Newport Hospital and Health Services executive: Outsourcing ER turned out to be an insurance 'fiasco'

Rates of surprise out-of-network billing soared in a group of hospitals that outsourced their ED care.

Hospitals that hire outside help to staff their emergency departments might want to brace for angry phone calls from patients hit by surprise medical bills.

It's an appealing approach for small and rural hospitals, in particular, which have trouble recruiting physicians and might otherwise have to close community ER services. And patients in rural areas already have a hard time accessing emergency services.

RELATED: The devastating impact on a poor community when a rural hospital closes its doors

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But one small, rural organization, Newport Hospital and Health Services in Washington, took that path and regretted it. The angry calls started when patients' bills jumped from less than $500 from the hospital's doctors to more than $1,600 from EmCare, one of the nation’s largest physician-staffing companies. 

"The billing scenario, that was the real fiasco and caught us off guard," Tom Wilbur, Newport's chief executive, told the New York Times. “Hindsight being 20/20, we never would have done that.”

The hospital ultimately took back control of its coding and billing, the Times reported.

A new study by Yale University researchers linked EmCare and another outsourcing company, TeamHealth, to rising out-of-network charges in hospital emergency departments. Although the hospitals who hire the companies were in-network, the companies didn't always negotiate with insurance companies, which let them bill at higher rates. 

RELATED: Shrinking networks give rise to surprise medical bills

EmCare disputed the results of the study, calling it “fundamentally flawed and dated,” according to the Times. The company said it helps hospitals treat patients with more severe illnesses, which accounts for the higher billing rates.

According to the study, half the hospitals in the United States rarely charge out-of-network rates—in fewer than 5% of cases, in fact. Among 15% of the hospitals in the study, however, 80% or more of all patients received bills for out-of-network rates.

According to the Yale team’s research, hospitals that outsourced their ED care also saw a significant increase in their out-of-network billing rates. In several hospital emergency rooms, out-of-network rates for customers of one large insurer jumped to nearly 100% after EmCare took over.

Below, the year before and the year after a switch:

The study found that, in particular, when hospitals outsourced ED care to EmCare and TeamHealth, both the incidence of out-of-network billing rates and billing for high-cost procedures increased significantly. For hospitals with low rates of out-of-network billing, the introduction of staffing firms jacked rates by more than 70%, according to the study, with additional increases in those rates in the second year after outsourcing.

The study’s authors noted that a New York law prohibiting physicians from charging out-of-network patients higher rates than in-network patients has taken out-of-network billing rates down by 34% in the state.

That approach only works for patients with full insurance, however. So rather than replicating New York’s law, the study’s authors advocated a different policy fix.

“Rather than having hospitals and physicians separately negotiate with insurers, we propose requiring hospitals to sell emergency care packages that include both hospital and physician services,” study co-author Fiona Scott Morton said.

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She pointed out that this type of solution provides for negotiated rates between doctors and hospitals, preserving competition while protecting patients from surprise medical bills.

Some health systems are rethinking their billing process to make costs clearer to patients; several across the country have tested medical bills approved by the federal government because they are easier for patients to understand.

More efficient and fair negotiations between payers and providers could also reduce the number of unexpected bills.

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