How Much Should We Pay Hospitals Boss?

CFO: Boss, what should our self-funded health plan pay hospitals?

CEO: “Authoritative research shows that Medicare plus 25 percent is the reasonable amount for hospitals to charge….” 

J. Patrick Rooney, someone you probably have never heard of, is considered by many to be the Father of Margin Based Pricing better known these days as Reference Based Pricing. Many believe his conclusion of what the “sweet spot” reference point should be still holds true today.

“In October 2006, Mr. Rooney was the subject of a NUVO Dispatch titled “Defending the Uninsured.” [10] which reported “Rooney has found that hospitals have made a common practice of charging 3.5 times what Medicare will pay for services.”

“While Rooney acknowledges that hospitals may need to charge more than Medicare will pay, he contends that authoritative research shows that Medicare plus 25 percent is the reasonable amount for hospitals to charge….” – Wikipedia

America’s Health Care Crisis Solved by J.P. Rooney & Dan Perrin provides additional commentary in the link below, representing that Margin Based Pricing of Medicare +20% is reasonable and defensible: MARGIN BASED PRICING