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May 2, 2019

Surprise billing … it sounds like so much fun. Who doesn’t love a surprise? Except receiving a surprise bill is zero fun. In case you’ve been out of the loop on this, surprise billing is when the patient, unbeknownst to them, racks up out-of-network charges, usually at a hospital. The patient may have done absolutely everything right—selected an in-network hospital, got all their tests preapproved—and then, wham! A month or a year later, the patient gets a bill that could be a few hundred dollars or a few hundred thousand dollars, usually from someone they’ve never heard of. And that’s an important point. The vast majority of physicians out there, especially the ones with relationships with patients, don’t surprise bill.

Unfortunately, surprise billing isn’t a one-off random event: 54% of Americans have received a surprise bill. And that 54% of Americans … not happy about it. So unhappy, as a matter of fact, that lots of legislation is pending to curtail the practice.

Surprise billing has been identified as a solid barrier to access and to patients who need care getting it. Patients fear the looming threat of having their bank account emptied out no matter how diligent and smart and well insured they are. Why does surprise billing—or balance billing, as it’s usually called by those engaging in it—continue when it’s so clearly a problem for patients?

If you read a recent Brookings Institute report, you’d have discovered that surprise billing is a lucrative gambit for some, certainly not all, hospitals. It’s especially lucrative in, but not limited to, emergency rooms (ERs). So much money can be raked in from incapacitated or, at a minimum, injured patients, in fact, that certain ER-staffing companies have turned surprise billing into a business model. If you follow me on LinkedIn, you’d know that I wrote an article about this on Medium recently.

Today I speak with Devon Herrick, PhD, who is an expert in surprise billing. Devon is a health care economist and public policy analyst who has authored many articles on surprise billing. You’ll find some links in the show notes. Devon is also an adviser to the Heartland Institute, which is a free-market think tank. I find it incredibly thought provoking that a free-market think tank, for reasons we discuss in this podcast, finds unfettered market-driven surprise billing as egregious as the most progressive socialists do. Handshaking across aisles everywhere.

If you’re a hospital or insurance carrier executive, what are you doing right now in light of all this public attention and legislation? I hope your response includes actions to protect your patients—and not just an industry-centric lobbying effort.


You can learn more and connect with Devon on Twitter at @DevonHerrick or on Facebook at Devon Herrick.  


Devon M. Herrick, PhD, is a health economist and former hospital accountant. He is currently a health policy adviser for the Chicago-based Heartland Institute. Dr. Herrick worked for the Dallas-based National Center for Policy Analysis (NCPA) for 21 years until it ceased operations in 2017. He also served two terms as chair of the Health Economics Roundtable of the National Association for Business Economics (NABE).

Dr. Herrick focuses on health insurance issues, including state health care regulations, federal health reform, managed care, Medicare, Medicaid, and the uninsured. He also researches issues such as consumer-driven health care, telemedicine, medical tourism, pharmaceutical economics, and emerging trends in retail medicine.

While with NCPA, Dr. Herrick authored more than 100 studies and papers based on his research. Dr. Herrick is a sought-after speaker on health policy issues and is quoted widely in the press, including on radio and television. He has testified before Congress and numerous state legislative hearings and meetings. His articles and comments have appeared in hundreds of newspapers across the country. He is a coauthor, with John C. Goodman and Gerald L. Musgrave, of Lives at Risk: Single-Payer National Health Insurance Around the World.

Dr. Herrick began his career in health care as a staff accountant with Baylor University Medical Center (Dallas) in 1986. He later transferred to Baylor Center for Restorative Care, where he worked as an accounting manager.

Prior to joining NCPA, Dr. Herrick was a research assistant at the Bruton Center for Development Studies at the University of Texas at Dallas (UTD). The Bruton Center integrates geographic information systems, spatial analysis, and exploratory data analysis in the social sciences, applying research on trends, forces, and public policy. While a teaching assistant, Dr. Herrick also taught the economics of health at UTD.

While pursuing a doctorate in 1995, Herrick came to the National Center for Policy Analysis as a policy intern. He subsequently became manager of information systems and later the research manager. Dr. Herrick was a senior fellow at NCPA from 2003 to 2017.

03:33 How common surprise billing, or balance billing, actually is.
03:55 The statistics behind how pervasive surprising bills are.
04:49 Balance billing vs business law.
05:55 Why patients fear hospitals.
06:27 How transparency can solve the problem of balance bills.
06:50 “If there’s no meeting of the minds, it’s not an enforceable contract.”
07:27 How to solve surprise billing in ERs.
09:32 The tipping point of surprise bills.
10:32 The negative incentive in stopping this problem.
11:11 “Health care is similar to a gold rush.”
13:26 Is there spillover into other financial models?
13:50 What doctors think of surprise billing.
16:14 How surprise billing became a default practice to begin with.
19:50 “Hospitals can wield more power than they realize.”
21:07 How balance billing affects insurance carriers.
22:15 Doctor fees vs hospital fees.
23:28 “Someone’s prices are going up.”
24:09 “It’s partly based on opportunity.”
26:00 Devon’s advice to insurance companies on eliminating balance billing.
31:18 Devon’s consulting practice.

You can learn more and connect with Devon on Twitter at @DevonHerrick or on Facebook at Devon Herrick.