$6000 Office Visit? Insurers Slam Steep Out-of-Network Fees

February 01, 2013

Out-of-network charges for physician services are often out of this world, and a financial hardship for patients, asserts a new report released today by a health insurance trade association.

The findings represent the latest salvo in a long-running battle between insurers and physicians over out-of-network claims.

Medicare paid on average $152.60 in 2011 for a level-5 office visit with an established patient (billing code 99215) in Massachusetts, according to a survey that America's Health Insurance Plans (AHIP) conducted among its members. That same year, a private health insurer received a bill for $6205.93, or 40 times more, for the same visit from an out-of-network provider in Massachusetts(see the table for the highest 99215 charges in other states).

Table. Highest Out-of-Network Physician Claims in 2011 by State for Office or Outpatient Visit With Established Patient (CPT Code 99215)

State Amount Billed Medicare Fee Amount Billed as Percentage of Medicare Fee
Alabama $1441 $130.75 1102%
California $4170 $152.53 2734%
Colorado $1749 $136.25 1284%
Connecticut $2550 $150.59 1693%
Indiana $2250 $133.09 1691%
Louisiana $1505 $132.82 1133%
Maryland $3172 $154.76 2050%
Massachusetts $6205.93 $152.60 4067%
North Carolina $2150.01 $133.56 1610%
Ohio $3280 $136.31 2406%
Oklahoma $884 $131.57 672%
Pennsylvania $1900 $135.52 1402%
Tennessee $1250 $132.18 946%
Washington $2450 $144.01 1701%

Source: America's Health Insurance Plans. Data collected and prepared by Dyckman & Associates.

Other physician services were marked up even higher, said AHIP. For a hospital visit coded 99233, an out-of-network provider in Texas billed an insurer $9470.90, which was almost 95 times higher than Medicare's average fee of $100.06 in that state. A lumbar spine fusion was billed at $115,625 by a New York out-of-network provider, or 6194% of the Medicare rate of $1866.71 in that state.

Private insurers don't pay thousands of dollars for an office or hospital visit. They reimburse out-of-network physicians based on a fee schedule that might be slightly more generous than Medicare's. The problem with such high charges, says AHIP, is that such physicians then can bill patients for the balance, a privilege not afforded to network physicians. They generally must accept the insurer's allowable charge — which may include a co-pay and co-insurance — as payment in full.

Exorbitant bills that patients receive from out-of-network physicians limit the ability of health plans to offer affordable access to such providers, the AHIP report stated. Health reformers must corral such runaway and crushing costs.

"As we shine a spotlight on the affordability issue, we encourage policymakers to look at how much is being charged for services, particularly when there is often no relationship between higher charges and higher quality of care," said AHIP President and CEO Karen Ignagni in a press release.

The AHIP report drew a harsh rebuttal from Jeremy Lazarus, MD, president of the American Medical Association (AMA). In a statement released today, Dr. Lazarus called the study "grossly misleading" because it "focuses solely on a handful of examples out of billions of medical bills filed annually that in no way reflect typical physician charges for out-of-network services." The study contains no data on how much the out-of-network physicians were actually paid, he noted. Furthermore, it isn't clear how many of the charges resulted from data entry errors.

AHIP states that it took several steps to try to exclude out-of-network insurance claims that could have been billed or reported erroneously in its survey. For example, it discarded claims where the charge was more than 20 times the Medicare allowable and at least 50% greater than the next highest reported ratio of charge to Medicare allowable for that billing code in the same locale.

AHIP, assisted by the consulting firm Dyckman & Associates, asked its members to provide the 3 highest billed charges in 2011 from out-of-network providers for 24 billing codes — also called procedure codes — in the country's 30 most populous states. AHIP said it gleaned billed charges only from clean or errorless claims that were ready for adjudication.

Dale Blasier, MD, who chairs the coding, coverage, and reimbursement committee of the American Academy of Orthopaedic Surgeons (AAOS), also sees the AHIP as focusing unfairly on outliers. "It doesn't look at median charges," said Dr. Blasier, a professor of orthopaedic surgery at the University of Arkansas for Medical Sciences. "It looks at the most gross, spectacular charges you can imagine."

AHIP, however, suggests that bloated out-of-network charges are anything but rare.

"Health plans and their members routinely receive bills from physicians that are 10 to 20, or sometimes nearly 100 times higher than Medicare would allow," the association's report said.

Physicians Say AHIP Report Diverts Attention From Insurer Abuses

The AHIP report turns the tables on physicians, who have long accused private health insurers of systematically underpaying them when they submit claims as out-of-network providers.

Insurers base their out-of-network rates on what are called "usual, customary, and reasonable" (UCR) charges submitted by physicians. In 2009, UnitedHealthcare agreed to pay $350 million to settle a class-action lawsuit brought against it by the AMA, other medical societies, individual physicians and patients, and several unions who said that the giant insurer manipulated its database of UCR charges to set them at an artificially low level. By its very nature, a settlement does not represent an admission of wrong-doing.

Last December health insurer Aetna said it would pay $120 million to settle a similar class-action suit (the settlement awaits final approval by the court). Class-action lawsuits against WellPoint and Cigna over out-of-network reimbursement are pending.

The AMA's Dr. Lazarus takes note of this history of litigation in characterizing the AHIP report.

"The report," he said, "attempts to divert attention from the health insurance industry's history of short-changing payments to patients for out-of-network services."

Dr. Blasier with the AAOS agrees. "The whole report is trying to take the blame off insurers, and find fault with individual greedy physicians," he told Medscape Medical News.

NY Physicians Account for Half of Highest Out-of-Network Charges

AHIP found that the highest out-of-network charges as a percentage of the Medicare allowable for each of the 24 billing codes were concentrated in a handful of states. New York led the nation with 12, followed by Texas with 5, New Jersey with 3, and California, Illinois, Massachusetts, and Wisconsin with 1 apiece.

There was wide variation in the highest out-of-network charges by state. The top charge for an upper GI endoscopy and biopsy (billing code 43239) ranged from $29,998, or 7331% of the Medicare allowable, in New York, to $781, or 243% of the Medicare allowable, in Iowa. For all 30 states surveyed, the average top charge for this procedure was 1325%, or more than 13 times, the Medicare allowable.