(Background info: Insurance carriers either:
1)Collect premiums in order to pay claims
or
2)They pay claims with money a “self-funded” client has saved. These companies have elected to not line the pockets of the insurance carriers, but rather pay “premiums” to themselves, this account then accessed by the carriers to pay the claims. These are the self-insured companies I mention from time to time. Self funded companies that have recognized that the large carriers often administer health benefits in their own interest (and their crony hospital pals) rather than that of their client, hire “third party administrators (TPA’s), a move that is much more likely to be mutually beneficial.)
A large national insurance company called this past week to negotiate a rate for a single case. This would not be remarkable were it not for the fact that this company has refused to enter into any sort of contractual agreement with us since we opened in 1997. It was only after the conversation ended that I realized the significance of what had just happened, the import of which I will relay after revealing the conversation, itself.
INS. CO.
“We have a beneficiary needing a tympanoplasty and wondered if you would be able to provide us with a price, you know, a single case rate quote? What you would charge to do the case? We are convinced that if this patient has their procedure at XXXX (very large, local) hospital, it will cost much more than if the procedure is performed at your facility.”
ME
“Do you want the all-inclusive price?”
INS. CO.
“No. Just the facility fee.”
ME
”I think I will give you the facility fee plus the anesthesiology charges since our anesthesiologists are not contracted with you.” $4800.
INS. CO.
”How long is that price good for? The rest of the day? Can I send you a contract and you get it back to me today holding you to that price?”
ME
“Sure.”
After the call ended, I wondered what the CEO of the hospital they named would have thought about this “breaking ranks” conversation. More importantly is the question, why? Why did this insurance company make this call? If you are up to speed on how the repricing scam works, you now know that it is actually in the best interest of the insurance company to seek out the most gigantic bills they can find to maximize their repricing opportunities. This call to our facility makes no sense. Unless the insurance carrier is administering the benefit plan for a self-funded company and that company is on to the scam.
What if someone at this self-insured company had heard about our facility and our pricing and had demanded that their benefit administrator (in this case, the giant insurance company) seek a better price than what they had historically seen from the “not for profit” hospital? What if the employer demanded that their benefit administrator (insurance company) go “out of network” to secure a better price?!!
This is exactly the case and the answer to the “why” question. Can you see that the self-funded client was basically pressuring his vendor (giant insurance company) to act in the self-funded company’s interest (for a change), rather than in the insurance company’s interest? Can you now imagine that the CEO of the self-funded company is wondering why the insurance company has not been working in his interest for all of these years, acting instead in a way that benefits the insurance company and their hospital pals?
I had mixed feelings about making this deal. On the one hand, I can see some long term benefit to having told the insurance company to take a hike, placing them in a position to explain to their client that…well….”Dr. Smith told us to take a hike.” This would have served to demonstrate the lack of value that this particular insurance carrier brings to their client and would have further weakened their relationship with their client. On the other hand, agreeing to a price (probably 1/6th or 1/10th) far less than the client had historically been charged for this procedure probably solidified the impression the client had about our facility and vindicated the decision to pressure the insurance carrier to make this deal.
I decided the latter course damaged the carrier’s credibility more while simultaneously allowing the patient to have their surgery at our facility, more than likely sparing the patient any out of pocket expense. As I have written previously, more and more self-funded clients are paying the entire bill for their employees who chose to have their procedure at our facility, as this decision many times spares their health plan bankruptcy at the hands of those hospitals so aggressively trying to not make a profit. The vast majority of the time this “go out of network”decision is made in spite of the insurance carrier and over their objections. This scam has worked well for the carriers and the hospitals but the phone call relayed above shows cracks in the cabal, cracks which show that the carriers will toss their hospital co-conspirators aside rather than lose their client. Then there is this irony: employers, sold a bill of goods from the big carriers about how necessary their “network” is to keep their costs down, are now demanding that this same “network” be shoved aside in order to keep their costs down!
I predict that as this syndicate comes apart, the members, once pals, will begin to devour each other not unlike what happens in most gangster movies. If the market discipline that rules most other industries is allowed even a window of opportunity in the arena of healthcare, I predict that the resulting competition will bring prices down drastically and quality will soar. As more and more of these cronies break ranks, high quality and affordable health care will soon become a reality, a manifestation of the power of the market not the product of central planners and their failed legislation.
G. Keith Smith, M.D.
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