Charge Master Rates & Magical Discounts

A client on Reference Based Pricing experienced first hand the magic of Charge Master rates and magical discounts………………………….

A recent claim incurred through a Reference Based Pricing plan sponsor is instructive. It illustrates the charade of medical pricing strategies by hospitals in this country.
The Hospital Bill
Hospital billed charges are 777% of Medicare. Hospital accepts Assignment of Benefits. Plan pays 120% of Medicare, or less than $2,000. Despite Assignment of Benefits contract, hospital demands $12,554.69 balance bill from patient.
The “Real” Hospital Bill

Patient advocate “negotiates” with hospital to reduce bill. Hospital agrees to accept $1,413.83 which added to the plan’s payment equals 212% of Medicare. Hospital eats the “loss” of the difference, i.e., uncompensated care.

Billed Amount (777% of Medicare)
Allowed (120% of Medicare)
Balance Bill of $12,554.69 Reduced To
Total Payment (plan Allowable + Additional Payment)
% of Medicare
Average PPO Allowed Bill
Assuming PPO discounts average 55%, a PPO allowed charge on this claim would have been $7,204. or 466% of Medicare which is 220% higher than the potential final settlement in this case of 212% of Medicare………………777% magically changed to  a PPO 466% or a Push & Shove 212% or a 120% RBP reimbursement.
Plan Sponsor’s (Your) Dilemma 
If you were the plan sponsor would you agree to pay 212% of Medicare on this claim? What are the future implications if you do?
Are You Ready To Challenge Status Quo Health Care Reimbursement Strategies?
If you are currently on a PPO plan, does this claim example cause concern?
Are You Ready To Take Action?

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Ah, but it really is the ChargeMaster…………..


I have this same exact issue on at least 2 of the 4 claims I personally had from (SAME HOSPITAL) a year ago (maybe all 4) when I had a kidney stone and some other complications.  I can get the exact numbers, but the strategy they’re employing, and the percentages they’re willing to accept for my claims are probably about the same as with this example.  About a year after demanding $30,000+ for one of the claims, they’re now willing to settle for maybe a total payment of around $4,000 (plan payment plus my proposed payment).  I don’t know what that represents as a percentage of MC.  That can be calculated.

But I’m not going to pay.

It’s clear that they have a game plan.  Threaten in the beginning; mail multiple notices of the ridiculous BC, demanding payment, and then after about a year, and without notice, just lower the amount they’re demanding to something that sounds reasonable.  Most would say, “wow, that’s a big reduction in what they’re asking”, and do what I felt like doing – just pay it and be done with it.

But I think that’s a mistake.  It pays them way more than they deserve for the service; it reinforces their strategy and as that strategy is successful, they’ll just keep doing it. I suspect they’ll begin to assemble information about which employer caves in on their demands, and then begin, over time, to inch up those reductions of the BC from, say, 212% of MC to 250% of MC……and then higher until they stop getting payments.

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