XYZ Insurance Company Hospital Contract – Guaranteed Cash Flow Mechanism


Below is actual language found in an insurance company’s  Hospital Contract which in effect gives the participating hospital an annuity contract of sorts. The participating hospital is guaranteed a weekly cash payment whether they see a member patient that week or not.

XYZ Insurance Company will adjust the weekly Uniform Payment Plan (UPP) for all applicable allowances for Covered Services rendered to XYZ Insurance members. The UPP means the weekly payment that shall be made from XYZ Insurance Company to Hospital representing the average weekly claims volume incurred in the previous running quarter.  The adjustment to the UPP check will be the estimated difference between the Net Covered Charges and the applicable XYZ Insurance Company liability based upon the agreed upon rates attached hereto for each Hospital as a separate Exhibit and incorporated by reference herein. Net Covered Charges means Covered Charges for Covered Services rendered to XYZ Insurance Company members less deductibles and co-payments, less coordination of benefits amounts.

The estimated XYZ Insurance Company liability for Covered Services rendered to XYZ Insurance Company members will be determined based on the amounts reflected in the Rate Exhibits attached hereto.

Adjustments will be reviewed and recomputed by XYZ Insurance Company only as necessary to reflect actual XYZ Insurance Company claims and/or contractual allowances for XYZ Insurance Company Covered Services rendered to XYZ Insurance Company members by the Hospital during the particular year as evidenced by XYZ Insurance Company processed claim data and/or Rate Exhibits. In the event of termination of this Agreement any indebtedness of Hospital to XYZ Insurance Company may be offset and/or recouped via reductions to or elimination of UPP payments during the month prior to the effective date of termination. In addition, XYZ Insurance Company has the right to offset 100% of any claims liability due the Hospital beginning on the effective date of the termination until XYZ Insurance Company has been paid in full, regardless of whether Covered Services were rendered prior to or subsequent to the date of termination.

XYZ Insurance Company will periodically reconcile for each year during the term of this Agreement the payments made by XYZ Insurance Company to Hospital, and the weekly adjustments to UPP.

Editor’s Note:  Many hospitals are dependent upon the cash flow advantages of this and similar hospital contracts. With up-front health care financing, reconciliation strategies employed may very well reward the insurance company with higher fees than are normally  paid to competing payers. However, consumers will never be able to learn the truth because, as is the case with all the various hospital contracts we have  been able to review, invaribly there is the famous paragraph that reads something like this: The hospital certifies that unless otherwise required by law, the specific compensation rates and discounts under this Agreement have not been, and will not be, disclosed by Hospital, its employees, agents or independent contractor, to any third parties including Hospitals or competitors of XYZ Insurance Company.

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