Hospitals increasingly rely on out-of-network physicians and independent contractor groups to staff emergency departments, operating rooms, and specialty services. While these arrangements have long been common, the Federal No Surprises Act has significantly altered the compliance landscape. Hospitals are now facing heightened scrutiny and potential liability for the billing practices of out-of-network physicians practicing within their facilities.

For hospitals operating in New York and New Jersey, understanding how the No Surprises Act allocates responsibility — and where hospital exposure may arise — is essential to managing regulatory and financial risk.

Why Hospitals Are Implicated in Physician Billing Compliance

Although the No Surprises Act primarily regulates provider billing behavior, hospitals are often the focal point of enforcement activity. Patients typically associate surprise bills with the hospital where care was received, not with individual physician groups or billing entities.

Regulators and payors increasingly examine whether hospitals have adequate systems in place to prevent prohibited billing by out-of-network physicians practicing at in-network facilities. As a result, hospitals may face liability even when physicians are independent contractors rather than employees.

In-Network Facilities and Out-of-Network Physicians

One of the central triggers for No Surprises Act protections is the delivery of care by out-of-network physicians at in-network hospitals or ambulatory surgical centers. In these situations, patients are protected from balance billing for many services, including emergency care and certain non-emergency services.

Hospitals that permit out-of-network physicians to practice within their facilities without robust compliance oversight risk becoming entangled in billing disputes, audits, and enforcement actions — particularly when patients receive prohibited bills.

Hospital-Based Specialties and Elevated Risk

Certain hospital-based specialties create heightened compliance exposure. Anesthesiology, radiology, pathology, emergency medicine, neonatology, hospitalist services, and assistant surgery are frequently cited in enforcement actions because patients rarely have meaningful choice over these providers.

Under the No Surprises Act, many of these services are categorically excluded from notice-and-consent exceptions. Hospitals that fail to account for these exclusions in their contracting and billing oversight face significant risk.

Contractual Arrangements Do Not Eliminate Liability

Hospitals often assume that independent contractor agreements or management services contracts shield them from liability related to physician billing. In practice, regulators and payors look beyond contract language to assess operational reality.

If a hospital markets itself as in-network, schedules procedures, or facilitates care delivery without adequate disclosure or controls, it may be drawn into compliance investigations — regardless of how physician relationships are structured on paper.

Notice and Consent: Shared Compliance Exposure

Notice and consent requirements present another area of hospital risk. While physicians may be responsible for obtaining consent, hospitals frequently play a role in scheduling, registration, and patient communications.

Breakdowns in coordination between hospitals and physician groups — such as inconsistent forms, improper timing, or consent obtained for ineligible services — can invalidate billing rights and expose both parties to enforcement scrutiny.

NY and NJ Enforcement Environment

Hospitals in New York and New Jersey face particularly strong enforcement environments due to long-standing state surprise billing laws and sophisticated regulatory agencies. Complaints filed with state authorities or federal agencies often lead to detailed inquiries into hospital policies, physician contracts, and billing workflows.

In these jurisdictions, hospitals are expected to proactively prevent surprise billing, not merely react after complaints arise.

Financial and Reputational Consequences for Hospitals

Hospital exposure extends beyond regulatory penalties. Surprise billing disputes can damage patient trust, strain relationships with insurers, and attract negative publicity. Hospitals may also face repayment demands, corrective action plans, and increased audit activity.

In some cases, repeated compliance failures can affect network participation and reimbursement negotiations with payors.

Risk Mitigation Strategies for Hospitals

Hospitals can reduce exposure by implementing comprehensive compliance programs that address out-of-network physician billing. Key strategies include auditing physician group practices, standardizing notice and consent workflows, training registration and scheduling staff, and clearly defining billing responsibilities in contracts.

Equally important is ongoing monitoring, as reliance on one-time compliance efforts is rarely sufficient under evolving regulatory expectations.

The Role of Legal Counsel in Hospital Compliance

Healthcare attorneys play a critical role in helping hospitals navigate No Surprises Act obligations. Legal counsel can assist with contract review, compliance audits, policy development, and response to regulatory inquiries or patient complaints.

Early legal involvement helps hospitals identify vulnerabilities before they become enforcement matters.

Frequently Asked Questions for Hospitals

Are hospitals legally responsible for physician billing under the No Surprises Act?
Responsibility depends on the facts, but hospitals are often implicated when prohibited billing occurs at in-network facilities.

Do independent contractor arrangements eliminate hospital risk?
No. Operational realities matter more than contract labels.

Are hospitals required to police physician billing?
Hospitals are increasingly expected to implement reasonable oversight and preventive measures.

Does state law still apply in NY and NJ?
Yes. State and federal enforcement mechanisms may apply concurrently.

Can hospitals be named in patient complaints?
Yes. Hospitals are frequently the first target of complaints and investigations.

Conclusion

Hospital liability for out-of-network physician billing under the No Surprises Act is an evolving and high-risk area of compliance, particularly in New York and New Jersey. While hospitals may not issue bills directly, their role in care delivery, contracting, and patient communications places them squarely within the enforcement landscape.

Hospitals that take a proactive approach — combining operational oversight with legal guidance — are best positioned to reduce risk, protect patient trust, and maintain compliance in an increasingly regulated environment.

Mitchell C. Beinhaker, Esq. is a business lawyer and estates attorney who runs a solo legal & consulting practice representing business owners, entrepreneurs, executives, and professionals. Through his 30+ years of experience, Mitchell has handled business development, marketing, firm management, along with business transactional work for clients of the firm. He has extensive experience with corporate governance, commercial transactions, real estate, and risk analysis. Using his years of practical experience, he drafts contracts, negotiates purchases, and can manage outside counsel for any corporate situation. For business owners and executives, he creates and implements estate plans, along with succession plans to help companies continue for future generations.  

Mitchell is the co-author of 10 Ways to Get Sued by Anyone & Everyone:  the small business owners guide to staying out of court, available in paperback and kindle from Amazon.

He is also the host of The Accidental Entrepreneur Podcast, available on YouTube, Amazon, Spotify, Apple and most of the other podcast directories.  You can find audio episodes posted on mitchbeinhaker.com and even purchase merchandise to support the show.

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