How Employers Can Achieve a Fair Price in Hospital Negotiations

J Patrick Rooney – His research shows Medicare Plus 25% is the reasonable amount for hospitals to charge……

“Why should a plan sponsor negotiate a hospital contract when plan members do that already?” Bill Rusteberg

With healthcare costs skyrocketing, it is time for employers to take the reins on negotiating hospital prices to achieve a fair price………………………

MedPAC has indicated that a reasonably efficient hospital should be able to operate overall pretty close to Medicare. With that, you’d say, ‘well, why are plan sponsors being charged up to five times Medicare, then?’ And of course, no one knew the answer to that. Now I think we do: we’re just getting price gouged, effectively, in the pricing because they can,” said Thompson. “Plan sponsors as plan fiduciaries have to take action. They can’t just stand for it.”

SOURCE: How Employers Can Achieve a Fair Price in Hospital Negotiations (

Editor’s Note: Plan sponsors don’t need hospital agreements. Their plans pay what they pay, nothing more and nothing less. Hospitals don’t have to accept a plan’s payment, yet they do almost 100% of the time. And when they do, they memorialize a “single case agreement”, or contract, with the insured to accept the plan’s payment as payment in full in addition to the insured’s covered out-of-pocket expenses. A binding contract is established when a patient offers, and a hospital accepts, an Assignment of Benefits.

Between 2007 – 2021 our Reference Based Pricing has been set at 120% of Medicare for hospital care. Balance billing has been less than 2% of claims. Starting 2022 to present our clients have reduced their hospital payments to 105%. Balance billing has continued to remain below 2% of claims. The thought process is: “If hospitals don’t like 120%MC and balance bill, they won’t like 105%MC either. So what’s the difference?” After all, we know some BUCA out-of-network hospital reimbursements are 105%MC (we have proof).

Health care costs are directly related to what we agree to pay and what providers agree to accept. Unfortunately that’s not how it works in the American health care delivery system. Third party intermediaries negotiate pricing using other people’s money and that’s a problem.