Hospital Knows How To Play The System – Turning Cost Sharing Plans Into 100% Plans

winkHospital system knows how to turn cost sharing health plans into 100% plans, much to the delight of plan members…………….

By Bill Rusteberg

According to Texas Insurance Code Article 21.24-1, providers who accept Assignment of Benefits may not waive any applicable co-payments or deductibles.

If these violations are found in a licensed hospital, deficiencies may be cited for violations  of 25 TAC Section 133.121 (a) (1) (F) as the facility permitted the commission of an illegal act. Enforcement action may be taken including administrative penalties, suspension, denial, or revocation of the hospital’s license.

But some hospitals know how to game the system. They know it is difficult to collect patient share in the first place. With the advent of higher deductibles these days, account receivables are at record highs. How in the world do you collect a $2000 deductible from Joe Six Pack?

One hospital system we are familiar with has the answer. Renegotiate managed care contracting rates to a level to preclude the necessity of relying on patient share. They make their profits off what the insurance policy pays. Any cost sharing due from patients is “found money“, not “insurance money.”

Insurance carriers don’t care, after all they work under the ACA minimum loss ratio requirement. Administrative expenses and profits cannot exceed 15% of total spend. So the higher the cost, the more they make – 15% of a larger number is more than 15% of a lower number. Thus there is no incentive whatsoever  to negotiate lower hospital costs for consumers. Instead there is a huge incentive to negotiate higher hospital costs. Carriers too know how to game the system.

In addition, to compete with every other hospital in town, especially with those on the same managed care network, rather than publicly waiving patient share which is illegal in Texas, they do so in a very sneaky way.

The admissions clerk will of course try to collect patient share (Found Money) up front, but does that in passing. Instead, the clerk has been trained to say “That’s ok if you don’t have your deductible or coinsurance amount today, we will just go ahead and bill you, wink wink.

The hospital’s policy is to bill the owing patient three times. If there is no reply or response, the hospital simply writes off the “loss” and does not pursue collections. We were told by a hospital official “we don’t pursue patients because it gives us bad press. We always strive to maintain our kind and caring reputation within our community.”

Thus, this hospital system has effectively turned cost sharing health plans into 100% plans, much to the delight of plan members. Plus, they have created steerage on steroids to their hospital. Why go to other area hospitals when this one is “free?”

There is no secret here. Plan members, neighbors and friends talk to each other. So the word on the street in this particular community in South Texas is “Go to Hospital ABC if you can, they won’t charge you anything because if you go to any other hospital in town you will get hounded for money by greedy bill collectors and end up having your credit ruined. Heck, you might not even get into any other hospital without coming up with an arm and a leg first!” 

Unfortunately, we are all paying extra for this aren’t we? As managed care contracts come up for renewal, hospitals point to uncompensated care as one reason they need another rate increase. “Look at our accounts receivables, it’s at an all time high” is a common plea. “We must raise our rates or close our doors.”

The cycle is never ending. Except for smart plan sponsors who know better……………

Follow Up Blog Entry: Question for Hospital Administrators


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