To say there are a lot of shenanigans going on in the Healthcare industry would be an understatement. And one of the most unfortunate tricks being played is “the game” of network discounts.
Like any good business, every doctor and hospital know how much they must make on a service or procedure in order to provide the necessary cash flow to operate and grow.
Unfortunately, their ability to operate like any regular business is complicated by health insurance companies and their incessant drive to promote their network discounts.
For instance, we had a member who fractured his hip and needed in-patient care. The hospital’s initial charge was $54,243 for his semi-private room. The bill was processed by the insurance company, and they applied a 49.5% discount, meaning the allowed amount was $24,924.51.
The insurance company will definitely promote to the employer community the incredible discount they were able to negotiate with this particular hospital. They would suggest the employer would be crazy not to have their insurance with the company. All the messaging suggests the employer is going to save “a boat load of money” because of the huge discount the insurance company can get on all their claims.
The unfortunate aspect of this game of “smoke and mirrors” is that discounts mean absolutely nothing. As we always ask employers, “Forty-nine and a half percent of what?”
To put this into perspective, what would you say if a network said they negotiated a 65% discount with a particular hospital? When the average discount for hospitals is in the 40% range, you’d think this was amazing, and you might even be tempted to change your insurance to this company. Just imagine the money you’d save with discounts this high!
Again, you have to ask this critical question – “Sixty-five percent of what?”
The member had shoulder replacement surgery, which according to The Healthcare Bluebook should have a net cost of around $44,035. The Billed Charges from a very well-known hospital were $133,224.00, and with a 65% network discount the net cost was … you guessed it - $46,580. Just what it should be.
As I’ve already noted, decision makers at the hospital know exactly what they need to make in order have the cash flow needed to operate. They are willing to let the insurance companies and networks “play the discount game.” If insurance companies and network wanted to promote a 70% or even a 75% discount, the hospital would simply increase their billed charges, so they would net out at $45,000 after whatever goofy discount was being applied.
So, let the buyer beware!
Don’t fall for the “We have the best discounts of any of the other insurance companies!”
At the end of the day, the doctors and hospitals are going to get the money they need.
We desperately need transparency, but as long as insurance companies and networks are involved in in this aspect of controlling costs, we won’t see it anytime soon.
It’s going to require a lot of education and the necessary tools to help you and your members make decisions based on facts, such as the “true cost” as well as the quality scores of a doctor or hospital. There is absolutely nothing better than an empowered consumer!
We have a lot of work to do “to turn this ship around,” but it can be done!
In my next blog post, I’d like to address the fastest growing component of healthcare spend, and that is Specialty medications.
At MAGIC, it is our passion to help show you how to take back control of this out-of-control cost, so, that you can keep your hard-earned revenue, so you can grow your business, improve your bottom line, and offer awesome benefits to your incredible employees!
Give us a call at (844) 800-MAGIC for a free consultation and learn how we always do “MAGIC” and sometimes even miracles – all without “smoke and mirrors!” 😊
Click Here for Part 1 of Why Is Health Insurance So Expensive