Out Of Network Charges Fuel The Hidden Cost of Healthcare

According to a recent PricewaterhouseCoopers (PwC) report, the rate of medical inflation will be 6.8 percent in 2015. If you recall the bad old days of double-digit medical inflation in the 1990s and 2000s, 6.8 percent might seem like a bargain. On the other hand, medical inflation has been running in the low single digits for the past several years, so 6.8 percent presents a bit of sticker shock. And considering that health care is a nearly $3 trillion industry, the added cost from 6.8 percent inflation is bigger than the GDP of some countries!

What’s driving this? The PwC report cites four factors: An improved economy, which is causing more people to seek medical care they may have deferred; the high cost of new specialty drugs, such as those to treat hepatitis C; the acquisition of physicians by hospitals and health systems; and major investments in information technology.

However, there’s something hidden that’s also having a profound effect on health care costs: uncontrolled out-of-network charges, especially at emergency rooms, not just in Texas but all over the country. Unfortunately, in Texas and many other places, emergency rooms can charge whatever they want for out-of-network care.

At Cigna, we advise our customers to stay in network when they seek medical care, because going out of network is one of the most expensive financial decisions an individual can make. Naturally, we advise anyone experiencing a medical emergency to seek care at the nearest emergency room, regardless of network status. Sometimes individuals go to an in-network hospital only to find out later that the ER doctors who treated them aren’t in the network. When you’re having a heart attack or acute appendicitis, asking if the ER doc is in network is not top of mind!

Many health plans have out-of-network benefits, which limit an individual’s out-of-pocket cost, but many plans don’t. In either case, uncontrolled out-of-network charges raise costs not only for individuals, but also for insurers and employers who sponsor health plans for their employees. Insurers have a number of tools at their disposal to mitigate the out-of-network charges, but very often they (or the self-insured employer) are simply stuck paying an expensive bill. And those costs ultimately get passed on to individuals in the form of higher premiums or greater cost sharing.

Some hospitals and health systems have deliberately adopted an out-of-network strategy and refuse to negotiate in-network rates with insurers. In many areas of the country, including Texas, standalone 24-hour emergency rooms have sprung up, making it convenient for people to access medical care in a hurry, even if they’re not experiencing a true emergency. Many of these facilities charge extraordinarily high emergency care prices even if the patient receives minor care.

Not only do these facilities often charge exceptionally high prices for care, in many cases they also charge exorbitant facility fees, which can be hundreds or even thousands of dollars. A facility fee is simply an added charge for the privilege of using the facility, regardless of what care the individual receives.

Within the past year, a North Texas resident raced to an emergency room when he suddenly developed an unusual rash. The hospital wasn’t in his health plan’s network. After spending several hours in the ER, he was sent home with a prescription for an antibiotic – and a bill for nearly $100,000. In New Jersey, a patient visited an emergency room to treat a cut hand. The cost for a tetanus shot and a bandage was $9,000. In New York, an individual went to the ER at an in-network hospital to have a severed finger reattached. He was billed $83,000 because the plastic surgeon who treated him was out-of-network.

Out-of-network charges such as these aren’t sustainable and they pose a significant risk to making health care unaffordable. What’s the solution?

First, there should be some regulation of out-of-network charges. It’s just not right to charge $9,000 to bandage a finger or nearly $100,000 to treat a rash. There has to be a rational relationship between the service provided and the charge for that service.

Second, facility fees also need to be reined in. Supermarkets don’t charge a facility fee when you step through their doors and gas stations don’t charge you when you drive up to the pumps. You pay for the groceries and gasoline you buy. Why should a 24-hour emergency room charge an additional fee?

Third, if a hospital is in an insurer’s network, the emergency room doctors providing care should also participate in the network. The patient shouldn’t have to ask.

Fourth, we need to do a better job educating individuals on where to seek care. By all means, if you’re having a medical emergency, go immediately to the nearest emergency room. But if it’s not a true emergency, go to your doctor’s office or an urgent care facility where the cost of care will be much less.

If we can accomplish these four things, we can help keep medical inflation in check.

Dr. Watson is Cigna’s senior medical director for North Texas and Oklahoma.

Posted in Expert Opinions.
  • Brad Mayfield

    Cigna’s (and many other insurers’) in-network rates are horrible. This out-of-network strategy is a direct reflection of that. We need to meet in the middle, in my opinion.

  • Julie Turner

    My doctors were in network for ppo/oap/hmo etc suddently were not there in local plus and no understanding of why how the change on providers or patient’s part until after the bills came. Luckily the website now has you select the localplus option so you can look and try to get new drs now though they may be 15-20 miles away unless you live in main city area. Education is the key to understanding this as well.