Surprise! Out-of-Network Billing for Emergency Care in the United States

Zack Cooper, Fiona Scott Morton, Nathan Shekita

NBER Working Paper No. 23623
Issued in July 2017, Revised in January 2019
NBER Program(s):Health Care

Hospitals and physicians independently negotiate contracts with insurers. As a result, a privately insured individual can attend an in-network hospital emergency department, but receive care and potentially a large, unexpected bill from an out-of-network emergency physician working at that hospital. Because patients do not choose their emergency physician, emergency physicians can remain out-of-network and charge high prices without losing patient volume. As we illustrate, this strong outside option improves emergency physicians’ bargaining power with insurers. We then analyze a New York State law that introduced binding arbitration between emergency physicians and insurers and therefore weakened physicians’ outside option in negotiations. We observe that the New York law reduced out-of-network billing by 34 percent and lowered in-network emergency physician payments by 9 percent.

A non-technical summary of this paper is available in the 2017 number 4 issue of the NBER Bulletin on Aging and Health. You can sign up to receive the NBER Bulletin on Aging and Health by email.

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Document Object Identifier (DOI): 10.3386/w23623

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