Hospital Pricing: Is the Price Always Right?

Healthcare pricing is a complicated minefield.

A recent RACmonitor article written by Govind Goyal described enforcement of the price transparency rule. At the Chicago-Kansas City HCCA Regional Conference, Linda Wawzenski, the Deputy Chief of the Civil Division in the Chicago U.S. Attorney’s Office, spent a significant portion of her talk discussing pricing-related issues. 

I’ve never heard a U.S. Attorney spend any time talking about healthcare pricing, so I interpret this as indicating enforcement of the No Surprises Act, price transparency requirements, and other regulatory and common law issues related to healthcare pricing is about to increase. While the term fraud is used far too liberally when discussing healthcare issues, I think that healthcare pricing may be the area where that term can be legitimately used somewhat regularly. 

Much of the problem is that determining the actual charge for most healthcare services is incredibly difficult. The figure that appears on a healthcare bill is often dramatically different from the amount anyone will actually pay for the service. 

That’s a problem.

When you send a patient a charge for $500, but the patient has insurance and that insurance is contracted to pay $350 for the services, and you’re going to accept that $350 as payment in full, what was your charge for the service? Many people would say that the charge was $500 because that was the amount on the bill. But if you know you will take the $350 payment and call it a day, there is a pretty strong argument that your actual charge is $350. The NSA requires providers to give good faith estimates to patients who will not be using insurance to pay for a claim when they’re scheduling a service more than three days in advance. What price will you quote a patient in a situation where your billed charge is $500 but nearly every patient gets the service for 75 percent or less of that sum? This is not a hypothetical question. These are the sort of issues that arises every day in healthcare. If you are quoting them $350, why should an indemnity insurer be expected to pay more?

More than 20 years ago, a congressional committee investigated why uninsured patients often paid more than any other patient for a hospital service. To address that, some organizations offer cash discounts. Others will give uninsured patients a discount equal to the average discount given to insurers. Each solution comes with drawbacks. I encourage you to carefully reconsider all your pricing strategies and figure out whether they comply with various laws. 

For example, it may be appealing to give a 10 percent discount to a patient who pays on the day of service. But it’s important to understand someone can characterize that as charging 10 percent interest for payment a day after the initial service. That sort of interest rate will violate state usury laws in most locations. It isn’t crazy to take that risk, but you need to understand it. 

It’s common to rationalize certain prompt payments as meriting a discount because you don’t need to generate a bill to the patient. But many insurers include a provision in their contracts prohibiting you from charging the insurer for generating a bill. You need to make sure that the discount doesn’t result in you inadvertently violating some of your payer contracts. 

The bottom line is that healthcare pricing is a complicated minefield, and many organizations haven’t carefully considered how discounts offered to one group may allow a different group to argue you’re committing healthcare fraud. This is a good time to take a step back and carefully review all your pricing policies to minimize the risk that you wind up being the subject of an investigative report, or worse yet, a government investigation.

Programming note: Listen to healthcare attorney David Glaser’s “Risky Business” report every Monday on Monitor Mondays, 10 Eastern.