Working Paper: NBER ID: w23623
Authors: Zack Cooper; Fiona Scott Morton; Nathan Shekita
Abstract: Hospitals and physicians independently negotiate contracts with insurers. As a result, a privately insured individual can attend an in-network hospital emergency department, but receive care and potentially a large, unexpected bill from an out-of-network emergency physician working at that hospital. Because patients do not choose their emergency physician, emergency physicians can remain out-of-network and charge high prices without losing patient volume. As we illustrate, this strong outside option improves emergency physicians’ bargaining power with insurers. We then analyze a New York State law that introduced binding arbitration between emergency physicians and insurers and therefore weakened physicians’ outside option in negotiations. We observe that the New York law reduced out-of-network billing by 34 percent and lowered in-network emergency physician payments by 9 percent.
Keywords: out-of-network billing; emergency care; healthcare policy; New York law; binding arbitration
JEL Codes: I11; I13; I18; L14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Binding arbitration law (K41) | Reduced out-of-network billing (I13) |
| Binding arbitration law (K41) | Lowered in-network emergency physician payments (I11) |
| Reduced out-of-network billing (I13) | Lowered bargaining power of emergency physicians (I11) |
| Binding arbitration law (K41) | Enhanced bargaining power of emergency physicians (I11) |
| Enhanced bargaining power of emergency physicians (I11) | Reduced out-of-network billing (I13) |