Consumer Response to Surprise Medical Bills in Elective Situations

We investigate whether patients who receive potential surprise out-of-network medical bills are more likely to switch to a different hospital for subsequent elective treatments. Because surprise out-of-network medical bills adversely affect patients, we expect greater rates of switching after a surprise medical bill than otherwise, all else equal. Our data set is a large national sample of medical claims from 2007-2014 for patients with employer-sponsored health insurance. To control for patient heterogeneity, we restrict our sample to obstetric patients with two births and include a set of controls to account for variation in the likelihood of switching hospitals. We find that a potential surprise out-of-network medical bill on a woman’s first birth increases the odds of switching hospitals for her second birth by 12%. These results demonstrate learning on the part of patients in the repeated game of shopping for elective treatments and might be troubling to hospital executives who seek to maintain relationships with patients.