Our website (www.mollymulebriar.org) gets emails from time to time through our Tip Line exposing industry secrets……
The following is a redacted email which is especially a must read for Texas political subdivisions who routinely go to bid for their group health plans with little knowledge on how some in the industry prey upon ignorance for financial gain:
Molly, I’ve been thinking about (Name of BUCA) pepm fee they are charging TPA’s to access their network. It’s high and when added to a TPA’s other fixed costs they are just as expensive as the BUCA’s on a spreadsheet.
Unfortunately, most sales these days are off spreadsheets (especially political subdivisions).
Then, I remembered what a Texas TPA used to do back in the day. They did not charge a pepm PPO access fee, instead they charged a % of savings. They looked real good on a spreadsheet. Plus, they were able to lower their admin fee too since they were making a killing off the % of savings. They looked really good in competitive situations. They won more than they lost.
Here’s the math:
SCENARIO NUMBER 1 – Suppose the TPA’s admin fee is $17 pepm and there are 500 employees. The annual admin fees would be $182,000. The (BUCA) network fee is $14 which will be an additional $84,000 for a total of $186,000.
SCENARIO NUMBER 2 – The TPA proposal would show the (BUCA) access fee of 25% of savings instead of $14 pepm. A group of this size will have a total billed charged medical spend of approximately $3,000,000. Allowed charges would probably be around $1,500,000 for a savings of $1,500,000. A 25% of saving fee would produce $375,000.
From the % of savings fee of $375,000 you must pay (BUCA) $84,000, leaving you $291,000. Since the TPA admin fee under Scenario Number 1 is $182,000, the TPA will be making an additional $109,000. If the TPA wanted to reduce their $17 pepm admin fee by $109,000, their admin fee would go from $17 to $12.16
So on a spreadsheet their numbers would look better.
This is exactly what the BUCA’s have been doing for years. They indicate their ppo access fees are “included” in their admin fees. However, we know that is not true. For example, Aetna was earning 9.6% of the savings at Weslaco ISD (Weslaco ISD vs Aetna). And, according to Jeff Seiler’s famous article, “The Truth About The Blues” he exposes how BCBS does the same (The Truth About The Blues). Then we look at Oakland County vs BCBSMN and Anheiser Busch vs Cigna and find the same (Court Case Exposes Industry Secret – Hidden Fees Within PPO “Discounts”)
Two can play the same game.
Taking this a step further, you can broker an agreement with a PBM to kick back to you $5 per script. Since scripts can average 1.2 per employee, this would produce $36,000 in additional revenue, or about $6 pepm. Now your admin fee is $6.16. You are looking really good on that spreadsheet!
Then of course you can jack with the aggregate factors too by buying down the corridor…………………..
It is all about hiding fees on the claim side of the ledger and about the importance Charge Masters play and why the industry relies on them, making billions off the spread…………….(Hospitals Dismiss Significance Of Chargemaster Prices?)