Why Be Hungry When Food Is Aplenty?


By William Rusteberg

Have you ever tried to negotiate pricing with a hospital? Fun wasn’t it! Our most memorable encounter with a hospital official was several years ago in East Texas. The meeting went something like this:

“Nice to meet you. I represent XYZ Company and we are here today, as I mentioned over the phone last week, to negotiate a direct contract with you.” Hospital official, not smiling at all, responded “Ok, our offer is a 3% discount off billed charges with a quick pay provision of 30 days from the date of a clean bill. If you violate the quick pay provision you will be responsible for full billed charges!”

“Thanks for your very generous offer, but I think we will pass” and out we went.  The time we entered the board room and the time we left totaled 9 minutes.

Hospitals are not hungry. The status quo is just fine and it really doesn’t matter that other hospitals in town are on the same networks.  The key is network membership and alliances with local physicians who are, in reality, the true customers, not patients. Patients don’t care about costs, after all they’ have insurance that takes care of the bills. Inflating charges has never been easier in the history of the free market.

Health care costs are now so high that more plan sponsors are calling it quits. No longer accepting time tested explanations of why costs are going up every year, employers are taking a stand, asking questions and learning secrets that the health care delivery system have held close for years.

Times are changing, and changing fast. Narrow networks of providers who charge less are gaining acceptance in the market. More plan sponsors are asking questions about costs and are doing something about it…………Medicare benchmarking of claims, reference based pricing is gaining ground with dramatic effects.

Smart hospital administrators who understand the changing food chain economics of health care are, for the first time, sensing opportunities to compete with the other hospitals in town. Understanding that plan sponsors are no longer lemmings, health care providers are seeking partnerships based on fair and equitable and transparent basis. No one wants to be hungry.

ObamaCare does have it’s good sides that some believe is directly responsible for these substantive market changes. That is a good thing.