Out-of-Network Care

Series of studies analyzes fall and rise of out-of-network spending in the U.S.

A stack of hundred dollar bills.
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In recent years, patients across the country have reported receiving “surprise” bills for medical treatment they received from out-of-network providers, often unknowingly. The bills often run in the thousands of dollars.

And patients don’t have to go far to be out of network. These bills sometimes come about when patients receive care from an out-of-network provider who is working in an in-network hospital. To protect patients from such situations, out-of-network spending has increasingly been a focus of health policy in the U.S.

To gain a better understanding of this phenomenon, Zirui Song, assistant professor of health care policy in the Blavatnik Institute at Harvard Medical School, and colleagues from the Health Care Cost Institute and Yale School of Public Health recently published a series of articles that combine an overall analysis of trends in out-of-network spending with in-depth looks at spending in areas of health care of particular concern for out-of-network spending. The studies appeared in Health Affairs and the Journal of General Internal Medicine.

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In a study published in the June issue of Health Affairs, the researchers found that while the share of total health care spending that was out of network declined slightly from 2008 to 2016, there was a rapid increase in out-of-network spending for several distinct segments of the U.S. health care system over the same period.

“Although we’ve seen that out-of-network care comprises a relatively small share of overall health care spending, and this share has been declining overall, the surge in out-of-network care in some areas of the delivery system is concerning,” said Song, who is also HMS assistant professor of medicine at Massachusetts General Hospital. “The average surprise bill from unanticipated out-of-network care has been increasing in size, and vulnerable populations such as those with substance use disorders and behavioral health needs may be especially at risk.”

Analyzing two of the nation’s largest commercial insurance databases, Song and colleagues found that out-of-network spending, as a percent of total spending, decreased from 7 percent during 2008-10 to 6 percent during 2014-16. The percent of spending out of network for emergency care, a focal point of policy discussions, also declined.

However, the researchers found, laboratory services, pathology services and hospitalist services—three lesser-discussed areas of the delivery system—saw sharp increases in out-of-network billing during this period. The share of laboratory spending out of network grew from 5.2 percent during 2008-10 to 11.5 percent during 2014-16, an average of 0.8 percentage points per year. Although patients often go to in-network facilities, these services may still be billed as out of network, resulting in surprise bills for the patient.

Prices for health care services were higher out of network than in network, the researchers found. To understand how provider charges—which exceed final prices—have evolved, the team published another report in Health Affairs noting that out-of-network charges grew rapidly in recent years, likely exposing patients to larger balance bills. Specifically, the researchers reported, out-of-network charges grew at more than twice the rate of out-of-network prices (or allowed amounts), meaning that after the insurer pays its portion, the patients were increasingly left with larger out-of-pocket costs. This difference between charges and prices (often referred to as the “balance”) can be the amount on a “balance bill,” which is frequently called a surprise bill if the patient received it unexpectedly.

In a separate study published in January in the Journal of General Internal Medicine, Song and colleagues focused on out-of-network spending in mental and behavioral health. The researchers found that psychiatry and behavioral health care are the segment of U.S. health care with the highest share of out-of-network spending—with about 25-30 percent of its spending out of network and stably so across the years.

Similar to the surges in out-of-network spending for laboratory services, pathology services and hospitalist services, the researchers reported a rapid rise in out-of-network spending in behavioral health facilities from about 10 percent to about 40 percent of spending in these places of care—driven in part by substance use disorder treatment facilities. The researchers noted that there are at least two possible explanation for these increases. In the midst of the opioid epidemic, these facilities may be charging higher out-of-network prices (a price explanation) or capacity constraints at in-network treatment centers may be driving patients to out-of-network facilities (a volume explanation), the researchers said.

In the July issue of Health Affairs, Song and Nicole Benson, HMS instructor in psychiatry at McLean Hospital, further investigated out-of-network pricing and cost sharing for psychotherapy. From 2007 to 2017, the prices paid for psychotherapy by insurers and patients (cost-sharing) rose for out-of-network psychotherapy and declined for in-network psychotherapy. This was the case for both adults and children. Behavioral health providers in independent private practice can set their own prices and decide whether to negotiate with insurers or remain out of network. While the use of out-of-network psychotherapy was largely stable and the use of the less expensive in-network psychotherapy grew over the study period, the widening gap between out-of-network and in-network prices may limit access to behavioral health care, especially for lower-income or vulnerable populations who, or whose insurers, may not be able to afford out-of-network care.

Addressing surprise billing has been a focus of policymakers in recent years. Bipartisan bills in the U.S. Senate have been debated, and calls to stop surprise billing has been a part of campaign platforms in this election year. This set of studies by Song and colleagues adds to the evidence base that can inform such efforts to protect patients and payers from surprise bills.

“While the overall downward trend in out-of-network spending as a percent of total spending is encouraging, our findings uncovered increases in out-of-network spending in some areas of the delivery system that have not been a focus of the surprise-billing debate,” Song said. “Our findings provide a strong motivation for policymakers to better understand who is affected by surprise out-of-network bills, for what services, and in which scenarios.”

“We need to make sure that our health care system isn’t putting people who receive out-of-network care unknowingly or out of medical necessity into financial peril,” he said.

This research was supported by grants from the National Institutes of Health, the National Library of Medicine and NIH Director’s Early Independence Award (no. DP5-OD024564).