PUBLISHED:August 03, 2012

Richman and co-authors propose method for controlling abusive health care pricing

Three health care experts have proposed a novel method for controlling abusive pricing practices against the uninsured and those seeking out-of-network health care. Their article, “Overbilling and Informed Financial Consent — A Contractual Solution,” was published in the Aug. 2, 2012 issue of the New England Journal of Medicine.

Recent media accounts have documented pervasive billing practices that brought significant harm to the uninsured and insureds seeking care. Out-of-network and uninsured patients are frequently charged “an average of 2.5 times what most health insurers pay and more than 3 times (the) actual costs,” causing lawsuits and contributing to increased public and congressional debate over pricing transparency, the authors write. “It is time to revisit some of the billing practices that have brought us to a state of financial crisis in health care, and the decoupling of the relationship between price and service is among the health care market’s biggest problems.”

Barak Richman, a professor of law at Duke University, Mark Hall, the Fred D. & Elizabeth L. Turnage Professor of Law at Wake Forest University, and Kevin Schulman, the Gregory Mario & Jeremy Mario Professor at Duke’s Fuqua School of Business  and associate director of the Duke Clinical Research Institute at the Duke University School of Medicine, offer a simple legal mechanism—relying on “implied contracts”—that could redress many abusive practices in their article.”

Richman, Hall, and Schulman argue that implied contracts theory suggests that unless providers obtain informed financial consent prior to providing care, then they may recover no more than “whatever amount a prudent patient and provider would have agreed to, given appropriate time and information.”

“The best proxy for informed bargaining is what similarly situated consumers and providers actually bargain for —namely, the rates negotiated between providers and private insurers.”

Media Contact: Forrest Norman
(919) 613-8565