Surprise Medical Billing

Surprise billing is a healthcare epidemic.
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The Issue: Surprise medical billing, technically called balance billing, occurs when a patient enters a hospital or other facility that is in the provider network for his or her insurance plan, but then is treated without prior knowledge or consent by an out-of-network physician or other provider. The result is that the patient inevitably ends up paying a considerable sum out of pocket for the services of that provider.

Consumers Union, the publisher of Consumer Reports magazine, released the results of a survey in March 2015 indicating that about one-third of Americans have experienced surprise medical billing, often at significant cost.

Drive-by Doctoring: A particularly egregious species of surprise, or balance, billing is what has come to be called drive-by doctoring. In this scenario, an out-of-network physician is called in for a brief consultation regarding a patient's condition, and submits a huge bill for mere minutes of effort, and without the patient's prior knowledge or consent. How large can such bills become? The headline of a New York Times article says it all: "After Surgery, Surprise $117,000 Medical Bill From Doctor He Didn't Know" (September 20, 2014).

Drive-by doctoring involves collusion by physicians to increase each other's billings, even in cases where there is no obvious need for the extra consultation.

Per that New York Times article cited above, the bills produced in drive-by doctoring schemes often are in the range of 20 to 40 times the normal insurance reimbursements for in-network practitioners. Referring physicians sometimes share in the drive-by billings, effectively receiving kickbacks for their complicity.

Insurance companies have begun to file suits challenging the legality of such surprise billings by out-of-network doctors. For example, insurance regulators in the State of New York now receive more complaints about balance billing, drive-by doctoring and related matters than any other issue.

Relevance to Financial Careers: See our related articles on

As healthcare costs continue to skyrocket, even in the wake of the Affordable Care Act ("Obamacare") that was supposed to constrain them, the need for financial skills among regulators, insurers and medical provider organizations alike is rapidly increasing.

Proposed Legislation: Representative Lloyd Doggett, Democrat of Texas, has introduced what he has named the End Surprise Billing Act. As of October 23, 2015, it was under consideration by the House Subcommittee on Health. Key features of the bill include:

  • A ban on balance bills from out-of-network providers in situations where the patient was admitted on an emergency basis to an in-network facility.
  • A requirement for 24 hours notice to the patient if there are plans to have him or her treated by an out-of-netowrk provider.
  • A requirement that this advance notice include an estimate of charges, to which the patient must provide written consent.

Several states, most notably New York and Texas already have begun to address the problem of surprise medical billing (or balance billing) ahead of possible federal action on the matter.