Billed Charges vs PPO Allowed Charges vs Cost Plus Insurance

cost plus

By Bill Rusteberg

A random sampling of hospital / facility claims incurred in the Lower Rio Grande Valley, Texas (The Valley) illustrates the crazy world of health care pricing strategies.

What a hospital bills patients has nothing to do with what hospitals accept for payment. Billed charges are a scam that benefits a multitude of third party intermediaries, draining billions of dollars from health care at the expense of consumers. (Hospitals Dismiss Significance Of Chargemaster Prices?)

Approximately sixty hospital / facility claims, incurred in the Valley, were reviewed to determine the ratio of billed charges to PPO allowed charges and to Medicare allowable charges. The results are stunning.

Total billed charges total $ 2,018,665.46. PPO allowed  charges total $ 1,163,817.74. Medicare allowed charges total $ 396,988.86.

PPO allowed average in-patient = 280% of Medicare. PPO allowed average out-patient = 367% of Medicare.

How does this compare to our clients in the Valley who have eschewed managed care plans and are instead paying claims based on fair, reasonable and defensible reimbursement rates?

Our Cost Plus / Reference Based groups are paying 120% of Medicare and have been doing so for five years and more. The savings have allowed these employers to keep their health care costs static while improving benefits at the same time.

Cost Plus insureds continue to receive medical care in their communities. Hospitals continue to cash our checks.

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