How does a hospital’s billed charge compare to what they actually receive from various payers? Is there a public data base that provides this information? Perhaps a visit to www.txpricepoint.org would be productive in your search for the truth.

We keyed in on Valley Baptist Hospital in Harlingen, Texas to check statistics posted on this website. We have no idea if the information is accurate, but let’s assume it is.

The payer mix at Valley Baptist is 45% Medicare, 25% Medicaid and 30% “Other”.

Most of us have been conditioned to believe that hospitals lose money on Medicare and Medicaid patients. Therefore, we are told, private payers, in this case we assume that to be the “Other” class of payers, pay more than other patients. While the former may not be true in all cases, the later is certainly borne out in the numbers here.

According to this website, all payers in the aggregate pay 72% off billed charges. Medicare patients pay 77% off billed charges while Medicaid patients pay 85% off billed charges, specific to Valley Baptist Hospital. That must then be true that “Other” payers pay a lower percent off billed charges, i.e., pay more than do government health plans. If you have a mathematical background, it is easy to come up with the average % off billed for “Other” payers.

How does this compare to Cost Plus Insurance? (www.costplusinsurance.com ) Cost Plus payment methodology is based on the greater of Cost Plus 12% margin or Medicare +20%. Under  Cost Plus statistics show the percentage off billed charges ranges from 70% to as high as 88%, sometimes more.

Hospitals do not lose money on Cost Plus reimbursement formula. They make a 12% margin.

This is useful information and is illustrative of hospital billing practices in comparision to what payers actually pay.

Thus, the fallacy of PPO discounts is exposed.

VALLEY BAPTIST MEDICAL CENTER

Editor’s Note: Proponents and supporters of the 50% Club now look like patsies – http://blog.riskmanagers.us/?p=7253 Molly Mulebriar, in a rare press release issued this morning, announced the formation of The 70% Club. She welcomes  and encourages 50% Club members to join. Membership is free and the savings are greater.

What do hospitals charge to remove an appendix? The startling answer is that it could be the same as the price of a refrigerator — or a house.

(more…)

Why would an employer who sponsors an employee welfare plan want to pay more for Employee Jones and less for Employee Smith? Yet, that is exactly what is happening in this convoluted health care system we have these days.

Employer sponsored group health insurance plans  today covers every doctor and every facility that employees have ready access to through extensive PPO networks, even though costs vary radically. For example, a  plan may  pay seven times as much for an MRI scan for one employee as they pay for another.

We can attest to the scan pricing differential on a personal basis. Last year we had a scan in Harlingen, Texas at a free standing MRI center – our PPO allowed amount was about $1,800. This year we had the same procedure at another free standing center in San Benito, Texas (4 miles away) and the PPO allowed was $300. Same PPO network, different providers with different PPO negotiated rates.

Should not all participants in a group health plan be treated equally?

Editor’s Note: This is why many of  our clients are moving away from PPO networks and paying providers a fair and reasonable rate for services. And, these Plan Sponsors pay the lowest market driven prices. If an MRI can be done for $300, and that is the best and lowest pricing available in the locality, then that is what the plan will allow no matter where Employee Jones or Smith seek treatment. If Jones goes to Harlingen for his MRI, the plan pays $300 and Jones pays the difference, $1,500.

Proposed Health Care Reimbursement Model

“Provider Freedom health plans allow you the full choice of health care providers without restrictions or penalties. There are no preferred providers or networks required. See the provider you choose!”

“You still receive the value of PPO-like discounts for all medical services. These discounts are arranged on your behalf directly with the provider of your choice to gain the highest level of discounts possible.”

“If there is a disagreement between your plan and a provider on the fee for a service, we will negotiate directly for you to ensure there is no “balance bill” to you for discounts taken. The only out-of-pocket expenses are normal deductibles and coinsurance. ”

Editor’s Note: This trend is growing. Many of our clients dropped their PPO networks several years ago and have since enjoyed significant savings.  For more information on how claims are negotiated and how balance billing issues  are resolved, write riskmanager@sbcglobal.net

 ”The old model is not working,” BlueCross CEO Alphonso O’Neil-White said Wednesday .

BlueCross BlueShield of Western New York is teaming up with the region’s largest provider system to offer self-insured
employers with new tailored networks, in hopes of providing more efficient care that decreases costs.

The BlueCross and Kaleida Health initiative, which officials said is the region’s first integrated network of its kind, lets employers customize health plans, tailoring the doctors and hospitals covered under the plan, reported Business First.

“The old model is not working,” BlueCross CEO Alphonso O’Neil-White said Wednesday . “This is not the standard model where a health plan creates a product and throws it out there to the market.” See http://blog.riskmanagers.us/?p=8085

BlueCross and Kaleida Health both admitted that the tailored networks will limit members’ choices of doctors and hospitals, but they believe the breadth and depth of services will lead to members accepting the restrictions.Although each participating employer’s health plan will differ, they will share common goals, for example, basing medical decisions on research, avoiding
unnecessary tests and procedures, tracking, using data to evaluate performance and stressing preventive care.

The initiative also could lead to BlueCross to create new provider payment systems, such as bundled payments that help cover non-reimbursed services, the insurer said.

Employer groups could begin creating their tailored plans in June and offering them to employees Jan. 1, Business
First noted.

Editor’s Note: Is this is an SBPPO? – see http://blog.riskmanagers.us/?p=7246 , http://blog.riskmanagers.us/?p=7246 , http://blog.riskmanagers.us/?p=7715

Tiered or carve-out networks. They realize we are on to them. That thick telephone book of providers they have touted in the past is fast becoming an albatrose. While the first 25 years of managed care the herd was rounded up,  expanded and fed well,  now the movement is to cull.

We just received a hospital bill incurred through a self-funded employee benefit plan located in the Lower Rio Grande Valley. The total billed charges were an amazing $264,665.00. The PPO allowed was $185,265.50, a wonderful savings of 30% off billed charges. This is great!

Or is it?

What did it cost the hospital to provide the services rendered? In looking at the CMS report filed by this hospital, their costs are of course lower. The difference is called a profit margin. We dont begrudge anyone from earning a profit do we? After all, nothing is ever free despite what you may hear sometimes.

And what about Medicare allowable for this claim? About 60% of this hospital’s admissions are Medicare recipients – it is assumed that 60% of admissions should generate a profit otherwise why accept Medicare patients – there is no law that requires the hospital to accept Medicare patients is there? Surprisingly, with the low reimbursement rates Medicare is accused of by many medical practicioners, in this case the hospital is actually making money off their Medicare book of business. And of course, in this claim the Medicare reimbursement would have been less than the billed amount.

So how does the PPO allowed of $185,000 compare to what Cost + 12% margin or Medicare allowed? Don’t tell the CFO this, but  he could have saved another $100,000 plus………………..he is smiling over his 30% PPO discount so why upset his day?

Editor’s Note: Stop loss insurance paid a portion of this claim. Unfortunately, if the Plan Sponsor had employed a common sense solution to his ever increasing health care costs, he would not have had the expense of a stop loss policy. If this is the only stop loss claim on this case for this year (remains to be seen), then the fixed cost to pay a portion of this particular claim would be about $350,000. In other words, not only pay more first dollar exposure (pre-stop loss retention level), this group will have paid a total of about $500,000 on a claim whose cost was less than $60,000.

Almost all hospitals accept Medicare patients. Medicare reimburses hospitals 100% of the Medicare fee schedule. As a private payer, what do we pay for hospital care as compared to Medicare? Do we know? Do you know?

You probably have no idea what your insurance plan is paying as compared to what Medicare would have paid for your claim. You dont have the data because you have not asked for it. You should.

Is guaranteeing the hospital a profit of 12% fair? Or 50%, 80%, or 500% fair? Is Medicare + 300% fair? Or +1,000%? What is a fair price to pay for your hospital care?

If you want to know what a fair price is, try asking your local hospital administrator. Or for a direct, no holds barred answer, write RiskManager@sbcglobal.net