The Case of The $153,887 Kidney Stone

“The patient spent 1 hour in the OR.  I kid you not, the facility billed $153,887……….”

By Bill Rusteberg

No one ever pays full billed charges. That’s why PPO networks and Reference Based Pricing plans re-price all claims before payment is made.

The Scheme

There are good reasons for turbocharged billed-charge markups. For example, the scheme generates lucrative hidden revenue streams that can drive up costs by 100% and more. Removing those revenue streams, as in the case of Reference Based Pricing plans, can reduce plan costs by as much as 50%. (See Hospitals Dismiss Significance Of Chargemaster Prices?)

Shared savings schemes memorialized in side-deals dilute the effectiveness of PPO discounts. A example can be found in the Weslaco ISD vs Aetna lawsuit. (Weslaco ISD vs Aetna).

Aetna was earning 9.6% of the PPO discount as a fee which was posted on the claim side of the ledger, not the fixed cost side of the ledger. There are other similar examples such as Oakland County vs BCBSM, Anheusser Busch vs Cigna, etc.

Manipulation of Value Parameters

When plan members receive their Explanation of Benefits Notice they rejoice in knowing their insurance company has their backs. They see enormous discounts off their bills. They don’t realize their plan may be paying 50% off double the price.

The Outrage Continues

Yesterday we received notice of an incurred out-patient hospital claim in deep South Texas. For those who don’t know, health care costs in the Lower Rio Grande Valley are some of the highest in the country and has been the subject of numerous articles (both local and national) over the years.

The claim in question is an outpatient surgery procedure for a patient with a kidney Stone. It appears they intervened surgically, versus using lithotripsy. The procedure occurred at a hospital system in Edinburg, Texas.

The third party administrator sent the following note to us yesterday:

“The patient spent 1 hour in the OR.  I kid you not, the facility billed $153,887.  We have calculated a Medicare allowed amount of $8,497.62.  The claim will be on next week’s claims run as we are still doing some investigation.”

A typical PPO discount of 60% would generate approximately $62,000 in allowed charges, or about 730% of Medicare. In this case though, the plan pays 120% of Medicare equalling a claim allowable amount of $10,196, or about $50,000 less than a typical PPO allowable amount.

History Repeating Itself?

Could this the same hospital that tried to defend their turbo-charged markups some years ago? – (South Texas Health System Defends 920% Price Markup).

The scheme continues and its not limited to this hospital alone. For example a family member recently had an out-patient surgical procedure in Victoria, Texas. The facility (hospital owned) billed-charge was $79,000. Her insurance plan (Reference Based Pricing) paid less than $10,000.

The Pitch

BUCA sales reps. are well aware no one ever pays full billed charges yet they continue to play the Disco Discount game.

“Look how much we saved you this year, $2,000,000 !!!! Aren’t you happy you chose (select one) Aetna – Blue Cross –Cigna – Humana – United HealthCare!!!!!!?

Armed With The Truth

More and more plan sponsors see through the scheme these days.  Plan sponsors message to insurance companies – “You don’t want me to learn your business because it will not be good for you.” And that’s the truth. 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.