As we discussed in our previous blog, freestanding emergency centers (FECs) are a convenient option for patients in need of quality emergency care. Unfortunately, insurance companies tend to be unsupportive of these facilities, and they work to actively deter patients from utilizing them when the need arises. In this article, we will discuss the misguided reasons health insurance companies are working so hard to keep patients away from FECs, learn how these actions harm patients, and present a possible solution to the problems created by insurance companies’ lack of support for these independent emergency care centers.
In-Network vs. Out-of-Network
Healthcare can be boiled down to three interested parties: patient, provider, and payer. The patient buys health insurance to cover future medical needs, they receive care from a provider, and the pre-paid health insurance company pays the provider for the care. Seems simple right?
Unfortunately, there’s more to it than that—though there shouldn’t be. Take, for example, the term “in-network.” Insurance companies tend to use this term as something that works in the patient’s favor, but this isn’t necessarily the case. When a provider or healthcare center is “in-network,” this means that they have negotiated set coverage rates for healthcare services performed by the provider. The in-network deal guarantees that the insurance company will only have to pay the provider the pre-negotiated amount for the service in question and ensures that the provider can only treat patients within the confines of the insurance company’s pre-authorization requirements and confidential insurance contracts. This may result in payment for the facility, but it is rarely in the patient’s best interest. If a facility is labeled “out-of-network,” this simply means that the provider or facility has chosen not to engage in these pre-negotiated deals with insurance companies.
Simply put, insurance companies want patients to see only providers who have entered in-network contracts; that way, they can pay a lower amount for the services provided. When it comes to emergency healthcare, whether a provider or facility is in-network or out-of-network shouldn’t matter. Emergency care is mandatory; a patient cannot be turned away by an emergency care provider if they are without insurance or their coverage is not in-network for the facility they choose. If a patient is insured, their insurance must cover emergency services at a “fair and customary rate.” (More on this later.)
How does this relate to FECs specifically?
FECs are still considered new healthcare models. Many are run by physicians who see the need to deliver emergency care without insurance companies’ pre-authorization requirements or confidential insurance contracts, which have been designed to limit patient care through delays or coverage denials. Because FECs only deliver emergency care—which insurance must cover at “the usual and customary rate”—many choose not to enter into in-network contracts with insurance companies. This is problematic for insurance companies who benefit from a pre-negotiated (or “in-network”) coverage structure. FEC physicians’ freedom to treat outside of a pre-negotiated discount bothers big health insurance companies so much that direct, misleading attempts (such as this letter sent by Health Plan of Nevada in August of 2017) are made to deter patients from seeking care from independent emergency centers.
Although Section 10101 of the Patient Protection and Affordable Care Act requires insurance companies to reimburse FECs for patient care at “the usual and customary rate,” there is no definition nor are there uniform guidelines for what this means. Rather than reasonably evaluating services and reimbursing providers at fair market value, insurance companies choose to grossly underpay FECs for emergency services—sometimes at amounts well under the necessary cost of the procedure. When facilities are reimbursed low percentages of procedure costs, the FEC may bill the remaining balance to the patient. These balance bills are a result of insurance companies taking advantage of the lack of uniform definition of “usual and customary” and taking the opportunity to arbitrarily create unjust coverage rates for emergency services.
Information Wars: Follow the Money
In 2017, Yale University’s Institution for Social and Policy Studies’ published a study entitled, “Surprise! Out-of-network Billing for Emergency Care in the United States.” This study attempts to illustrate the increasing problems with the rising costs of emergency healthcare. While it claims to address surprise billing, it concludes that the best way to reduce rising costs of emergency medical care is to support increased in-network deals with health insurance companies.
It should be noted that the Yale study was funded by a 2016-2017 research grant from the National Institute for Health Care Management (NIHCM) Foundation. NIHCM’s Board of Directors is made up of 1 former and 15 current health insurance CEOs, indicating a systemic bias toward insurance companies and the effectiveness of in-network deals.
Due to its high-profile nature, this study is routinely referenced in media coverage on “surprise billing” and FECs. Because it was funded by the health insurance industry, it fails to address the larger issue: the insurance system is broken. Patients pay monthly premiums meant to protect them from unexpected medical debt, but they’re still met with unreasonable charges when the need for care arises. The actions of the insurance companies show a dedication to their own bottom line without regard for the patients’ best interests.
How can this issue be solved?
Ideally, patients paying monthly insurance premiums should not be involved in the billing process after receiving emergency care. The Texas Association of Freestanding Emergency Centers (TAFEC) proposes a collaboration with insurance companies that does not include making in-network deals. The proposed collaboration would instead be patient-focused and would entail creating a process for defining fair and uniform “usual and customary” reimbursement rates for emergency services. This process for defining “usual and customary” should take into consideration the average necessary cost of procedures for FEC providers. Once a uniform definition is agreed upon, both insurance companies and FECs should hold themselves and each other to the agreed-upon rates and standards. TAFEC proposes that FECs that accept the agreement will legally forfeit the right to balance bill patients if the agreed upon reimbursement rates are met.
As direct-to-patient emergency care centers, FECs are intentionally structured to meet patient needs without the pitfalls of traditional emergency care—many of which come from strategically designed insurance pre-authorization requirements and confidential insurance contracts. When an FEC chooses not to enter an in-network deal with an insurance company, the facility should not be penalized with underpayment for emergency services and direct attempts to deter patients from their FEC. TAFEC’s proposed plan aims to reduce the time and resources used when mediating patient coverage, with the goal of allowing patients to get the care they need without the worry of surprise billing.
Healthcare works best when patients are given options for quality care. Freestanding emergency centers are an answer to the need for innovation in emergency medicine, and the novelty of the FEC model—one that aims to do away with insurance companies’ restrictive requirements for care—has caused established parties to object and push back. If healthcare is truly about patients, innovative healthcare options that meet the immediate needs of patients must be supported nationwide. Big insurance should stop funding campaigns to prevent providers from improving access to high-quality healthcare.
- Cooper, Zack & Fiona Scott Morton & Nathan Shekita. "Surprise! Out-of-Network Billing for Emergency Care in the United States," NBER Working Papers 23623, National Bureau of Economic Research, Inc. Jul 2017.
- Freestanding Emergency Departments Annals of Emergency Medicine, Volume 64, Issue 5, 562. Nov 2014.
- 3. Gold,Esq., Jeffrey, et al. “Reimbursement for Emergency and Non-Emergency Services Provided by Out-of-Network Physicians: The Issue of Balance Billing.” ABA Health eSource, Volume 8, Issue 3. Nov 2011. American Bar Association. www.americanbar.org. Accessed 20 May 2018.
- HPN Emergency Care Letter 2017. UMCSN, 2017. https://www.umcsn.com/Documents/HRNewHire/Benefits/HPN%20Emergency%20Care%20Letter%202017.pdf
- Texas Association of Freestanding Emergency Centers. TAFEC, 2018, www.tafec.org . Accessed 26 Mar 2018.