Out-of-Network Healthcare Spending Spikes for Lab Tests, Pathology

June 08, 2020 - While overall out-of-network or potential surprise billing is slightly declining, out-of-network healthcare spending is on the rise for laboratory tests and hospitalists—particularly in pathology, a recent Health Affairs study found.

The researchers looked at a sample of over 27 million individuals between 2008 and 2016, observing out-of-network healthcare spending during that time period. They found that the percentage of out-of-network spending decreased by 7.0 percent from 2008 to 2010. It also went down to 6.1 percent between 2014 and 2016.

Looking at the Health Care Cost Institute database, the researchers confirmed that in most segments of the healthcare industry, out-of-network healthcare spending either remained stagnant or dropped. The three exceptions were inpatient services, pathologist services, and lab testing.

In inpatient services, share of out-of-network healthcare spending for hospital medicines rose from 3.3 percent to 5.9 percent. Share of pathology spending that was out-of-network went from 5.3 percent to 8.3 percent.

While out-of-network hospital healthcare spending increases seem to be synced with higher out-of-network hospitalist utilization, the trend didn’t emerge for pathology. Higher out-of-network spending for pathology was not tied to out-of-network service usage for pathology. .

Meanwhile,  eout-of-network healthcare spending declined for some emergency department services. This comes even as many studies focus on rising healthcare spending in emergency departments.

Emergency medicine and anesthesiology dropped the most—decreasing 0.46 percentage points and 0.25 percentage points, respectively. This is an intriguing trend in light of other recent research that showed administering medications outside of the inpatient setting is less costly.

In-network healthcare spending rose faster than out-of-network healthcare spending across the eight-year period. This contributed to the decline in out-of-network spending.

The proportion of allowed out-of-network cost-sharing also declined by three percentage points. In 2008 until 2010, on average 13.6 percent of out-of-network costs could be shared with members. From 2014 to 2016, however, that percentage dropped to 10.6 percent.

The trend in laboratory and pathologist services having higher out-of-network healthcare spending is a novel finding.

“To our knowledge, this study provides the first national evidence of these divergent trends in  laboratory spending out of network, though this work builds on an important literature documenting the prevalence of and trends in surprise out-of-network billing,” the researchers also noted.

Why these trends in laboratory spending would be the case is complex, but the researchers suggested it can be traced back to a pathologist tendency to bill as out-of-network from in-network hospitals. Also, laboratory testing is often outsourced to out-of-network suppliers.

“Our results shed new light on the evolution of out-of-network care in the US,” the researchers posited. “For the roughly half of the population with employer-sponsored insurance, recent growth in the share of laboratory and hospitalist spending out of network translates into higher out-of-pocket spending for patients and overall spending for the health care system.”

They suggested that while concerns over emergency department surprise billing have successfully decreased the amount of healthcare spending in emergency departments, the focus on this issue has led to blind spots regarding other areas that have a high susceptibility to surprise billing.

As a result, out-of-network healthcare spending for laboratory and hospital services is on the rise.

The researchers recommended that policymakers consider:

• Extending consumer protections
• Capping out-of-network prices based on in-network prices
• Implementing reference pricing
• Extending protections for balanced billing

Before the coronavirus disrupted legislation, addressing surprise billing was a key 2020 legislative goal for Congress. As recently as February 2020, there were three bills between the House and the Senate that were pending an overall vote by their respective halves of the legislative branch.

The Lower Health Care Costs Act of 2019 passed in the House and is sitting in the Senate, the Consumer Protections Against Surprise Medical Bills Act of 2020 has only been introduced in the House, and the Ban Surprise Billing Act has likewise only been introduced in the House.