital they work at, or by bundling the costs of a hospital’s staffed physicians into a facility fee that is paid by insurance and considered in-network.
Hopefully one of these approaches will garner enough bipartisan support to overcome the influence and resources of special interest groups like Doctor Patient Unity, which is funded by physician staffing companies and spent tens of millions of dollars to defeat surprise billing legislation last winter.
However, the legislative solutions that have been proposed so far are all akin to treating a symptom instead of the underlying pathology. After years of mergers and acquisitions — TeamHealth was bought by private equity giant Blackstone for $6.1 billion in 2016 — the physician staffing industry has consolidated into a small group of just a few key players. Regulators ought to pay close attention: While there may be economies of scale to achieve in emergency department staffing, we should be leery of monopoly-like power in this sector of the industry, which has historically received less scrutiny than hospitals or insurance companies.
For now, Vice President Mike Pence has promised that patients will not get surprise bills for coronavirus tests. But the Trump administration has offered few details on how they will make good on that promise. Although some large insurers have pledged to drop copays on coronavirus tests, it’s not clear that they’ll prevent out-of-network labs who work on those tests from billing patients directly, nor is it clear whether Pence’s surprise billing pledge would apply to treatment of Covid-19. Surprise bills would be particularly reprehensible during times like these, when frightened consumers are forced to either seek health care services or risk transmitting a potentially deadly disease to friends and family. Physician staffing companies who burden patients with these bills – in the name of multibillion-dollar business opportunities – harm patients and society at large. It’s time to hold these companies to the intended standards of the professionals they employ.