Hospitals and Preferred Provider Organizations (PPO) are team players. They are business partners who have forged lucrative business agreements with each other at the expense of the unsuspecting, ill-educated and clueless consumer.
The scam is so well refined that the poor unsuspecting consumer is led to believe they are the recipients of a really good deal when in fact they are getting screwed big time. Yet, consumers continue to count PPO’s as the good guys. After all, arn’t PPO’s looking out for them by negotiating great discounts (as opposed to great savings) from their business partners, the hospitals?
Molly Mulebriar, forensic private investigator, has given us a bonafide fictional tape recording of a recent meeting between a PPO representative and a hospital administrator. We have permission to release the transcript, redacted, which illustrates the PPO/Hospital scheme to screw consumers:
Hospital Administrator – Good to see you again Jack. I really, really enjoyed that golf game last week – it felt swell beating you again – bought my wife a new car thanks to you. Ha Ha Ha, Anyway, as you indicated in your email asking for this meeting, you want to maximize our cash flow by maximizing yours. What is your proposal?
PPO Representative – It’s easy. First, the largest school district in the area just hired a so called insurance consultant. Ive met with her, and she doesnt know s–t from shinola. Now is a good time to screw the district again, maximizing both your revenue streams and mine, while making ourselves look like local heros. Plus, we will make the new insurance consultant a hero too, for a continued relationship that will maximize her revenue as well. It is a win win situation for all of us.
Hospital Administrator – Great! What is the plan?
PPO Representative – Ok, here is the deal. You raise your senseless Charge Master, which is already inflated, arbitrary and has no relationship to costs, by 18%. Then, I will go to the insurance consultant and tell her that because of her great talent in negotiating with us, we will increase our PPO discount from 35% to 45%.
Hospital Administrator – By God, she will be able to tell the district the new PPO contract will save them millions of dollars in discounts as opposed to savings! This is brilliant. But exactly how would this work?
PPO Representative – Ok, you raise your Bull Shit Charge Master by +18%. Don’t worry, no one will know since you will not release the Charge Master to the public. Then you sign an updated agreement with me to increase our PPO discounts from 35% to 45%. Of course you will continue to pay our PPO a 4% “re-pricing fee” of the discount. The net to the hospital is an overall revenue increase of 12% while we get a 29% increase in our re-pricing fee. We both win by not losing.
Hospital Administrator – Wait a minute, Im getting a 12% increase in an already inflated arbitrary Bull Shit number, while you are getting revenue maximization of 29%! I want part of that 29%!
PPO Representative – I am sure we can work that out. How about if I increase your revenue stream by directing more elective surgical admissions to your hospital? Would that help you out? What I will do is identify which local physicians routinely admit patients to the other hospital in town, and renegotiate our contracts with them. I will tell them that the more admits to your hospital, the more we will compensate them. It’s illegal but hey, it’s done every day.
Hospital Administrator – Ok, here is a list of local physicians I want you to contact. Raise their rates from 175% RBRVS to 225% RBRVS. I will let it be known, unofficially, that it was I who helped them out. They will certainly return the favor I am sure.
PPO Representative – Ok, but of course the district will see that their costs are increasing despite the better “discount.” What we need to tell them is the culprit is inflation. That your cost of business is going up and you simply have to pass those costs on to the consumer. Also, you can tell them you are losing your royal ass off Medicare and Medicaid patients.
Hospital Administrator – Right on! But between you and me, we are making money off Medicare patients who represent +60% of our patient revenue. And the more Medicaid and indigent care patients we treat, the more Medicare pays us. I just love those Medicaid and indigent care patients! I wish we had more of them.
PPO Representative – Yeh, I know, I haven’t met a hospital administrator yet who lost money on Medicare patients. If they did, their Board of Directors would find a replacement real quick.
Hospital Administrator – Ok, let me see if I got this correct. You are going to tell the insurance consultant that you negotiated a better contract for the district because of her amazing negotiating skills, the district is going to “save” money as a result while spending more, and my hospital is going to get an overall +12% raise in revenue while you get a +29% pay raise. And, about 60 local physicians will get paid more money by sending their elective surgical admits to me rather than to my competitor across town. It that right?
PPO Representative – Yes! Good doing business with you. No one will ever know what we agreed to today. Our contract is proprietary – no one but you and me knows what is in it. Not even the insurance consultant. I love this business! Let’s go play golf. Ive made a “bet” with a local insurance agent for $35,000 that Im going to lose on the 18th hole – it’s that time of year he contributes to some sort of scholarship fund at the district. Wanna make the same bet?
Editor’s Note: This is a true fictional narrative provided by Molly Mulebriar. Mulebriar cautions that this transcript is not attributable to any particular institution, person or locale.