Cost-Plus Hospital Reimbursement – A Market Driven Product

For years employers have relied on secretive PPO hospital contracts for promised discounts on health care costs. Yet employers have faced annual cost increases every year. “Trend” (medical inflation) has been touted by the insurance industry as the main culprit for ever rising costs. 

One wonders, to what extent have hospitals  been passing on annual operating costs  increases to their patients in order to remain profitable?  We suppose that hospital executives know what their costs are, and they charge patients accordingly by adding a profit margin to their costs. That is how capitalism works.

The Cost-Plus financing method is really what hospitals are doing already. The difference is that hospitals can arbitrarily inflate their charges behind the curtain of secretive PPO contracts. 

We have found that hospitals routinely charge cost-plus 400-500% or more. We can understand why hospitals dont want to step from behind the curtain. Consumers would be outraged if they knew.

PPO Hospital Contracts may be viewed as Contracts of Adhesion.

Market driven Cost-Plus financing takes a different approach – transparency. Both the consumer and the hospital benefits. The consumer is guaranteed a fair and reasonable rate, while the hospital is guaranteed a 12% profit margin.

If real estate brokers get 6%, general building contractors 25%, health insurance agents 5%, attorney contingencie fees are 33%, why would hospitals object to the public knowing that they get 12%. Is that because they are now getting 500% or more?

Hospitals scream that they lose money on Medicare and Medicaid and have to make up the loss elsewhere. The fact of the matter is that the majority of hospitals profit from these government programs. Just look at their financials.  

Cost-Plus is a market driven product and will earn it’s market share.

Editor’s Note: Insurance companies,PPO networks and hospitals should be careful in their reported efforts to band together to boycott, coerce and intimidate. Under law, it is generally understood that no one may commit, or agree to commit in concert with others, any act of boycott, coercion, or intimidation resulting in or tending to result in a monopoly or an unreasonable restraint of trade in the business of health care.

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