Surprise! It’s Your $10,000 Hospital Bill

School of Medicine

When healthcare providers and insurance companies disagree on a “fair” price for a service, patients can get caught in the crossfire. A UCSF student learned that the hard way when she received a surprise $10,000 bill after an ER visit at SFGH. What aspects of our healthcare system allow this to happen, and what is being done about it?

Last year, UCSF graduate student Adair Borges was biking in the Sunset when a car door opened into her path, knocking her off her bike and into oncoming traffic.

When paramedics arrived and assessed her injuries, they denied her request to be taken to UCSF Parnassus, instead sending her to the Zuckerberg San Francisco General Hospital (ZSFG). She was treated in the Emergency Department (ED) and later discharged.

But that was only the beginning of Adair’s troubles. Even though she had medical insurance under the UC Student Health Insurance Plan (UC-SHIP), she began receiving massive bills for the emergency care she received at SFGH.

All told, these bills totaled over $10,000.

It turns out that the UC-SHIP plan can hold students responsible for any out-of-network emergency care costs beyond a pre-determined limit.

Adair’s story is one of countless others across the country that illustrate a practice known as balance billing. If an insurance company pays a non-contracted (out-of-network) healthcare provider less than the provider’s billed fee, the provider can turn around and bill the balance directly to the patient, to make up the difference.

It happens more often than you might think. What allows it to happen at all?

In most simple consumer-purchaser relationships, like going to the grocery store or getting a haircut, money and products or services swap hands and it is clear what each side’s obligations are.

If only the U.S. healthcare system were that simple.

Instead of a consumer (the patient) directly paying the person providing the service (the healthcare provider), we now have an insurance company paying on their behalf. The insurer has a pool of money from customers’ premiums, and their financial incentive is to spend it as carefully as possible while delivering on the coverage they have promised to beneficiaries.

On the provider’s side, while a certain amount of altruism comes with the territory, the financial reality is that providers are looking to earn a comfortable living.

Independent healthcare providers can charge what they like, but in practice there are external pressures to keep prices from rising too high. Insurance companies often negotiate contractual relationships with certain providers, who receive a steady guaranteed flow of patients in return for offering discounted prices. These contracted providers are often referred to as “in network” for a given insurance plan.

To incentivize patients to see in-network providers (thereby saving money), insurance companies will make the patient pay more of the bill to see someone out-of-network.

If patients are free to choose between providers and are aware of which ones are in or out-of-network, then the system functions reasonably well – “reasonably” being a key word in the context of the American healthcare system.

However, as with Adair’s story, sometimes the system does not work in patients’ favor.

Take, for example, an inpatient surgery. A patient may be at an in-network hospital, and about to receive care from an in-network surgeon. However, if the anesthesiologist is out-of-network, they may balance bill the patient for whatever portion of their fee is not covered by insurance.

The patient did not know that someone providing care would be out-of-network, and the result is a surprise bill.

Emergency care is another particularly risky area for balance billing. In Adair’s case, she was not given the choice to go anywhere other than ZSFG, so she did not have a choice between providers.

In more remote settings, there may be a limited pool of providers to respond to emergencies, and those providers are likely to be out-of-network. As a result, the emergency care safety net can become financially treacherous for patients.

Over half of personal bankruptcies in the U.S. are triggered by medical costs, and of those cases, nearly 75% are in patients who have some form of insurance. Even as the Affordable Care Act expands coverage, many Americans are on insurance plans that leave them vulnerable to balance billing, making the issue more relevant than ever.

Unfortunately, simply banning balance billing puts healthcare providers and hospitals in an untenable position.

Anthem, which administers the UCSF SHIP insurance program, may set its reimbursement rates for emergency services based on national or state averages. But ZSFG might argue that it is no average hospital, and its prices for emergency care services deserve to be higher. After all, San Francisco is an expensive city, and the hospital must care for a large number of the city’s underserved uninsured patients who may not be able to pay.

Additionally, the Emergency Medical Treatment and Active Labor Act (EMTALA) mandates that EDs provide care to all patients, regardless of whether they have insurance or what insurance they have. It would be unfair to require EDs to take all patients while depriving them of the ability to recoup their costs in some manner.

That hasn’t stopped legal and legislative efforts at the state level to ban balance billing. Some state court rulings force healthcare providers to resolve disputes with insurers in court – a massive burden for the everyday provider.

Physician organizations have argued that these court decisions hamper staff retention at EDs, while simultaneously increasing causing overcrowding by turning EDs into universal in-network care settings for all patients.

Is there room for compromise?

Medical professional organizations have expressed willingness to eliminate balance billing, in return for laws that would mandate reimbursement levels that they see as fair. But providers and insurers rarely see eye to eye on what constitutes a fair price, and even different doctors may disagree with each other.

Some frustrated emergency care physicians have advocated for legislation that would force insurers to pay whatever rate those providers set, in-network or out. However, it is unlikely that insurers would accept a system that could leave them open to price gouging by providers.

Ultimately, state and national legislatures will likely need to legislate a compromise between insurers and providers on reimbursement rates. In the meantime, there is room to take some of the surprise out of balance billing.

A New York “no surprises” law passed last year allows patients to step out of the fray, creating an independent board for resolving disputes between providers and insurers. The law does put a greater burden on providers, but at least it takes vulnerable patients out of the conflict.

Here at UCSF the Student Health Advisory Committee (SHAC) – which now lists Adair as a member – directly advocates for students who face surprise medical bills.

SFGH still does not formally contract with the UC-SHIP plan, an unfortunate state of affairs given the hospital’s close ties with UCSF. However, following hard work by SHAC and other groups, UC-SHIP insurance administrator Anthem will now negotiate on students’ behalf to get reduced rates for emergency services. If negotiations are not successful, UC-SHIP will pay the balance of the bill.

So while much remains to be done on a broader level to protect patients from surprise balance bills, UCSF students now appear to be less vulnerable to surprise balance bills.

What are your thoughts on – or experiences with – balance billing? How can providers serve patients’ best interests while still satisfying their financial requirements? Continue the conversation in the comments section below.