Effect of Surprise Bill Legislation on Reimbursement Rates

January 18, 2022

Surprise medical billing is a major issue affecting many Americans. While the term encompasses a variety of billing scenarios, the most common situation is when emergency procedures are carried out in an out-of-network facility or by an out-of-network doctor. This can be devastating for patients — one study by Sun et al., found that the incidence of out-of-network bills rose to 42% of inpatient admissions in 2016, with the average emergency inpatient bill totaling more than $2,000 [1]. However, a raft of recent state and federal legislation has been enacted recently to combat the surprise bill issue, with yet-to-be-seen effects on physician reimbursement.

This legislation is usually aimed at emergency situations where the patients are not able to select an in-network facility for their care. Much of the legislation, including the recently implemented No Surprises Act, has broad bipartisan support [2]. While support for the policies is widespread among patients and lawmakers, these laws may lower reimbursement rate for medical services.

This landscape is particularly relevant to anesthesia, as anesthesia services are often out-of-network. According to one study, around 12% of anesthesia care at in-network hospitals is billed as out-of-network, which was one of the highest rates among specialties covered in the study [4]. However, from the point of view of many anesthesiologists, the pay structures set by Medicare and/or insurers make it financially difficult to be in-network. Research has shown that the contracted pay of a given specialty correlates directly with its rate of out-of-network billing [6].

A study by La Forgia et al. examined 2.5 million medical claims for anesthesia services between 2014 and 2017 [3]. In California, Florida, and New York — all of which passed surprise medical bill legislation — prices paid to anesthesiologists decreased, regardless of whether they were in-network or out-of-network. Out-of-network per-unit rates declined significantly more than in-network rates, leading to reimbursements of $10 to $30 less per unit, depending on the state.

The effects of lower per-unit rates can be significant, as it can push providers to remove themselves from insurance networks in search of higher reimbursement rates. In cases where a host of insurers pay lower per-unit rates, as is the case with surprise bill legislation, providers sometimes choose to care for cash-only patients [5]. In the long run, this can undercut the healthcare market and lead to significant issues in its operation. However, many recent laws also cover uninsured or cash-only patients, effectively managing that potential loophole.

While the effects of surprise bill legislation are only starting to be felt on a national level, early studies from states that enacted these laws independently indicate that reimbursement rates will drop significantly. This will likely lead to a decrease in pay for many doctors, with the effects felt strongest by specialties with high out-of-network billing rates, like anesthesiology. On the other hand, these laws will hopefully have a significant positive impact on patient care.


[1] Sun, Eric C., et al. “Assessment of out-of-Network Billing for Privately Insured Patients Receiving Care in in-Network Hospitals.” JAMA Internal Medicine, vol. 179, no. 11, 2019, p. 1543., https://doi.org/10.1001/jamainternmed.2019.3451.

[2] Pollitz, Karen, et al. “US Statistics on Surprise Medical Billing.” JAMA, vol. 323, no. 6, 2020, p. 498., https://doi.org/10.1001/jama.2020.0065.

[3] La Forgia, Ambar, et al. “Association of Surprise-Billing Legislation with Prices Paid to in-Network and out-of-Network Anesthesiologists in California, Florida, and New York.” JAMA Internal Medicine, vol. 181, no. 10, 2021, p. 1324., https://doi.org/10.1001/jamainternmed.2021.4564.

[4] Cooper, Zack, et al. “Out-of-Network Billing and Negotiated Payments for Hospital-Based Physicians.” Health Affairs, vol. 39, no. 1, 2020, pp. 24–32., https://doi.org/10.1377/hlthaff.2019.00507.

[5] Fabi, Rachel, and Brendan Saloner. “Covering Undocumented Immigrants — State Innovation in California.” New England Journal of Medicine, vol. 375, no. 20, 2016, pp. 1913–1915., https://doi.org/10.1056/nejmp1609468.

[6] Adler, Loren, et al. “State Approaches to Mitigating Surprise Out-of-Network Billing.” Brookings Institution, Brookings Institution, Feb. 2019, https://www.brookings.edu/wp-content/uploads/2019/02/State-Approaches-to-Mitigate-Surprise-Billing-February-2019.pdf.