The Attack on Out-of-Network Doctors
By G. Keith Smith, M.D ,www.aapsonline.org
A patient who wanted to have a procedure at our facility asked us to file insurance. We discovered that if she had her surgery at our facility rather than at an “in network” hospital, her deductible would have been $3,000 instead of $1,500, her copay would have been 50% of the charge rather than 20%, and she had to agree to a 25% penalty for coming to the Surgery Center of Oklahoma rather than one of the hospitals in the network.
Never mind that the hospital would receive multiples of our fee from the insurance company, and the patient’s copay at the hospital was more than our entire charge.
This insurance company (a huge national company) made it clear when they came to Oklahoma that they were not interested in contracting with any facilities that were not hospitals or affiliated with hospitals.
Because of this, our facility is out of network. In order to steer patients to in-network facilities, insurance companies financially punish patients for wandering outside.
These networks were ostensibly devised to control cost and to guide patients to quality care. They have done the opposite, as you can see by comparing what you were charged for your medical care or insurance premiums 10 years ago with what you are charged now. Fewer and fewer good physicians with busy practices have remained in these networks as these organizations cut their fees every year.
Cutting the physician fees introduced a soft form of rationing that was central to the profitability of the carrier-PPO concept, as preposterously low payment to a physician for a service resulted in little of that service being rendered.
You may well ask, “If profitability is what drove these carrier/PPO’s, why would they want to pay more at a hospital? This doesn’t make any sense.”
It doesn’t make sense until you understand that the giant hospital bills gave the PPOs an opportunity to profit from their repricing scam, charging for the extent to which they are successful in “discounting” these inflated bills.
The out-of-network penalties didn’t work well at first because our acceptable profit margin was so low that even what the PPOs and carriers considered giant penalties weren’t sufficient to put us in the red. The carriers started to punish patients more and more aggressively, but our prices were so low that we could work with patients individually, making sure that their cost for working with us out of network was less than if they stayed in their network at the more expensive hospitals.
While these punishments were limited by statute, the carriers found ways around them that no insurance commissioner felt like challenging. Most of the funding for state insurance commissions comes from fees paid by insurance carriers, not taxpayers, and as the proverb says, “Whose bread I eat, his song I must sing.”
Carriers finally hit on a solution to stop the leakage. They made the “in” and “out” of network deductibles separate, so they didn’t cross-apply. That meant that if you had met your $1,500 deductible at an in-network facility and you chose to go out of network for other care, you started at zero. Your $1,500 did not apply toward the new and separate $3,000 deductible.
This solution worked. The number of these carriers’ patients we saw at our facility plummeted. Their hospital pals rewarded the carriers by giving better rates for certain hospital services, so the carriers could now much more effectively loot the employer groups with their repricing fees. Everyone but patients and their employers won.
Increasingly aware that something was wrong, managers of employer health plans had become more skeptical when their insurance broker rambled on about the spiraling cost of care and the next year’s 10% premium increase. All the employer groups needed to see the scam clearly was for someone to post prices online.
The tables are turning now. Employer groups (self-funded plans) are carving out more and more medical services from carrier/PPO groups, and are directly contracting with facilities like ours. As prices fall and quality soars, all patients will benefit, even those who are not beneficiaries of these employer plans.
I believe that the corporate hospitals and carriers have known for some time that their scam was unsustainable, and consequently may have turned to their cronies in D.C. Maybe they were told, behind closed doors, “If you like your scam, you can keep it.”
