Hospital Official Tells Us Cost-Plus is an Illegal Scheme


One of our clients whose self-funded health plan is currently payng hospitals on a cost-plus basis, had an initial contact with a local hospital yesterday to discuss a possible agreement regarding hospital reimbursment methodology both sides could agree to.  The hospital administrator started the conversation by saying that he was familiar with what the employer was doing and thought that cost-plus reimbursement methodology our  client was employing was “illegal.”

We passed that comment on to our auditing firm and below is their response:

“We had a file yesterday  where a patient went to xxxxx xxxxxxx for a highly specialized retina  procedure. In the hospital for three days and the bill was  $ 18,000 , including the OR.  My guess was that most of the NJ and TX hospitals would charge more in the area of 35 to 50 K . We paid xxxx xxxxxxxx $ 12,000  based on audit and they accepted without a fight.  xxxxx xxxxxxx , like other Maryland hospitals , hospital may not develop outrageous  chargemasters because of  regulation. ”

“So , xxxxx xxxxxxx , arguably  one of the finest hospitals in the world has no problem with our process  and accepts the payment.    These other guys  ( that couldn’t hold a candle to xxxxx xxxxxxx ) charge ficticous amounts and then threaten patients and employers when they don’t get their way.   If that is “ illegal “ ,  then we need to change the laws.    But we are not doing anything illegal in performing reasonable fiduciary duties on behalf of a Plan.   I look forward to speaking with Mr. xxxxxxx and it sounds like Barbara gave him a good  walk through.   These are all positive developments : transparency , maybe competition  between providers in the near future  .    Can you imagine ?”

Editor’s Note: This particular hospital administrator needs professional counseling. We have a bevy of attorneys lathering at the bit to address the legality of cost-plus with anyone who is stupid enough to spout off like an uneducated moron.  We have redacted the name of the hospital herein since we do not want “flavor” future discussions with this particular hospital system.