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No More Surprises: Patients fight back against Surprise Medical Bills

By: Alexander Tibor, Volume 103 Staff Member 

Before his 2013 surgery for herniated disks, Peter Drier checked off all the boxes a diligent patient could: he made sure the facility was in-network, the surgeon was in-network, and he even ensured the anesthesiologist would be in-network.[1]Nonetheless, during the surgery an out-of-network assistant surgeon—whom Drier had never met—stepped in to help. As the dust settled and Drier recovered, he received his bills: his surgeon accepted a $6,200 negotiated fee from his insurer, but he also received an unexpected $117,000 bill from the assistant he didn’t know was involved in his care.[2]

Drier, like many other patients, fell victim to a practice referred to as “surprise billing.” Healthcare billing practices have attracted persistent attention from journalists—and legislatures—in recent years.[3]But few have faced as much sustained criticism as surprise bills. In fact, in a promising development, patients have begun to challenge such bills in court.

First, some background. A surprise medical bill is one that contains charges from an out-of-network provider even though the patient did not expect to be treated by an out-of-network provider.[4]Such bills typically happen when a patient receives emergency care at an out-of-network facility,[5]but may also arise from treatment at an in-networkfacility. Somewhat surprisingly, in-network providers (such as hospitals) may have out-of-network physicians or other professionals who may become involved in a patient’s treatment—often without the patient’s knowledge—and who may bill separately, resulting in steep out-of-network charges.

This may not be much of a problem if such surprise out-of-network bills weren’t outrageously expensive. Without a network agreement between the patient’s insurer and the provider, out-of-network bills are often set at what’s known as “chargemaster rates.” A provider’s chargemaster compiles list prices for the provider’s services,[6]and because it serves as a starting point for negotiating steep discounts with insurers,[7]its rates are generally many times higher than what private insurers and government payors (Medicare and Medicaid) pay. According to one study, out-of-network emergency department doctors receive, on average, 2.7 times what in-network doctors are paid for the same services.[8]And another study suggests out-of-network physicians’ fees can be up to 20 to 40 times those charged by in-network providers.[9]Because chargemaster rates are so much greater than the price providers typically receive for their services, chargemasters are a poor candidate for determining market prices for out-of-network care.[10]

While Drier’s insurer decided to pay the assistant surgeon’s full charge, many patients are not so fortunate, and may be obligated to pay any portion of the chargemaster bill their insurer refuses to pay. Even Drier faced a moral dilemma: if he forwarded the insurer’s check to the surgeon, he’d be complicit in allowing the surgeon to exploit his insurer (and, indirectly, his fellow policyholders). Ultimately Drier forwarded the check, but only after the surgeon’s attorney threatened litigation.

Recently, some patients have been bold enough to call out-of-network providers’ bluffs and challenge surprise bills in court. In fact, one company has developed a unique health insurance model centered on the principle that if out-of-network providers want to recover chargemaster prices from out-of-network patients, they should have to convince a jury that the charges are fair. ELAP Services, Inc., a Pennsylvania company, is a claims administrator for employer-sponsored health plans.[11]Rather than enter network agreements with healthcare providers, ELAP audits providers’ bills, and offers to pay what it determines to be the reasonable price of their services based on the cost of those services plus a modest profit.[12]If the provider refuses to accept ELAP’s offer as payment in full and pursues the patient for the rest of the bill, ELAP defends the patient in court.

Such challenges to surprise medical bills face an uphill legal battle. Patients often explicitly agree to pay the provider’s “usual and customary charges,”[13]an agreement courts frequently interpret to refer to the provider’s chargemaster rates.[14]Still, several contract law doctrines give patients strong support for resisting surprise bills at unreasonably high chargemaster rates.[15]Perhaps the most significant argument is that such contracts lack a definite price term; and, consequently, the patient is only bound to pay a “reasonable price.”[16]While contract law allows parties to substitute a definite price term for a formula,[17]the chargemaster—which amounts to a “blank check” to the hospital[18]—should not count. Thus, the argument goes, providers are entitled only to a reasonable fee.

A Colorado jury, apparently persuaded that chargemaster rates are not as reasonable as providers pretend, recently handed ELAP a stunning success.[19]The case—ELAP’s first to reach the trial stage—involved Lisa French’s 2014 spinal-fusion surgery. The hospital, St. Anthony, billed French $303,709.49, but ELAP determined a reasonable payment would be only $74,597.25. St. Anthony sued French for the difference. Apparently, the jury scoffed at the hospital’s $229,112.13 demand—which included, e.g., surgical spinal implants for which the hospital charged a 624% markup.[20]The jury found that while French’s contract obligated her to pay “all charges of the Hospital,” it referred only to the “reasonable value” of the hospital’s services—not the hospital’s chargemaster.[21]Accordingly, while the jury found French had breached the contract by failing to pay the reasonable value of St. Anthony’s services, it ordered French to pay just $766.74 (half of which was an unpaid co-pay)[22]—far less than the hospital’s chargemaster rate.

While the case highlights ELAP’s success in defending its patients, both in the courtroom and at the negotiating table, its approach is not without drawbacks. Refusing to pay a provider can harm a patient in two key ways. If the provider refuses to accept the payment as payment in full, it can send the remainder to collections—potentially harming the patient’s credit. More importantly, having an outstanding balance with a provider might prevent the patient from obtaining further treatment—a serious risk for chronically-ill patients. Both problems are alleged in a 2017 complaint against ELAP filed with the Better Business Bureau.[23]In addition, network agreements provide all parties involved with an important sense of certainty—the provider and payor both know exactly what the price will be. To the extent ELAP avoids entering network agreements, it forfeits that benefit.

Hopefully ELAP’s success will encourage other insurers to help patients fight unreasonable surprise medical bills. While they should pay careful attention to the consequences for patients, resisting surprise bills at unreasonable chargemaster rates offers a promising avenue for lowering healthcare costs for plans and patients. The Colorado case sets an important precedent for this approach as insurers and plan administrators continue to fight skyrocketing healthcare costs.

[1]Elisabeth Rosenthal, Paying Till It Hurts: After Surgery, Surprise $117,000 Medical Bill from Doctor He Didn’t Know, N.Y. Times(Sept. 20, 2014),

[2]Id.(describing several similar incidents of surprise billing through so-called “drive-by doctoring,” where in-network physicians bring in out-of-network assistants, consultants, and other staff without the patient’s knowledge).

[3]See, e.g., Bill of the Month, Kaiser Health News, visited Apr. 1, 2019) (compiling stories about patients’ experiences with unexpected and costly medical bills).

[4]Erin C. Fuse Brown, Consumer Financial Protection in Health Care, 95 Wash. U. L. Rev. 127, 136 (2017) (citing Karen Pollitz, Surprise Medical Bills, Kaiser Fam. Found. (Mar. 17, 2016),

[5]See Christopher Garmon & Benjamin Chartock, One in Five Inpatient Emergency Department Cases May Lead to Surprise Bills, 36 Health Affairs 177, 177 (2017) (finding that 20% of hospital admissions originating in the emergency department, 14% of outpatient emergency department visits, and 9% of elective inpatient admissions were likely to lead to a surprise medical bill).

[6]See generally The Role of the Hospital Chargemaster in Revenue Cycle Management, RevCycle Intelligence (Feb. 9, 2018), the chargemaster’s role in healthcare billing).


[8]Dan Mangan, Many Get Hit with Surprise “Out-of-Network” Bill After Emergency Rooms: Study, Health & Sci. (Nov. 16, 2016), on a study of more than two million emergency department visits conducted by Yale researchers).

[9]Harry M. Feder, Efforts to Protect Consumers from Surprise Billings: An Update Experts Say Enrollees in Plans Purchased on Exchanges Are Vulnerable to Network Narrowing Consequences, 19No. 2 J. Health Care Compliance35, 35 (2017).

[10]George A. Nation III, Healthcare and the Balance-Billing Problem: The Solution Is the Common Law of Contracts and Strengthening the Free Market for Healthcare, 61 Vill. L. Rev. 153, 153–54 (2016) (“[H]ospital bills based on list or chargemaster prices are exorbitant and unfair, because they reflect prices that are set to be discounted and not paid. . . . [T]he list prices or chargemaster rates that hospitals claim are usual and customary are instead exorbitant amounts, arbitrarily set by hospitals, as a starting point for negotiating huge discounts with insurers.” (footnote omitted)).

[11]See generally ELAP Services, visited Apr. 1, 2019).

[12]ELAP Services Disrupts Healthcare Billing, Tells Employers Not to Pay, Kaiser Health News(May 13, 2015),

[13]E.g., Holland v. Trinity Health Care Corp., 791 N.W.2d 724, 726 (Ct. App. Mich. 2010).

[14]See, e.g., id. at 727–30 (holding contract requiring uninsured patient to pay hospital’s “usual and customary charges” required patient to pay hospital’s chargemaster rates).

[15]See generally Nation, supra note 10, at 190 (arguing that common law contract and restitution doctrines prevent providers from recovering full chargemaster prices); Barak D. Richman et al., Battling the Chargemaster: A Simple Remedy to Balance Billing for Unavoidable Out-of-Network Care, 23 Am. J. Managed Care e100, e100(Apr. 28, 2017), that “providers have no legal authority to collect chargemaster rates from surprise and [out-of-network] billing abuses”).

[16]See, e.g., Victory Mem’l Hosp. v. Rice, 493 N.E.2d 117, 119–20 (1986) (holding that contract between patient and hospital was indefinite as to price, requiring proof that hospital’s charges were reasonable); Payne v. Humana Hosp. Orange Park, 661 So. 2d 1239, 1241 (Fla. Dist. Ct. App. 1995) (“A patient may not be bound by unreasonable charges in an agreement to pay charges in accordance with ‘standard and current rates.’”). But seeAllen v. Clarian Health Partners, Inc., 980 N.E.2d 306, 308–11 (Ind. 2012) (holding that patient’s agreement to pay “the account” referred to hospital’s chargemaster rates and did not have an open price term, precluding the court from imputing a reasonable price).

[17]See Allen, 980 N.E.2d at 310 (“A contract need not declare a specific a dollar amount for goods or services in order to be enforceable.”); Restatement (Second) of Contracts § 33 (Am. Law Inst. 1981) (requiring that a contracts terms be “reasonably certain”).

[18]Nation, supranote 10, at 185.

[19]Christopher N. Osher, A Denver-Area Hospital Sued a Patient for Nearly $230,000 over Her Surgery Bill. A Jury Said Not So Fast, Denver Post (June 29, 2018),

[20]Gregg Land, Jury Deems Centura Health $230K Surgical Bill ‘Unreasonable,’ Awards $766, EBSO (June 21, 2018),

[21]Special Verdict Form, Centura Health Corp. v. French, No. 2017-CV-030884 (Adams Cty. Dist. Ct., June 11, 2018),

[22]Id.; Osher, supra note 19.

[23]ELAP Services, Better Business Bureau, dated November 9, 2017).