American Journal of Law & Medicine

Drive-by-Doctoring: Contractual Issues and Regulatory Solutions to Increase Patient Protection from Surprise Medical Bills

I.   INTRODUCTION II.  THE CONTOURS OF SURPRISE MEDICAL BILLING IN THE UNITED      STATES III. CONTRACTUAL IMPLICATIONS OF DRIVE-BY-DOCTORING      A. FAILING FOR INDEFINITENESS      B. BREACH OF CONTRACT      C. BREACH OF FIDUCIARY DUTY      D. UNCONSCIONABLE AND UNENFORCEABLE         1. Procedural Unconscionability         2. Substantive Unconscionability      E. AN ECONOMIC BARRIER TO BRINGING SUIT IV.  A STATUTORY SOLUTION      A. THE PROPER FEDERALISM BALANCE      B. THE CURRENT STATE LAW LANDSCAPE      C. NEW YORK'S SURPRISE MEDICAL BILL LAW V.   CONCLUSION 

1. INTRODUCTION

In September of 2014, Elisabeth Rosenthal of The New York Times detailed a burgeoning problem she termed "drive-by-doctoring," (1) a practice in which patients go to the hospital for surgery with an in-network physician who, without the patient's knowledge or consent, is assisted by, or consults with, an out-of-network physician during the procedure. (2) While the in-network physician's costs are covered by the patient's insurance, the out-of-network physician charges large fees for her participation, which typically are not fully covered by the patient's insurance plan and are instead passed directly through to the patient. (3) Patients wake from surgery with surprise medical bills that can total over one hundred thousand dollars. (4) Providers typically attempt to collect the full amount of these surprise charges, which "can be especially significant because ... they may involve out-of-network providers who bill 20 to 40 times the usual local rates ..." (5)

This billing practice raises two questions. First, is drive-by-doctoring legal? At first blush, it may seem that various common law claims are available for patients blindsided by unreasonable surprise medical bills. Breach of contract, indefiniteness, adhesion, and unconscionability all seem colorable here. As the analysis in this Note demonstrates, however, the peculiar nature of healthcare suggests otherwise. It makes the relationship between patient and provider challenging for contract law, and precision concerning the price term within a medical contract becomes unrealistic. As a result, ambiguous medical contracts are tolerated by the courts. (6) Further, current jurisprudence does not look favorably upon adhesion or unconscionability arguments within the healthcare patient-provider context. (7) Common law rarely provides a remedy. (8)

This leads to the second question: what can the law do to protect unsuspecting patients from surprise medical bills? Strengthening common law doctrine to protect patients from predatory billing practices is backward looking and unlikely to provide any deterrent effect." Even if common law doctrines were strengthened to help patients in these situations, most disputes would represent a negative value suit and would therefore never be brought. Moreover, following the Supreme Court's decision in Wal-Mart Stores, Inc. v. Dukes, victims of these billing practices would not have enough in common with one another to be certified as a class for purposes of a class action lawsuit. (10)

Considering that the common law is insufficient in supplying adequate patient protection, this Note suggests that a regulatory solution is the most effective approach, and, through a functional federalism analysis, argues that state level regulation is most appropriate.

Finally, this Note examines New York's recently enacted Emergency Medical Services and Surprise Bills law, which is aimed specifically at preventing the type of surprise medical bills that can result from involuntary out-of-network care. (11)

II. THE CONTOURS OF SURPRISE MEDICAL BILLING IN THE UNITED STATES

For this analysis, drive-by-doctoring is defined as involuntary contacts with physicians that result in surprise bills from out-of-network physicians during medical care that would otherwise be entirely in-network. (12)

The 2013, the United States Health Insurance Census found that 64.2% of Americans received some form of private health insurance, the vast majority through their employers. (13) Most Americans with private health insurance are enrolled in some form of Managed Care Organization ("MCO"). (14) The term MCO includes Health Maintenance Organizations ("HMOs") and Preferred Provider Organizations ("PPOs"), among other forms of managed care. (15) MCOs contract with a network of providers and set their reimbursement rates for healthcare services; this negotiated rate is less than what the provider usually charges. (16) Individuals who enroll as members in an MCO do so under the belief that, if they seek care within the MCO's network and follow the MCO's guidelines, they will not face medical costs in excess of the premium, copay, and the deductible for which they contracted. (17)

"Balance billing" is the term used to describe "the situation where a provider seeks to collect from a MCO [sic] enrollee the difference between the provider's billed charges for a service, and the amount that a MCO paid on that claim." (18) The charge billed by the provider is the "chargemaster rate," which refers to a comprehensive list of billable services that "are set unreasonably high so they can be discounted" following negotiations with insurers. (17) In effect, "an out-of-network patient subject to balance billing is in the same position as an uninsured patient ...." (20) The Social Security Act prohibits balance billing of Medicare and Medicaid beneficiaries. (21) Most states have implemented policies to protect MCO enrollees from in-network balance billing. (22) According to the Georgetown University Policy Institute, every state except Alaska has restricted balance billing by in-network providers of HMOs. (23) Twenty-seven states have extended balance billing restrictions to in-network PPO providers. (24) Usually, these states require "hold harmless" provisions in contracts between MCOs and participating providers, under which providers agree not to bill enrollees for costs beyond the MCOs cost-sharing requirements. (25) In effect, they agree "not to balance bill patients" and instead "hold harmless" the difference between the rate contracted with the HMO and the rate they regularly charge. (26)

Very few states have extended balance billing protections to enrollees who obtain care from out-of-network providers. (27) Given the cost containment goal of MCOs, (28) exposing consumers to the costs of out-of-network care makes sense when patients voluntarily choose out-of-network physicians. By contrast, involuntary encounters with out-of-network care, such as those that result from emergency medicine and drive-by-doctoring, are different because consumer choice has been removed. Interestingly, the Patient Protection and Affordable Care Act (ACA) provides only minimal protection for patients in these situations. (29) MCOs must cover emergency services and are only required to pay out-of-network emergency service providers the same rate as participating providers. (30) This ensures that some payment is made to the out-of-network provider, who is then free to balance bill the patient for any additional costs. (31) In a drive-by-doctoring situation, where the patient seeks care at an in-network hospital but the consulting or assisting physician is out-of-network, these assissting physicians "are not required to limit charges to the amount allowed by a health plan[,]. .. [and] [w]hen they don't," patients are often balance billed the large remainder, much to their surprise. (32) Medical bills from these situations can be crippling. (33)

In June 2013, Kyanko et al. published the first nationally representative survey of involuntary out-of-network-care. (34) In total, about "40 percent ... of individuals using an out-of-network physician reported any (at least one) involuntary out-of-network contact in the last 12 months ...." (35) More than half of all "inpatient out-of-network contacts were involuntary ...." (36) Most important for this analysis, more than half of "involuntary inpatient out-of-network contacts [occurred] at in-network hospitals ...." (37) The authors argue that this level of involuntary out-of-network care is attributable to "system-level failures rather than individual health literacy." (38)

The Kyanko findings are not surprising considering that "hospitals do not require physicians to participate in the same plan networks as a condition of receiving hospital privileges, and health plans do not require hospitals to have such agreements with hospital-based physicians ..." (39) Additionally, health plans struggle to negotiate with hospital-based specialists (for example, anesthesiologists and radiologists), who typically charge higher fees. (40) This leads to hospitals and emergency rooms employing large numbers of out-of-network physicians, as indicated in a Texas study of insurers Blue Cross Blue Shield, United Healthcare, and Humana that found the insurers had emergency rooms with zero in-network physicians in twenty-one, forty-five, and fifty-six percent of their in-network hospitals, respectively. (41) Receiving involuntary out-of-network care at an in-network hospital in Texas is essentially a coin toss, and there is not much to suggest the situation differs substantially in other states.

III. CONTRACTUAL IMPLICATIONS OF DRIVE-BY-DOCTORING

This brings us to the practice of drive-by doctoring. Again, for this analysis, drive-by-doctoring is defined as involuntary contacts that result in surprise bills from out-of-network physicians during medical care that would otherwise be entirely in-network. (42) This Part examines the contractual issues raised from balance billing following drive-by-doctoring and the legal strategies available for victims of this billing practice. This Part begins by examining why ambiguous price terms in hospital admissions contracts do not cause the contracts to fail for indefiniteness. The analysis then turns to breach of contract and breach of fiduciary duties as potential avenues for suit. This is followed by an examination of the doctrine of unconscionability and its application to the drive-by-doctoring scenario. Finally, this Part closes by looking at the economic barriers would-be plaintiffs face in attempting to bring suit under any of the theories forwarded here to escape from oppressive medical billing practices.

A. FAILING FOR INDEFINITENESS

Upon agreeing to undergo treatment at a hospital, a patient assumes financial obligations towards the hospital and its physicians, as set by the standardized contracts between the patients and the providers. (43) These boilerplate contracts are analogous to blank checks for providers: they provide no price term and list no specific services to be provided, but typically state that the patient authorizes and is responsible for paying for any medical procedure or treatment deemed medically necessary. (44) Some agreements to pay go further, stating that the patient even agrees to charges that exceed what "insurance carriers] may define as 'usual and customary, or reasonable. …

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