During the time I was the CEO of a hospital, a very nice schoolteacher I knew from my son’s school came into my office. It was abundantly obvious she was upset. She explained that she was recovering from surgery performed at our facility. 

I asked her if she was doing okay health wise.

“Yes, doing great,” she said. 

I asked her if her experience with us had been satisfactory.  She said she had received excellent service.

Going down my differential diagnosis, I finally asked, “Is there a problem with your hospital bill?”

“Not the hospital bill,” she said.  “But, there is a major problem with the bill I received from one of your anesthesiologists, and I am looking at a big out-of-pocket expense."

I explained that the anesthesiologists are independent physicians who have privileges at the hospital, and they negotiate their own managed care contracts. That answer did not please her, and frankly, even as I was mouthing the words, it didn’t sound all that great to me either.

“Look, let me talk with Dr. So-and-So, and I will ask him to accept the payment that your plan would normally pay as if he were contracted with it,” I said.

I spoke with the doctor who explained that he and the insurance company were at odds over rates; but, he agreed to my suggestion. Finally, the nice schoolteacher was satisfied. However, the exchange told me, and I told the anesthesiologist, we had a problem. 

“You are going to have to come to terms with this insurance company because it is the plan that a major employer in our community, the school district, uses and when people come to our hospital, they need to know that the anesthesiologists accept the same insurance as the hospital and the other hospital-based specialists,” I explained.

He grumbled a bit at my suggestion. But, a couple of weeks later, he told me in the hallway that he had come to terms with the insurance company used by the school district. I thanked him.

What this little yarn is about is a problem we are really seeing a lot of these days, which is the “narrow network” of providers in certain insurance plans. A provider who is out-of-network may treat a patient at a hospital that is in-network. This can result in the patient having to pay more out-of-pocket because the provider is out-of-network. Health care bills are obviously confusing, and it is difficult for a person to know if provider is in or out of network. And, it makes sense that when you go to an in-network hospital that all of the providers would be on the same insurance plans.  But, it is not always the case.

One could argue that, at least indirectly, the Affordable Care Act (ACA) has encouraged the formation of narrow-network plans because their cheaper premiums appeal to price-sensitive consumers. About 70 percent of plans sold on the exchanges in 2014 featured a narrow network. Premiums were up to 17 percent less expensive than plans with broader networks, according to a study by consulting firm McKinsey and Co.All of this is leading to controversies, and even lawsuits, over the adequacy of the provider network in these narrow-network arrangements. In California, for example, health plans are now required by statute to ensure they offer adequate provider networks.

I actually have a little sympathy for the insurance companies on this one point, they cannot win--if they have a narrow-network and “steer” patients to certain hospitals and certain other providers in their narrow-network in order to save money and thereby offer lower premiums, they often end up upsetting the policy holders who are covered by the policy. If they upset enough of them and they drop out of the plan, it is no longer economically viable to offer.

The solution to this issue will be the topic of next week’s column, an accountable care organization.