Name Your Own Price…for a Hospital Stay?

By a News Reporter-Staff News Editor at Managed Care Weekly Digest -- and Medicare may well be the hospital's largest customer (see also Lykes Insurance).

That's where Referenced Based Pricing comes in, according to Pariseau. Here's how it works. A self-funded employer replaces its managed care network, hires an RBP claim administrator and amends its plan document to limit spending on hospital charges to a reasonable amount, such as Medicare plus 20 percent. The RBP administrator has no "in network" or "out of network" hospitals, but it does include a traditional network for physicians and prescriptions, as RBP doesn't work as well in those areas.

After a hospitalization, the employee gets a hospital bill, for example $100,000; and the RBP administrator pays the hospital the Medicare rate plus 20 percent, say $25,000. The hospital then "balance bills" the employee for the $75,000 difference. Now it gets interesting. The key to the success of the RBP strategy is that the administrator then steps in on behalf of the employee.

The administrator's legal team explains to the hospital that the plan is limited to paying Medicare plus 20 percent, and since the hospital accepts Medicare charges every day, adding another 20 percent should be more than reasonable.

The conversation might go something like this: "But the patient signed pre-admission paperwork taking responsibility for the hospital charges," says the hospital. The RBP administrator replies, "Were the actual charges listed on that paper work? How can patients consent to prices they will never see until after discharge?"

In the end, knowing that the courts recognize a reasonable payment from an unreasonable charge, the hospital settles.

"RBP is not for the faint of heart," says Pariseau. "These settlements can take weeks and hospitals can play hardball with collection agencies, but good RBP administrators know how to protect employees. Eventually, though, the hospital accepts payment. Is it worth it? With the average premium for a family of four approaching 50 percent of median U.S. income, and no end in sight, it just may be."

Keywords for this news article include: Hospital, Medicare, Health Policy, Lykes Insurance.

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