Study authors challenge legality of billing out-of-network patients at chargemaster rates

Contract law does not support healthcare providers billing uninsured and insured out-of-network patients at chargemaster rates, claims a recent study published in the American Journal of Managed Care.

"Our analysis suggests that providers have no legal authority to collect chargemaster rates from surprise and OON billing abuses," the study's authors wrote. "A proper application of contract law can end such abuses and would facilitate superior pricing incentives to other strategies designed to end balance billing disputes."

With insured in-network patients, prices have been negotiated through a payer prior to the patient receiving care. The study's authors said this arrangement "benefits from the opportunity for providers and payers to negotiate deliberately, without emergency conditions and with the knowledge of prevailing market prices and costs of service."

However, this is not the case for uninsured and insured out-of-network patients. Therefore, hospitals may seek to collect chargemaster rates from these patients. According to the study, these rates are typically significantly above prices in negotiated contracts. Efforts to collect chargemaster rates can be financially burdensome for the patient and hinder efforts to establish affordable narrow-network insurance plans, according to the study's authors.

However, these issues can be solved by applying contract law. "It will prevent providers from hiding behind a convoluted hospital pricing system, encourage the development of attractive narrow-network insurance products, and shield urgently sick individuals from the dread of medical predation. Patients and payers should know that they are under no obligation to pay surprise bills containing chargemaster rates, and state attorneys general can use the law to prevent providers from pursuing chargemaster-related collection efforts against patients."

 

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