“Balance billing” and “drive-by doctors” are contributing to growing out-of-pocket medical costs.

When a Hospital Stay Is Covered by Your Insurance—but the People Helping You There Are Not

When a Hospital Stay Is Covered by Your Insurance—but the People Helping You There Are Not

Your money and your life.
Aug. 10 2016 4:55 PM

When the Hospital Is Covered but the Health Care Isn’t

It’s getting harder and harder to keep medical costs within your insurance network—even during a single hospital stay.

When you think every aspect of your hospital stay is covered.
Surprise medical bills are a major headache.

Wavebreakmedia Ltd/Thinkstock

When Cybele Perry’s oldest daughter was born, her pediatrician conducted the newborn hearing screen. But that didn’t happen when Perry delivered her second daughter this January, at Delaware County Memorial Hospital in suburban Philadelphia. Instead, a woman she had never met before came to the hospital room, handed the exhausted Perry and her equally fatigued husband a flurry of paperwork to sign, and conducted the audio screening.

Helaine Olen Helaine Olen

Helaine Olen is a former columnist for Slate and co-author of The Index Card. She was the host of the Slate Academy series the United States of Debt.

Her daughter’s hearing was deemed excellent. Perry would use a different adjective, however, to describe her subsequent dealings with the Pediatrix Medical Group, the company that conducted the test, one she only heard of after it mailed her a surprise $239 bill for the exam.

Advertisement

Perry says no way. An administrative assistant, she works hard for her money and doesn’t feel she should have to turn over $145.08, her share of the bill after the insurance payment. “It feels like a scam,” she told me.

Unfortunately, it’s not. The insider term for what happened to Perry is “drive-by doctoring.” The resulting tab is called “balance billing.” Taken altogether, Perry’s experience is a telling example of the powerlessness of patients when it comes to the predations of the medical-industrial complex.

Perry, after all, did everything right, according to the best financial advice. She used an obstetrician and pediatrician who accept her insurance. And Delaware County Memorial is considered an in-network provider by her plan. But even if a hospital or other medical facility is part of your plan’s network, the same isn’t necessarily true of the providers within it. And when those professionals take care of a patient, they aren’t always constrained by the price agreements between the institution they’re working in and the patient’s insurance company.

Nor do these out-of-network providers necessarily inform patients of that fact—in fact, in many cases the patients are in emergency situations and unable to consent. Other times they’re in surgery, and only later do they discover that the anesthesiologist or surgeon’s assistant doesn’t work for the hospital and isn’t covered by their insurance.

Advertisement

Surprise medical bills from out-of-network providers are an all-too-common phenomenon, and in many cases a legal one. As insurers shrink the number of providers they contract with to participate in their networks to save money and crack down on the nation’s growing medical expenditures, consumers are more and more likely to inadvertently encounter an out-of-network provider and get balance-billed in the process. Last year, a Consumers Union survey found that over a two-year period, 30 percent of those with private health insurance received a surprise medical bill. In 2008, BusinessWeek estimated consumers paid at least $1 billion in balance-billing charges annually, a number that has almost certainly grown substantially. Since that time, after all, out-of-pocket medical costs for households with employer-provided health insurance have increased by more than 50 percent.

Consumers get hit with balance bills because in many places they’re powerless to stop them. In only a minority of states is there significant regulation of balance billing by doctors and other medical providers, but loopholes remain. New York offers some of the most significant protection, with prohibitions on balance billing in emergencies and in situations like Perry’s; even there, self-funded employer health plans—which many large corporations use to cover their employees—are exempt. Pennsylvania, where Perry lives, currently offers limited protection from balance billing in emergency situations, though there is a proposal on the table that would further limit the practice in some situations. The Obama administration recently proposed an initiative that would mandate hospitals attempt to ensure patients receive services from providers that accept their insurance, but almost no one expects any movement on that issue in perpetually gridlocked Washington.

With her $145.08 balance, Perry got relatively lucky. Many patients get hit with much higher charges—like the woman from Boca Raton, Florida, who needed to drain an individual retirement account to pay an $82,000 surgeon’s bill, as described by Florida’s insurance consumer advocate. (Florida Gov. Rick Scott recently signed a bill banning insurers from balance-billing consumers with PPO plans when they’re in an emergency situation or otherwise seeking treatment at an in-network facility; the state already had similar rules for HMOs.)

As for Perry, her predicament began with a decision last year by the Crozer-Keystone Health System to contract out newborn hearing testing at Delaware County Memorial to Pediatrix, a provider of neonatal services ranging from maternal fetal medicine to neonatology. This isn’t an unusual practice: About 65 percent of hospitals in the United States run their emergency rooms in such a way, contracting out for some routine tasks.

Advertisement

This decision gave Pediatrix an all-but-captive audience for its hearing screen. In 2016, the vast majority of newborns in the United States—more than 90 percent—will undergo a testing to check for hearing loss. It’s mandated by law in a majority of states, including in Pennsylvania, where Perry lives and the hospital is located. A subsidiary of the publicly traded corporation Mednax, Pediatrix describes itself as “one of the largest newborn hearing screen programs in the United States” and claims on its website to perform hearing screens on 700,000 infants annually.

Under the provisions of the Affordable Care Act, hearing tests for newborns must be covered by insurers at 100 percent of cost—provided, that is, that the organization performing the exam is in network. When I asked Crozer-Keystone why it would sign a contract for a mandated test with a company that’s almost certain to run up surprise, out-of-network bills for some percentage of its patients, it simply replied, “We strive to use providers who accept the same insurance plans as the health system, but it is difficult to guarantee this on every occasion.”

When Perry first received a bill from Pediatrix, she ignored it, just as many of us do after a hospital stay, figuring she’d receive a second note from her insurer in a few weeks saying it had her back. “You know how these things get crossed in the mail,” she told me. “You get another note a week or two later saying, ‘Hey, this was paid.’ ” It wasn’t. Instead, Perry got a second, more threatening bill from Pediatrix; “To date, your insurance company has not responded and our bill remains unpaid. As they have not cooperated, we have no option but to hold you responsible for the entire balance.”

At that point, Perry, a bit annoyed, submitted the bill to Independence Blue Cross, her insurer, herself. Independence, in turn, quickly issued her a check for $93.92. Perry signed the check over to Pediatrix, which credited the check to her account—and then sent her a third missive showing the adjusted balance but also claiming Pediatrix still had “not received payment on your account.” “We will expect payment in full within 15 days or your account may be referred for legal action,” it read. After a contentious conversation with Pediatrix, Perry then called the hospital, only to be told by its billing department that it had never heard of Pediatrix. She got in touch with her insurer, too, though she didn’t file a formal appeal. She also emailed me.

Advertisement

Perry isn’t the only person to run into issues with Pediatrix, which has inspired a number of Reddit and Topix threads about its shortcomings. It has one star on Yelp. Complaints at Better Business Bureaus abound. “Pediatrix conducted a hearing test upon my newborn in the hospital without informing us that it was optional or would not be covered by insurance,” one complaint with the Southeast Florida Better Business Bureau reads. “I believe Pediatrix has acted in a deceitful manner along every step of this process.” Pediatrix ultimately reduced the commenter’s balance to zero and the case was closed. Others complain that their bills were sold to a collections agency even though they paid them.  

Pediatrix says these examples represent a small minority of customers. “The number of hearing-screen complaints we have compared to the number of babies screened per year is significantly less than 1 percent per year,” Laura Hall-Koethe, the company’s director of the newborn hearing screen program, said in an emailed statement. 

When I initially contacted Pediatrix, I got a taste of the runaround Perry encountered. At first, the company’s spokeswoman told me via email that “We would never threaten legal action; in fact, we don’t send low balance accounts such as ‘hearing screen only’ accounts to collections.” But that didn’t fully jibe with Perry’s experience, as evidenced by the letters from the company she shared with me, which used the phrases “legal action” and “further collection activities up to and including legal action.” When I pointed this out, the spokeswomen clarified that Pediatrix only threatens legal action if insurance-company payments the customer receives aren’t sent on to Pediatrix. Yet Perry did submit the money her insurer gave her to Pediatrix.

Eventually Hall-Koethe told me that “our patient accounts department is currently reviewing the language used in hearing-screen billing letters, which may have template language that does not apply specifically to hearing-screen-only accounts.”

Advertisement

During our correspondence, the Pediatrix spokeswoman promised to have someone contact Perry. And indeed an employee of the company did get in touch with Perry to offer a 50 percent discount on the remainder of the bill. She turned it down, saying she wanted the balance dismissed in full. The Pediatrix representative, in turn, said she would need to report her response to her supervisors.

“I told her when she reported to her boss she should ask why they become contract partners with hospitals that are in-network hospitals to insurances that don’t accept their bills,” Perry told me. “Better yet, why do they visit hospital rooms of patients that are out-of-network, offering ‘state required testing’?”

So how did it all end? When I contacted Perry’s insurer, it refused to discuss the matter with me, citing privacy laws. But it did get in touch with Perry to say it would resolve the situation by issuing her a check for the remaining balance, which she should turn over to Pediatrix. It also offered to review a few of her other pregnancy-related bills and immediately told Perry she was no longer responsible for one $635 blood test tab she hadn’t even mentioned to me.

Yay for Perry. But bummer for the millions of other Americans stuck with balance bills from medical providers, whom Slate can’t help.