By Bill Rusteberg
A hospital reaches out to a RBP plan expressing their interest in negotiating a direct agreement. That is encouraging since many plan members view the hospital as a preferred hospital in their community.
Their message was clear. Either enter into a direct agreement or expect aggressive balance billing against plan members seeking care there. When learning the plan paid primary care providers 150% of Medicare in exchange for certain concessions, the response was something to the effect “150% of Medicare is really good for primary care but not nearly enough for hospital care.”
Not being privy to the details of that meeting having not attended, below is a suggested follow up letter to the hospital memorializing thoughts going forward:
Dear Mr. Hospital Administrator,
Thank you very much for your expressed interest in contracting with our health plan. As I made clear during our meeting yesterday, we have always welcomed a partnership opportunity with your hospital in our mutual efforts towards providing quality access to affordable health care for our employees and their families.
As you must agree, we have never been in a position to negotiate health care pricing over the past 40 years of managed care in this country. Rather, we have relied on third party intermediaries to do that for us. Their failure to control health care costs is evident, reaching a point of unaffordability for most Americans. As a public school district our resources are limited, our teacher and staff underpaid. Each year, without fail, our health insurance costs go up, effectively taking away well deserved raises and Christmas bonuses. This has become unsustainable.
The leading cause of consumer debt and personal bankruptcy in this country is directly attributable to Contracts of Adhesion promulgated by third party intermediaries in partnership with hospitals and other health care providers. As a plan sponsor we have been relegated to a backroom role as a third party beneficiary with little or no control over health care pricing.
“Many benefit plans are bound by contracts they either don’t understand or have never seen” – Adam V. Russo, Attorney
We have a fiduciary responsibility to plan members to carefully and prudently manage plan assets in the most financially responsible way for the benefit of our plan members. We recognize that with most sincerity. To continue as a third party beneficiary bound to secretive managed care contracts we will abrogate our fiduciary duties by gifting taxpayer and plan member monies through provider contracts we cannot see nor audit.
Our plan eschews third party managed care networks in favor of fair, reasonable and transparent pricing. We believe plan sponsored hospital contracts are not always necessary as plan members, individually, routinely enter into single case contract agreements via an Assignment of Benefits agreement with your hospital and other medical care givers. An Assignment of Benefits is a legal document stipulating your acceptance of the terms and conditions of our Plan Document governing benefits under our plan.
“When a patient offers their right to obtain benefits from their insurance, that assignment of benefits is in and of itself consideration in full, exchanged for services and treatment. An assignment of benefits is thus not a form of access to consideration, and rather, is the consideration itself” – Adam Russo, Attorney
There is no question we both agree ABC Hospital must earn profits in order to continue serving our community. Our program is designed to do that by industry professionals including but not limited to independent risk managers, attorneys, actuaries, former managed care executives including hospital administrators and others with years of experience within the health care delivery system.
As a frame work for continued discussions I want to make our position as clear and transparent as possible. If any of the following points listed below are not acceptable to you then there is no further need to move forward:
- No charged-based contract.
- Medicare reimbursement rates or other recognized & public reimbursement benchmarking
- No outliers such as annual escalator clauses or stop-loss provisions
- No gag clauses
- Contract Agreement should be no more than two pages in length – See attachment
With your agreement, any further discussions must necessarily be with officials on both sides who are empowered with final decision making authority and commitment to a negotiating process of no longer than 30 – 45 days.
If, for whatever reason, we cannot come to a formal agreement please know we will make every effort to advise our members to be cognizant they may be subject to balance billing by your facility at their sole expense. We will advise them of alternative settings where we have direct contracts in place or to providers who have historically demonstrated acceptance of our plan of benefits without balance billing issues.
If you agree to the contract basis briefly outlined above I offer the following Plan Document language as a guide for further consideration:
CURRENT PLAN DOCUMENT LANGUAGE
Maximum Allowable Charge
Maximum Allowable Charge” shall mean the benefit payable for a specific coverage item or benefit under the Plan. The Maximum Allowable Charge will always be a negotiated rate, if one exists; if no negotiated rate exists, the Maximum Allowable Charge will be determined and established by the Plan, at the Plan Administrator’s discretion, using normative data and submitted information such as, but not limited to, any one or more of the following, in the Plan Administrator’s discretion:
• Medicare reimbursement rates (presently utilized by the Centers for Medicare and Medicaid Services [“CMS”]).
• Prices established by CMS utilizing standard Medicare Payment methods and/or based upon supplemental Medicare pricing data for items Medicare doesn’t cover based on data from CMS).
• Prices established by CMS utilizing standard Medicare payment methods and/or based upon prevailing Medicare rates in the community for non-Medicare facilities for similar services and/or supplies provided by similarly skilled and trained providers of care).
• Prices established by CMS utilizing standard Medicare payment methods for items in alternate settings based on Medicare rates provided for similar services and/or supplies paid to similarly skilled and trained providers of care in traditional settings).
• Medicare cost data as reflected in the applicable individual provider’s cost report(s).
• The fee(s) which the Provider most frequently charges the majority of patients for the service or supply.
• Amounts the Provider specifically agrees to accept as payment in full either through direct negotiation or through a preferred provider organization (PPO) network.
• Average wholesale price (AWP) and/or manufacturer’s retail pricing (MRP).
• Medicare cost-to-charge ratios or other information regarding the actual cost to provide the service or supply.
• The allowable charge otherwise specified within the terms of this Plan • The prevailing range of fees charged in the same “area” (defined as a metropolitan area, county, or such greater area as is necessary to obtain a representative cross-section of Providers, persons or organizations rendering such treatment, services, or supplies for which a specific charge is made) by Providers of similar training and experience for the service or supply.
• With respect to Non-Network Emergency Services, the Plan allowance is the greater of:
– The negotiated amount for In-Network Providers (the median amount if more than one amount to In-Network Providers).
– One hundred percent (100%) of the Plan’s Maximum Allowable Charge payment formula (reduced for cost-sharing).
– The amount that Medicare Parts A or B would pay (reduced for cost-sharing).
The Plan Administrator may in its discretion, taking into consideration specific circumstances, deem a greater amount to payable than the lesser of the aforementioned amounts. The Plan Administrator may take any or all of such factors into account but has no obligation to consider any particular factor. The Plan Administrator may also account for unusual circumstances or complications requiring additional or a lesser amount of time, skill and experience in connection with a particular service or supply, industry standards and practices as they relate to similar scenarios, and the cause of Injury or Illness necessitating the service(s) and/or charge(s).
In all instances, the Maximum Allowable Charge will be limited to an amount which, in the Plan Administrator’s discretion, is charged for services or supplies that are not unreasonably caused by the treating Provider, including errors in medical care that are clearly identifiable, preventable, and serious in their consequence for patients. A finding of Provider negligence and/or malpractice is not required for services or fees to be considered ineligible pursuant to this provision.
The determination that fees for services are includable in the Maximum Allowable Charge will be made by the Plan Administrator, taking into consideration, but not limited to, the findings and assessments of the following entities: (a) The national medical associations, societies, and organizations; and (b) The Food and Drug Administration (FDA). To be includable in the Maximum Allowable Charge, services and fees must be in compliance with generally accepted billing practices for unbundling or multiple procedures.
The Plan Administrator has the discretionary authority to decide if a charge is covered under this Plan. The Maximum Allowable Charge will not include any identifiable billing mistakes including, but not limited to, up-coding, duplicate charges, and charges for services not performed.
When prices established or utilized by CMS are applicable as described above, the Maximum Allowable Charge will be determined based on multiplying the most applicable of the following by ________% (Professional, Laboratory and Institution) of the national Medicare allowable amount, adjusted for the geographic wage index:
• For Inpatient Hospital expenses, the Medicare Diagnosis Related Group (“DRG”) scheduled dollar conversion amounts based upon the CMS weighted values.
• For outpatient Hospital expenses, the CMS Ambulatory Payment Classification (APC) based upon the CMS weighted values, or the current Medicare allowable fee for the appropriate area.
• For Physicians and other eligible Providers, the current Medicare allowable fee for the appropriate area. • For Ambulatory Surgical (ASC), the current Medicare allowable fee for the appropriate area.
Maximum Allowable Charges will not include charges based on Unbundling, Errors, Unclear Description or Misidentification.
Medical Care Facility means a Hospital, a facility that treats one or more specific ailments or any type of Skilled Nursing Facility.
We have assisted plan sponsors in direct contracting with hospitals for many years. We understand the strategies and tactics of both and how to navigate between opposing interests toward a common goal. The sign of a good business transaction is when both sides benefit – Bill Rusteberg
