Legislation aimed at curbing “surprise billing” for healthcare costs could bring significant liabilities for hospitals and health systems. Risk reduction will require a multipronged effort within the organization.

  • Several states have passed legislation.
  • A federal law is likely, with bipartisan support.
  • Noncompliance could invite scrutiny that leads to corrective action plans.

States and Congress are working to address the “surprise billing” that can hit consumers after a hospital stay or other care in which they learn that they owe thousands of dollars for services they thought were covered by insurance. The legislation is popular among consumers but could create significant potential liabilities for hospitals and health systems.

Reducing the risk of those penalties and other consequences will require the risk manager to work with multiple departments within the organization to prevent surprise bills from going out to patients, says Amy Andersen, healthcare industry lead with North Highland Worldwide Consulting in San Francisco.

Multiple states have enacted legislation to restrict or prohibit surprise billing, with various penalties. The National Academy for State Health Policy says the state legislation usually employs one or more these policies: prohibiting balance billing in certain circumstances such as when a consumer had no other provider choice; holding consumers harmless when insurance carriers and providers dispute a balance bill; setting reimbursement standards for providers in the case of balance bills; requiring providers and carriers to provide accurate and updated information about the provision of in- and out-of-network services; and establishing a balance billing dispute resolution process, facilitated by the state or an independent entity. (More information on the state legislation is available online at: https://bit.ly/2ZQqPdK.)

Federal Law Likely

One bill moving through the Senate is the Lower Health Care Costs Act, which would impose penalties on hospitals and health systems that send surprise bills. It also would cause physician and hospital payment rates to fall as much as 20% on average nationally, according to a study by the Congressional Budget Office.

Known within the healthcare community as balance billing, these bills usually involve ED visits, out-of-network physicians at in-network facilities, and ambulance services, Andersen says.

“This is not a new problem. There’s been a lot of finger-pointing when the issue is raised because providers depend on the revenue. Payers say they are justified because their policies clearly say that services above a certain threshold are the responsibility of the patient,” Andersen explains. “States have enacted their own laws, and now there is bipartisan consensus that this is something that should be addressed.”

Failing to comply with state and federal legislation on surprise billing could result in large fines, but Andersen notes that a potentially worse consequence is the scrutiny that could come with any investigation.

“Surprise billing is a strong consumer issue. If you are not complying, that could be damaging to your brand in the community,” Andersen says. “Even worse is having the regulator come in to audit your compliance. Once the regulator comes in to do a review, they can look at anything. Once a regulator starts sniffing around at your systems and processes, then you can get into corrective action plan hell.”

The initial compliance failure on billing could lead to a series of corrective action plans that last months or years, requiring many more additional steps and allowing the regulator to come in regularly for reassessments.

Risk managers should start formulating plans for complying with surprise billing legislation, Andersen advises. Each organization must determine what state legislation may apply, and soon will have to assess the effect of federal laws.

A likely first step is to start providing out-of-contract estimates and statements to patients before provision of medical services, she says. That could require a significant system and process update.

“This could be super complex to determine that individual’s contract, under what insurer or payer are they seeking care, and based on that specific coverage what are the levels of care that will be provided by the payer, and the difference between that and what the provider expects to be paid,” Andersen says. “The difference is the cost estimate that must be provided to the patient prior to receiving care. I can’t stress this enough to say that it is not enough to provide the information. Because this is regulatory, there must be documentation that it occurred in a timely fashion.”

Andersen notes that compliance will be especially important with Medicare enrollees because there is a higher bar for what must be communicated to them and through what processes.

“It sounds like a super simple thing to say ‘People should know what they might have to pay, so let’s get that information to them so they can make an informed decision,’” Andersen says. “But when you look at what they’re potentially liable for, how to communicate that to them, how to document that you communicated it, it’s not such a simple thing to accomplish.”

Involve Multiple Departments

Risk managers should note that complying with surprise billing legislation will not be a matter of reminding one department of the potential liabilities and letting them take the necessary steps, Andersen says. Compliance will require the cooperation of multiple silos within the organization, she says.

Most organizations will need to involve all the departments involved with claims, eligibility, communications, grievance, arbitration, and billing, she says.

Andersen notes that healthcare organizations are lobbying to minimize the scope and financial effect of surprise billing legislation. However, legislation protecting consumers enjoys bipartisan support and is gaining momentum.

“I don’t think the train is going to stop. We will see more of surprise billing legislation. The only question is exactly what it will include, what the penalties will be,” she says. “I think risk managers are critical elements in responding to this legislation and this is something that should be on the radar of the CEO, CFO, and chief counsel. This requires an organizational commitment.”


  • Amy Andersen, Healthcare Industry Lead, North Highland Worldwide Consulting, San Francisco. Phone: (415) 624-6572. Email: amy.andersen@northhighland.com.