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NBER Working Papers and Publications
|July 2017||Surprise! Out-of-Network Billing for Emergency Care in the United States|
with Zack Cooper, Fiona Scott Morton: w23623
Hospitals and physicians independently negotiate contracts with insurers. As a result, a privately insured individual can attend an in-network hospital, but receive care from an out-of-network physician. Because patients do not choose their emergency physician, emergency physicians can remain out-of-network and charge high prices without losing volume. This strong outside option improves their bargaining power with insurers. We show that emergency physician outsourcing firms take advantage of this strong outside option by either remaining out-of-network or by using it to negotiate higher in-network rates. We propose a policy that would restore competition to the ED physician market and protect consumers.