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New York Union Blames Out-of-Network Doctors for Millions in Costs

John Tozzi

(Bloomberg) -- Jose Lissade, a 43-year-old handyman who lives in Queens, New York, made two trips to the hospital in 2018 for a gastrointestinal infection. During those two stays, he had some routine heart tests that typically would cost a total of about $340. The tab for Lissade’s tests: $4,800.

Lissade personally shelled out only a $100 co-pay for each stay. But his insurance provider, a union health plan called the 32BJ Health Fund, paid much more to some doctors at the hospital, a Northwell Health facility in Queens. The plan settled claims for the tests for a total of $2,320, almost seven times what the plan normally pays. All that because Lissade was seen by out-of-network doctors.

“When we have a cardiologist who wants $5,000 for something that other people are willing to accept $80 to $120 for, that starts to raise concerns for us,” said Sara Rothstein, director of the 32BJ Health Fund.

32BJ says markups by outside physicians inflate costs by millions of dollars each year. Thousands of times a year, the health plan pays a higher price because some doctors don’t take the same insurance as the hospitals where they practice. Over three years, 32BJ has paid more than $10 million to out-of-network doctors at New York hospitals in its network, according to data shared with Bloomberg News. Employers fund the plan, which is jointly governed by representatives of labor and management.

The situation isn’t unique to Northwell. Physicians can set their sticker prices as high as they like. If they don’t contract with health plans, they can often negotiate higher payments for the same services. For that reason, health plans try to steer patients toward contracted doctors in their networks. But sometimes patients can’t avoid seeing out-of-network doctors, particularly if they’re working at hospitals that are in patients’ insurance networks.

Nationwide, about 16% of inpatient hospital visits trigger bills from out-of-network providers, according to an analysis by the Kaiser Family Foundation. The rate is twice as high in New York state.

Surprise Bills

Congress is considering legislation to insulate patients from so-called surprise medical bills – out-of-network charges in situations where patients can’t avoid the provider, such as emergencies. Committee leaders in the House and Senate this week promoted a proposal that would limit patients’ exposure to surprise bills and set up rules for insurers and providers to settle payment disagreements. President Trump has also called for a fix.

But even when patients don’t get charged directly, plans get the bill. 32BJ blames hospital systems for allowing out-of-network physicians to charge many multiples of contracted rates. The plan says it pays more for such claims to doctors at Northwell, one of the region’s biggest hospital systems, than at competing New York systems.

Northwell calls the analysis misleading. The health system says the out-of-network charges come from independent physicians who practice at its facilities but aren’t its employees, and that the hospital has no control over their billing.

“Those aren’t our physicians. Those are private practice, independent entrepreneurs,” said Felix Aviles, vice president of practice management at Northwell. Aviles said 99% of the health system’s employed doctors are in-network with 32BJ’s plan. The hospital found only $250,000 in out-of-network claims billed by Northwell’s employed physicians in the same period, he said.

The dispute pits a powerhouse hospital system against one of the region’s largest purchasers of health care. Northwell has 23 hospitals, 750 outpatient facilities, and more than 70,000 employees, which it says makes it the largest private employer in New York state. The 32BJ Health Fund controls more than $1 billion in annual health spending on behalf of 200,000 members -- unionized property workers like doormen, janitors, and superintendents.

Excellent Care

Lissade, who went to Northwell’s hospital in Forest Hills, Queens, said he had no idea that some of the doctors who saw him didn’t take his health plan. “I didn’t really think about how much it was going to cost,” he said. His care was excellent, he said.

In Washington, health-care industry groups have lobbied lawmakers over how to resolve disputed bills. Insurers prefer a policy to set a benchmark rate that would limit how much out-of-network physicians can collect. Doctors and hospitals favor private arbitration to settle billing disagreements.

The proposal emerging from Congress would set a minimum benchmark payment at the median in-network reimbursement rate – so insurers would pay out-of-network doctors at least as much as they typically pay physicians in their network. If either side disputes that price, they could ask an arbitrator to help reach an agreement.

“No one wants to be told how much they can get paid by the government,” said Gary Claxton, senior vice president at the Kaiser Family Foundation, a health research group. But he said high prices have driven health-care spending in the U.S.

The 32BJ Health Fund is getting more aggressive about steering members away from what it considers higher-cost or lower-quality care. About 12% of the total it paid to physicians practicing at Northwell facilities, or $4.2 million, went to out-of-network providers over three years between 2016 to 2018.

At other local hospital systems, the percentage of out-of-network payments ranged from 3% to 10%, according to data the fund shared with Bloomberg News. The plan paid at least twice as much to out-of-network doctors at Northwell than at any other system.

High Rates

“That raised a question for us as to whether there has been, implicitly or explictly, a business decision by Northwell to allow doctors to be out-of-network and to bill at really high rates,” Rothstein said.

Northwell insists the answer is no. Outside doctors that have admitting privileges at Northwell bill the health plan separately and aren’t authorized to use Northwell’s name on their bills, Aviles said.

“Legally we can’t tell another corporation what to do and how much to bill,” Aviles said.

The union health fund said a handful of provider groups accounted for a disproportionate share of the  out-of-network bills. It declined to identify those groups but one provider-group billed 100% of its claims at Northwell as out-of-network, according to 32BJ.

“We should of course blame the physicians because the physicians’ charge is so high,” said Ge Bai, an associate professor at the Johns Hopkins Carey Business School who has studied health care prices.

Hospitals, though, particularly large systems like Northwell with market clout, bear some responsibility. “Northwell could have flexed its muscle” to limit out-of-network charges by doctors at its facilities, she said.

To contact the author of this story: John Tozzi in New York at jtozzi2@bloomberg.net

To contact the editor responsible for this story: Rick Schine at eschine@bloomberg.net, Timothy Annett

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