Under New Jersey law, patients treated in a hospital emergency room outside their provider’s network have to pay out of pocket only what they would have paid if the hospital was in the network. But an out-of-network hospital can bill the patient’s insurer at essentially whatever rate it cares to set. While the insurers can negotiate with the hospital, they generally end up paying more than they would have under a contractual agreement.

In recent years, Bayonne Medical put up digital billboards highlighting the short waits in its emergency rooms in an effort to attract more patients. Insurers complained that the hospital was seeking to take advantage of the higher rates it could charge.

While the law was aimed at giving patients more hospitals to choose from, it “has had the unintended consequence of rewarding folks for these inflated charges,” said Wardell Sanders, president of the New Jersey Association of Health Plans. “When people say these charges are just the sticker price and it’s meaningless, it’s not meaningless.”

Community leaders in Bayonne, fearing the hospital could close, said the buyers were always candid about the methods they intended to use to make the hospital a profitable enterprise.

“That raised a lot of concern, but what other choice did we have?” said Jeanne Otersen, who was a member of the Coalition to Save Bayonne Medical Center and is policy director for the Health Professionals and Allied Employees, a union that represents nurses at the facility.

Not surprisingly, the insurers fought back against the out-of-network model. In 2009, Horizon Blue Cross Blue Shield of New Jersey filed an injunction in New Jersey Superior Court saying Bayonne Medical’s owners had “flatly rejected” and refused to negotiate an in-network hospital contract with Horizon. When the existing agreement expired in early 2009, Horizon said Bayonne sharply increased its prices. Bayonne’s in-network charges to Horizon averaged $13,000 a day in 2008. A year later, when it was out of network, the charges soared to $29,000, the insurer said in a spring 2009 news release.

Bayonne Medical denied allegations in Horizon’s lawsuit that it was artificially inflating prices, and filed its own lawsuit against Horizon, claiming the insurer had intimidated patients and tried to get them to leave the facility before completing their treatments.