Simple Hospital Agreement has facilitated direct provider agreements directly between self-funded employee health & welfare plans for years. It doesn’t take a rocket scientist to do this. It’s all about common sense, traditional American business practices (as opposed to traditional managed care practices), based upon fair value for both parties.

By Bill Rusteberg

We have copies of various hospital contracts we have obtained over the years and have found all incorporate essentially the same provisions. (I was going to put an adjective before the word “provisions” but in a spirit of good cheer and all things good I refrain from doing so here). You will not find these #%!@#$ provisions in our agreements.

The agreement below is an actual agreement in place for some of our clients in Texas. This agreement solves the hospital’s account receivables problem and provides the plan sponsor and plan member with significant savings. Utilization at this hospital system runs 95% with few plan members choosing other hospitals in the area.

The reader is free to copy this agreement for their own client’s use:

Letter of Agreement Between ABE Company & XYZ Hospital

(A Medicare based fee schedule with Carve-outs Where Needed)


100% of Medicare[1] using MS-DRG Reimbursement Methodology.  Patient is responsible for 5% coinsurance, up to $250.


100% of Medicare using APC Grouper Reimbursement Methodology. Patient is responsible for 5% coinsurance, up to $150 for any Ambulatory Surgical Procedure as defined by Medicare.  All other Outpatient encounters will not require a Patient Payment.

Exclusions (Applicable to Inpatient and Outpatient Services):

Excluded items will be recognized from the following revenue codes and reimbursed per the following:

Surgical implants, prosthetics and orthotics properly billed in accordance with nationally recognized billing standards under revenue code:

  • 274 (prosthetic/orthotic devisees)
  • 275 (pacemakers)
  • 276 (intraocular lens)
  • 278 (other implants)
  • 279 (Other supplies/devices)

(Collectively “Implant”) shall be reimbursed as follows:

Within each revenue code identified above, Hospital shall be reimbursed for the implants billed under that revenue code at 110% of cost (Manufacturer invoice based)

Drugs properly billed in accordance with nationally recognized billing standards under revenue code:

  • 634 (Erythropoietin (EPO) <10,000 units)
  • 635 (Erythropoietin (EPO) >10,000 or more units) or
  • 636 (drugs requiring detailed coding) when billed with revenue code 331, 332, or 335

Applicable J Codes are: J9000-J9999; J7190-J7195 and J2505

Collectively “High Cost Drugs”) shall be reimbursed as follows:

Within each revenue code identified above, Hospital shall be reimbursed for the High Cost Drugs billed under that revenue code at 110% of cost (Manufacturer invoice based)


Payer shall pay Hospital for Covered Services rendered to Members less any applicable Member Copayments, Coinsurance or Deductible amounts as described above.  Hospital shall accept such compensation, and any applicable Member Copayment, Coinsurance or Deductible as Hospital’s only compensation for Covered Services.  Payer shall make such payment for services with thirty (30) days of receipt of Clean Claims.

Recovery of Underpayments and Overpayments:

Payer and/or Hospital must provide an explanation as to why it is believed a refund is legitimate including details of their bundling edits, fee schedules, criteria or provider bulletins.

  1. Underpayments: Hospital has 1 year from payment to request adjustments to incorrect payments.
  2. Overpayments: Payer has 1 year from payment to request overpayments returned for incorrect payments.
  3. Barring any systematic practice to underpay Hospital by Payer, Payer and Hospital agree that underpayments and/or overpayments amounting to less than $25.00 on an individual entire claim shall be considered to have been paid in accordance with the terms of this Agreement and shall not be appealed by Hospital or Payer. Rather, Hospital or Payer shall write-off the under- and/or over-payment difference.

Retrospective Audits

Payer has 1 year from payment date to conduct a retrospective audit.

Term and Termination:

This Agreement shall be effective as of the Effective Date and shall continue until otherwise terminated in accordance with this Agreement.  The initial term is the first year this Agreement is in effect (the “Initial Term”) and will Auto renew on an annual basis at the end of each term unless noticed received 90 days prior to renewal date.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement to become effective JUNE 1, 2018:

By _______________________              ______________________________

ABC COMPANY                                                         XYZ HOSPITAL

Date: _________________                                Date:_________________

[1]MS-DRG Reimbursement Methodology: These payments are intended to mirror the payment mechanism that Medicare would pay to the hospital. The Medicare payment includes without limitation, DRG, outlier payments, GME, IME, Disproportionate Share Hospital, Capital Pass Through and any other compensation made by Medicare.


ABOUT RISKMANAGERS.US is a specialty company in the benefits market that, while not an insurance company, works directly with health entities, medical providers, and businesses to identify and develop cost effective benefits packages, emphasizing transparency and fairness in direct reimbursement compensation methods.

The shared vision of and clients who retain our services is to establish and maintain a comprehensive employee health and welfare plan, identify cost areas that may be improved without cost shifting to any significant degree, and ensure a superior and sustained partnership with a claim administrator responsive to members needs on a level consistent with prudent business practices.

Plan costs, in all areas including fixed expenses and claims are open for review on a continuing basis. Cost effective plan administration and equitable benefit payment to providers are paramount to fulfilling our mutual fiduciary duties. As we proactively monitor and manage an entire benefit program we are open to any suggestions members may make or the dynamic health benefit market may warrant in order to accomplish these goals.

Duty of loyalty to our clients, transparency and accountability are essential to the foundation of our services. To that end, we expect our clients to realize a substantial savings based upon the services that we will deliver.

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