Surprise Medical Bills And Balance Billing

There’s has been a lot of talk about “Surprise Medical Bills” and “Balance Billing” in the news lately, but is this really the problem or might we be missing something? We’ll examine the causes behind this troubling trend and see if we can find a way forward for providers and patients alike in this three-part blog series by QMC and industry expert, Ed Marasco.

Ed Marasco, MPM, CMTE, EMT-P (Ret.) is Vice President of Business Development at Quick Med Claims and a respected leader in the medical transportation industry. Ed has extensive experience in the areas of medical transportation billing and reimbursement policy gleaned from years as an air medical EMT-P and his time at QMC. He has served on several national committees and recently participated in the Negotiated Rulemaking Process to develop the current Medicare Ambulance Fee Schedule.

Part 1: Understanding the Disease

Surprise Medical Bills And Balance Billing-Part 1: Understanding The Disease

The challenges associated with Surprise Medical Bills and Balance Billing have placed these concepts near the center of the healthcare debate over the last 24 months; however, they are merely symptoms of the underlying disease.

What is Surprise and Balance Billing?

Before we go too far into the subject, it may be useful to take a quick moment to define the terms at the heart of the matter. Professor Jack Hoadley, Ph.D. of Georgetown University used the following definitions during his recent testimony to the US Department of Transportation:

“A Surprise Medical Bill is any bill sent by a medical provider to a patient for an amount larger than expected.

A Balance Bill is a bill sent by a medical provider to a patient for the balance remaining after the insurer makes a payment and after normal patient cost-sharing and deductibles are applied.”

Moving Beyond the Chief Compliant

Understanding that Surprise and Balance Bills are mere symptoms of an underlying disease, we need to look deeper to diagnose the underlying problem. Even a cursory look at these billing practices reveals a stark disconnect between insurance coverage and the clinical care needs of the patient.  

While most media coverage and social commentary surrounding the issue would lead the less-informed consumer to believe that exorbitant fees are the problem, in fact, fee increases are only what has brought it into the public eye recently. The real problem is the failure of the US Healthcare System to align the interests of patients, employers, and insurers with the providers of care. This probably isn’t news to you as it certainly isn’t new and it’s not limited to the medical transport community, but knowing it and understanding it are two different things.

Let’s dig a little deeper to truly understand how we got here in the first place.

Cost Shifting

Broadly speaking, the underlying problem that has spurred the proliferation of Surprise and Balance Billing can be summed up in two words – cost-shifting – and it’s been a huge problem in the US Healthcare System for decades.

Cost shifting is based on the notion that healthcare providers compensate for inadequate payments received from one set of payors by increasing charges for another set of payors.

Provider’s Attempt at a Cure
When a provider doesn’t receive adequate payment for their services, they are forced to seek other avenues to improve revenue so they can continue to offer the same level of care for all of their patients.  This approach has been employed by hospitals, physicians and ancillary service providers for years and resulted in a rift between providers and the payors who bear the majority of the cost burden.

Typically, commercial payors are on the receiving end of cost-shifting, while government payors and individuals without the ability to pay tend to be the source of the economic challenge.

Commercial Payor’s Attempt at a Cure
When an insurer doesn’t receive adequate premium payments to fund the cost of the services, they are forced to reduce spending where they can. Ultimately, commercial payors responded to provider cost-shifting by performing their own evaluation of the cost of healthcare services alongside the premiums they can reasonably charge for their services while adhering to industry regulations. The strategy they landed on to lower costs involved creating narrow networks of providers that agreed to accept lower negotiated rates in exchange for access to the insurer’s patient volume.

This approach requires providers to make decisions about the best way to operate within the confines of networks that restrict access to the payors that bear most of the cost of their services. Let’s look at the concept a little more closely.

In-Network or Out-Of-Network – That is the Question
Choosing whether to opt-in or opt-out of payor networks requires serious consideration of the operations, political, strategic and financial ramifications of the decision. Especially germane to the topic of this article is understanding that if they elect to remain Out-of-Network (Non-Participating) with an insurer, their patients could be on the receiving end of Surprise and/or Balance Bills.

Scenario 1: The Surprise Medical Bill
It may not be clear to the patient or their family that everyone on their care team isn’t In-Network. For example, during an emergency, they might innocently choose to go to one local Emergency Department over another because they believe it to be In-Network with their insurance. What they don’t realize is that all of the care providers and services rendered there (e.g. evaluation by an Emergency Medicine Physician, diagnostic imaging services, laboratory services, etc.) may not also participate. Therein lies the surprise. The patient could potentially get hit with significant medical bills when they were under the assumption that they were using the preferred network of their insurer, when in fact some providers were not governed by any contract whatsoever.

Scenario 2: The Balance Bill
When a provider is In-Network, the patient’s out-of-pocket costs are limited because of the In-Network agreement. When a provider is Out-of-Network, insurers will usually pay a set rate that usually lies somewhere between the full charges issued by the provider and the In-Network contracted rate. Therefore, the patient might very well receive a bill for the difference between the full charges and the rate the insurer paid if they see an Out-of-Network provider. Hence, the Balance Bill.

Transparency and Awareness for the EMS Patient

The challenge in all of this for the emergency services world is the fact that patients don’t typically have any visibility into the cost of care, much less the ability to choose In-Network care when life-saving services are involved. The nature of an emergency generally precludes the same clinical and cost assessment they may apply when choosing a dermatologist and the patient has little to no control.

Focus on Air Medical Transport
Not surprisingly, the air medical transport industry, with its complex, high-cost service model, rose to the top of this debate through a series of negative stories, several statewide regulatory efforts, and the emergence of more than a dozen class-action lawsuits filed on behalf of patients and families in the last five (5) years.

Other factors that brought the air medical transport industry under further scrutiny include a 2019 GAO Study, the proliferation of available services and plain old negative press.

2019 GAO Study
A recent GAO study found that 69% of the transports in 2017 were completed by Out-of-Network providers at a median charge of $36,400 for rotor wing (RW) and $40,600 for fixed-wing (FW) transport.  The combination of the high rate of non-participating provider transport and the cost per unit of service certainly worked to catapult air medical transport further into the spotlight.

Proliferation of Services
The last 20 years have seen exponential growth in the sheer number of RW bases and subsequent patient transports. While some would argue that this growth has drastically improved access to care – and it has, especially in rural areas – there is a compelling argument that some markets are oversaturated. A review of certain areas of the country would clearly demonstrate an excess of air medical transport resources, which is magnified by the fixed-cost of providing and maintaining these resources.

Negative Press
Negative stories in the media discussing everything from cost and fees, to over-utilization and safety concerns have also hurt the image of air medical transport services in recent years. Also, the high-profile nature of the service and the way services are marketed within the community have unfortunately also worked against the industry in some respects.


While certain factions within the US Healthcare System would have you believe that Surprise Medical Bills and Balance Billing should be blamed on greedy providers that are taking advantage of patients in pursuit of the almighty dollar…reality dictates that the problem is not a simple one. Instead, Surprise and Balance Bills may be the chief complaint, but they are not the disease. The underlying cause is a healthcare delivery system that doesn’t effectively align the interests of patients, employers, and payors with the providers of care.

Check out next week’s blog, when we’ll dive into the Treatment Plan!

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