How to Reduce Out of Network Medical Billing Costs

By Denise Johnson | November 27, 2012

Though claimants often have a choice when it comes to medical providers, charges for treating with out-of-network providers can be substantially higher than charges submitted by doctors in preferred provider networks.

Reviewing out-of-network billing associated with workers’ compensation, personal injury protection (PIP), auto and even medical payments (medpay) claims can result in significant medical cost containment, according to Greg Gaughan, vice president and general manager for Mitchell NHQ Negotiation Services.

Currently, between 50 to 70 percent of medical provider charges that are out-of-network are being paid at full price, Gaughan said.

“There is a huge opportunity for savings in comp and auto,” Gaughan said, adding that there is quite a bit of opportunity on the medical payments side as well.

According to Gaughan, who has experience working in claims at both Nationwide and AAA, the main reason for the increase in billing costs is cost shifting. Medicare and Medicaid reducing their overall payments to providers caused the providers to look for ways to recoup the costs, thus they have been seeking payment from private insurers.

“We stretch the limit by cutting down the extra medical cost,” Gaughan said, describing it as chipping away at healthcare inflation.

The company developed a survival guide to assist insurers in identifying and negotiating out-of-network medical bills. According to the guide, “offering injured parties the flexibility to use providers of their choice is often a necessity that puts insurers in the challenging out of network territory.”

The guide offers tips to effectively negotiate out-of-network settlements at minimal cost:

Employ Experienced Negotiators

Claims adjusters are used to negotiating. It’s part of the job; however, adjusters may not have time to scrutinize every bill that comes across their desks. It’s helpful to have someone with experience in negotiating bill reductions, Gaughan said.

Identify Addressable Bills

According to Gaughan, while high value bills attract more scrutiny, there are great savings opportunities in negotiating lower value bills, too. Mitchell estimates more than 80 percent of medical bills received by insurers are within the $500 to $5000 range.

Signed Settlement Agreements

In order to avoid disputes among insured, claimants and providers about what is fair and reasonable, NHQ suggests securing signed agreements from medical providers.

Streamlined Process

NHQ’s turnaround time is between one and three days for negotiating bills, Gaughan said. Insurers should consider implementing a good procedure to handle billing review because it will help speed up the process and will lead to a greater ability to negotiate billing. Prompt payment supports the efficiency, he said.

“We negotiate with them [medical providers] for a prompt pay discount,” Gaughan said.

If the charge is paid by the payer and is processed within ten days, it has led to a reduction of 15 to 70 percent of the bill, he said.

The company has achieved a 30 to 40 percent success rate in negotiating out of network charges, Gaughan said.

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