Why would any plan sponsor that’s able to pay cash at the point of service reimburse a hospital more than their discounted cash price?
The time value of money in a typical claim cycle averages 90 days X cost of money. What is 90 days worth in the value of services received in today’s dollars? Suppose a claim under a PPO contract is paid at 225% of Medicare and the cash price is 100% of Medicare, the time value of money under a PPO contract in this instance is 2.25. That beats money market and CD rates these days.
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