AJMC® Authors Say Contract Law Offers a Fix for Out-of-Network Billing

Insurance Business Weekly

By a News Reporter-Staff News Editor at Insurance Business Weekly -- More and more states have tried to end "surprise" medical bills, which have become more common as patients seek care from a network hospital, only to be treated by an out-of-network doctor. Often, the patient has no idea the doctor was outside their health plan network until the bill arrives.

In the current issue of The American Journal of Managed Care®, two doctors and two lawyers say they have a solution that doesn't require legislation: better use of contract law. For the paper, "Battling the Chargemaster: A Simple Remedy to Balance Billing for Unavoidable Out-of-Network Care," click here.

Authors Barak D. Richman, JD, PhD; Nick Kitzman, JD; Arnold Milstein, MD, MPH; and Kevin A. Schulman, MD, say the problem starts with the "chargemaster," a hospital's master list of prices for billable services. The authors say the defining feature of the chargemaster is that it is "devoid of any calculation related to cost," and has no relation to local market conditions.

"A contract law solution empowers the very parties who currently are being exploited by out-of-network charges," they write. An emerging consensus, supported by a key court ruling, finds that providers are not entitled to "chargemaster" rates, because neither the patient nor the payer agreed to them. Instead, the authors write, the law "entitles providers to collect no more than the prevailing negotiated market prices" for out-of-network care. In other words, rates already negotiated by hospitals, doctors, and area payers are the norm, not those artificially inflated on the "chargemaster."

"This leads to a stark conclusion," the authors find. "Providers have no legal authority to collect chargemaster charges that exceed market prices for out-of-network services, nor are payers under any obligation to pay such chargemaster prices." The authors make their case in a legal analysis available online.

While the authors praise state legislators for trying to end surprise medical bills, they say the courtroom is the proper place for these disputes. Other remedies, like bans on out-of-network bills, don't encourage cost-saving steps or competition. The authors conclude: "Applying this interpretation of contract law will prevent providers from hiding behind a convoluted hospital pricing system, will encourage the development of attractive narrow network offerings, and will shield urgently sick people from the dread of medical predation." About The American Journal of Managed Care®: The American Journal of Managed Care® (AJMC®) is a peer-reviewed, MEDLINE-indexed journal that keeps readers on the forefront of health policy by publishing research relevant to industry decision makers as they work to promote the efficient delivery of high-quality care. AJMC.com is the essential website for managed care professionals, distributing industry updates daily to leading stakeholders. Other titles in the AJMC® family include The American Journal of Accountable Care® and two evidence-based series, Evidence-Based Oncology™ and Evidence-Based Diabetes Management™. These comprehensive offerings bring together stakeholder views from payers, providers, policymakers and other industry leaders in managed care. To order reprints of articles appearing in AJMC® publications, please contact Dr. Jeff Prescott at (609) 716-7777, x331. http://www.ajmc.com/journals/issue/2017/2017-vol23-n4/Battling-the-Chargemaster-A-Simple-Remedy-to-Balance-Billing-for-Unavoidable-Out-of-Network-Care View source version on businesswire.com: http://www.businesswire.com/news/home/20170504006164/en/

Keywords for this news article include: AJMC, Hospital, Managed Care.