“Would you pay $43 for a gallon of milk and be happy to negotiate that down to $19 knowing that the cost is $2.40? That is exactly what is happening to your current health plan………………” – William Rusteberg
Several months ago we had a client, an owner of a long haul trucking firm, who suffered a stroke while hunting in Colorado. His hospital bill alone (3 day stay) was $52,272 in billed charges.
We asked a firm in California to look at this claim for us over the Christmas holidays. This firm is a technology firm specializing in health care pricing nationwide and reference based pricing schemes for self-funded employer groups.
Here is what they reported:
Hospital’s Billed Charge – $52,272 (Cost Plus 18,641% or Medicare + 935%)
Hospital’s Cost – $2,804.03
Medicare Allowable – $5,588.31 (Cost Plus 200%)
PPO Allowable – $45,707.40 (817% of Medicare, or Cost Plus 1,630%)
The PPO allowable was determined by running the claim through a network you are familiar with.
The California firm recommended: “Payment recommendation would be to issue a payment of $8,382.47 or 150% of Medicare which are on the higher end of prevailing charges and are Fair & Reasonable prices according to objective pricing data published by the U.S. government based on regulated pricing-cost submission by CMS providers. If appropriate reference-based pricing (RBP) procedure is in place this would constitute the reimbursement.”
There are more firms in the market today that can provide this kind of accurate and documentable information for Plan Sponsors than there were just a year ago. Transparency is becoming not just a politically correct word bantered about by those of us in the industry, it is becoming reality.
BTW – a 2008 Milliman Analysis reported average PPO managed care contract reimbursement rates range from 140% to 220% on facility claims nationwide.
So now you know, or at least have a feel for how the American health care delivery system and their managed care partners price goods and services.
Would you pay $43 for a gallon of milk and be happy to negotiate that down to $19 knowing that the cost is $2.40? That is exactly what is happening to your current health plan………………