By William Rusteberg
Hospitals dismiss the significance of chargemaster prices? (See link to article below). That is totally misleading. Chargemaster prices are extremely significant and gives rise to a billion dollar business for intermediaries such as insurance companies, audit firms, law firms, claim re-pricers, and third party administrators.
The scheme is tied up in “savings” to be realized through the difference between arbitrary and unreasonable chargemaster prices and what is actually paid. The quantative differential can be enormous.
Percentage of savings fees is the greatest fraud foisted upon consumers since Vicor Lustig sold the Eiffel Tower in 1925.
It is clear to all that chargemaster rates are “totally around the bends.” No one will disagree with that. Yet many ancillary industries, given rise by our current health care delivery system including managed care companies, audit firms and third party administrators depend on chargemaster pricing without which they could not survive.
If the average differential between chargemaster pricing and the actual price paid is 50-80%, there is a lot of “money” contained in the “spread” to be earned. Many PPO networks, for example, will charge 30% of savings for out-of-network claims. 30% of 80% is 24%. To earn 24% of an inflated, arbitrary number that no one ever pays is better than robbing a bank.
A well oiled conspiracy requires sharing. Commonly formed side-agreements are forged between willing partners. Health care intermediaries are in a competitive business.
Thus, hospital chargemasters have fueled the fortunes of many health care intermediaries and the scheme continues…………………………
Editor’s Note: See previous posting: http://blog.riskmanagers.us/?p=11495