Balance Billing: A Practice that Serves No One

Balance billing, also known as surprise billing, is when a medical bill from an out-of-network healthcare provider charges a patient for the difference between the total cost of services and the amount covered by the insurance plan. Consider this example: a patient visits an in-network hospital for a surgical procedure. Unbeknownst to the patient, the anesthesiologist providing services for the procedure is not in the patient’s healthcare network and therefore will charge the out-of-network rate of $1,500. The patient’s insurance plan covers $600, but the remaining balance will be charged directly to the patient. This practice has wide-ranging negative externalities including perverse incentives that pit healthcare providers and insurers against one another. This exacerbates the shortcomings of fee-for-service care and costing patients millions of dollars every year. Federal and state governments have attempted to implement several policy-focused regulatory solutions in the past, though with minimal success. However, the value-based healthcare framework has the power to minimize the impact of and need for balance billing.

Incentivizing Additional Medical Services

Balance bills are typically issued as a type of contract negotiating leverage to extract higher payments from insurers. Although negotiation between provider and payer is the foundation of the healthcare market, balance billing initiates a process in which all parties are worse off. The existence of balance billing as a practice incentivizes healthcare providers to maximize the services provided to each patient, regardless of whether those services have a positive impact on the patient’s health outcome. This is a misallocation of time and resources, both of which could be better spent providing essential care to those in need. It also leads to insurers paying for more services than were actually warranted, and patients paying for services that oftentimes they weren’t even aware they were receiving.

Improving Patient Outcomes

Value-based healthcare agreements address these issues by limiting unnecessary services and prioritizing outcome-related metrics. These contracts align the interests of insurers and healthcare providers, allowing them to work together to achieve the best outcome for the patient while cutting costs and focusing on using in-network providers and facilities. Value-based care also seeks to limit emergency room services – where balance billing is most common – thereby reducing the likelihood that additional charges will be passed onto the patient. The healthcare industry is better off without balance billing, and value-based care contributes to a future without them.

The volume-based, fee-for-service model that currently dominates the American healthcare industry has numerous shortcomings. Balance billing compounds these failings by increasing costs, incentivizing inefficient allocation of care, and decreasing trust in the healthcare industry. Value-based care agreements provide an alternative to these entrenched entities, creating a path towards disrupting the current flawed healthcare system and replacing it with something better. Once value-based care supplants fee-for-service at the forefront of healthcare, balance billing will be a thing of the past.

References

Healthcare.gov Balance Billing

How often do providers bill out-of-network?

Public worries about and experience with surprised medical bills