By JULIE CRESWELL, REED ABELSON and MARGOT SANGER-KATZ
JULY 24, 2017
Early last year, executives at a small hospital an hour north of Spokane, Wash., started using a company called EmCare to staff and run their emergency room. The hospital had been struggling to find doctors to work in its E.R., and turning to EmCare was something hundreds of other hospitals across the country had done.
That’s when the trouble began.
Before EmCare, about 6 percent of patient visits in the hospital’s emergency room were billed for the most complex, expensive level of care. After EmCare arrived, nearly 28 percent got the highest-level billing code.
A small, rural hospital in Washington State, Newport Hospital and Health Services, outsourced its emergency room, as many hospitals have. Soon it started hearing from patients confused by getting large bills from the E.R. doctors.
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On top of that, the hospital, Newport Hospital and Health Services, was getting calls from confused patients who had received surprisingly large bills from the emergency room doctors. Although the hospital had negotiated rates for its fees with many major health insurers, the EmCare physicians were not part of those networks and were sending high bills directly to the patients. For a patient needing care with the highest-level billing code, the hospital’s previous physicians had been charging $467; EmCare’s charged $1,649.
“The billing scenario, that was the real fiasco and caught us off guard,” said Tom Wilbur, the chief executive of Newport Hospital. “Hindsight being 20/20, we never would have done that.” Faced with angry patients, the hospital took back control of its coding and billing.
Newport’s experience with EmCare, now one of the nation’s largest physician-staffing companies for emergency rooms, is part of a pattern. A study released Monday by researchers at Yale found that the rate of out-of-network doctor’s bills for customers of one large insurer jumped when EmCare entered a hospital. The rates of tests ordered and patients admitted from the E.R. into a hospital also rose, though not as much. The use of the highest billing code increased.
“It almost looked like a light switch was being flipped on,” said Zack Cooper, a health economist at Yale who is one of the study’s authors.
In a statement, EmCare described the study as “fundamentally flawed and dated.” But it acknowledged that surprise billing, as the billing is called when the doctor is unexpectedly not part of an insurance network, is “a source of dissatisfaction for all payors, providers and patients in our current health care system.” It said that the issue was not specific to any one company, and that it had already publicly committed to reaching agreements with insurers for the majority of its doctors within the next two years. This study, and others, have found that EmCare is not alone in the practice of sending out-of-network bills.
EmCare said that it allowed hospitals to treat sicker patients when it takes over, and that an increase in such patients explained the higher billing in Newport.
In the study, the researchers examined nearly nine million visits made to emergency rooms run by a variety of companies between 2011 and 2015, using data from a single insurance company that does business in every state. In exchange for access, the researchers agreed not to identify the insurer. Insurers and health care providers typically sign contracts forbidding them to reveal the prices they have agreed to, and the national trends in surprise billing detected by the Yale team are consistent with a broader study by government researchers.
The new data suggests that EmCare, part of publicly traded Envision Healthcare, did not sign contracts with the insurance company and was able to charge higher prices.
Fiona Scott Morton, a professor at the Yale School of Management and a co-author of the paper, described the strategy as a “kind of ambushing of patients.” A patient who goes to the emergency room can look for a hospital that takes her insurance, but she almost never gets to choose the doctor who treats her.
Sometimes, insurers simply pay higher out-of-network bills, but the cost is often passed on directly to patients.
A broken ankle sent Debra Brown of Crescent City, Calif., to the Sutter Coast Hospital’s emergency room. She was surprised to get an additional bill from a doctor who she said never identified himself and only briefly touched her ankle.
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After slipping on some wet leaves outside her house in Crescent City, Calif., in February, Debra Brown, a 60-year-old county accounting clerk, wound up at Sutter Coast Hospital. She is paying off her deductible, but her insurer covered most of her remaining hospital bill. She was shocked to get an additional bill from a doctor who she said never identified himself and only briefly touched her broken ankle. That physician worked for EmCare. Her portion of the bill is more than $500.
“Now I’m going to have to pay this bill off, and I can’t afford to see a doctor about my high blood pressure medication,” Ms. Brown said. “This is insane, and it’s greedy.”
Nationwide, more than one in five visits to an in-network emergency room results in an out-of-network doctor’s bill, previous studies found. But the new Yale research, released by the National Bureau of Economic Research, found those bills aren’t randomly sprinkled throughout the nation’s hospitals. They come mostly from a select group of E.R. doctors at particular hospitals. At about 15 percent of the hospitals, out-of-network rates were over 80 percent, the study found. Many of the emergency rooms in that fraction of hospitals were run by EmCare.
When emergency room doctors work for a company that has not made a deal with an insurer, they are free to bill whatever they want, insurers say. “The more they bill, the more they get paid,” said Shara McClure, an executive with Blue Cross of Texas.
E.R. doctors say out-of-network billing isn’t their fault. Sometimes, insurance companies will offer only low payments, leaving physicians no choice, said William Jaquis, an executive with the American College of Emergency Physicians, who is also an E.R. physician employed by EmCare. Doctors would “prefer that we had better payment and better negotiation with the insurers, and the patients would be covered,” he said.
The researchers focused on 16 hospitals that EmCare entered between 2011 and 2015. In eight of those hospitals, out-of-network billing rose quickly and precipitously. (In the others, the out-of-network rate was already above 97 percent, and it did not go down.) They also looked at a larger sample of 194 hospitals where EmCare worked and found an average out-of-network billing rate of 62 percent, far higher than the national average.
The before-and-after analysis was limited to the small number of hospitals where the researchers could find public records of EmCare’s entrance, and it was based on claims from only one large insurance company. While the nationwide patterns are consistent with studies that have looked at other insurance companies, the single insurer in the study may not be typical in all cases: EmCare does participate in some insurers’ networks, such as Blue Cross of Texas. EmCare also says it has reached agreements with more insurers in Texas, Arizona, Florida and Virginia since 2015.
Researchers also examined what happened when one of EmCare’s top competitors — TeamHealth — took over a handful of mostly nonprofit emergency departments. There, they found a smaller increase in out-of-network billing and virtually no change in hospital admissions, testing or coding.
Analysts point out that hospitals, despite any patient complaints, can benefit financially from the increased testing and admissions EmCare has delivered. In the study, surprise bills were more common at for-profit hospitals than at their nonprofit competitors.
“They’d have to have their heads in the sand to be totally unaware” about the out-of-network billing, said Leemore Dafny, a professor at Harvard Business School, who reviewed the research.
EmCare’s emergency room management has come under scrutiny before. The company was named in a 2011 whistle-blower lawsuit against Health Management Associates, a for-profit hospital chain. The suit alleges that both EmCare and the hospitals pressured E.R. doctors to increase admissions and tests, even when the physicians believed they were not medically necessary. The company “repeatedly terminated physicians and E.R. medical directors” who pushed back, the suit says. The case, which was brought by a hospital chief executive and a former EmCare executive, is still pending. Envision said it does not comment on pending litigation.
Hospital emergency departments, which must take all comers regardless of their health insurance, were once viewed as financial drains. Then hospital leaders started to see the E.R. as the front door, critical to attracting paying patients. In the early 1990s, emergency departments accounted for a third of admissions to hospitals; today, they account for half, according to a RAND study.
As in so many other parts of the modern economy, turning operations over to large outside contractors has been a big part of the transition. Nearly a quarter of all emergency room doctors now work for a national staffing firm, according to a 2013 Deutsche Bank report.
EmCare in particular has thrived. Founded in the 1970s, it has grown rapidly in recent years.
Its sales pitch to hospitals is that it can find high-quality doctors and run emergency rooms more efficiently. It offers a software program called RAP & GO (short for Rapid Admission Process and Gap Orders) that it says speeds admissions and potentially produces “significant new hospital revenue.”
Some doctors say the staffing companies save them from the administrative headaches of billing and scheduling.
In addition to its work in emergency rooms, EmCare has been buying up groups of anesthesiologists and radiologists. In these hospital specialties, it is hard for patients to shop, and out-of-network billing is common.
EmCare’s size and reach have made some doctors wary of criticizing its practices. According to Dr. Carol Cunningham, an emergency room physician in Ohio, that is especially true in places where there is little alternative to working for a large staffing company. “You may have trouble finding something in the area,” she said.
But some doctors outside the E.R. have been less reticent. Dr. Gregory Duncan, chief of surgery at Sutter Coast Hospital in Crescent City, Calif., said patients started complaining about bills they received after EmCare took over the emergency room in 2015.
Dr. Gregory Duncan, chief of surgery at Sutter Coast Hospital in Crescent City, Calif., said patients started complaining about bills they received after EmCare took over the emergency room in 2015.
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“I discovered a pattern of inflated bills and out-of-network bills,” he said. “What they are doing is egregious billing.”
Dr. Duncan, who also sits on the county health care district board, has joined with other elected officials in asking Sutter Coast to terminate its contract with EmCare.
In an emailed response, Mitch Hanna, the chief executive of Sutter Coast, said the hospital chose EmCare because of its ability to fully staff its emergency department. He added that he understood EmCare was working to bring two large commercial insurers into its network by the end of the year.
EmCare said in early February that it planned to reach agreements with insurers for most of its doctors. The company also said it was working with insurers, hospitals, lawmakers and others to make sure patients get appropriate care “without creating undue financial burden.” The American College of Emergency Physicians favors an approach in which out-of-network emergency room doctors are paid a standard rate.
California recently passed a law setting a maximum amount that out-of-network doctors can charge patients. Other states, including Florida and New York, have also passed laws to limit surprise bills.
But many state efforts to reduce surprise billing have been met by fierce lobbying from doctors who oppose efforts to weaken their bargaining position, said Chuck Bell, the programs director at the consumer advocacy group Consumers Union.
“The whole thing is really a mess,” he said. “Progress is really slow.”
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