Monday, August 14, 2017

Why hospitals overbill for services

I always assumed that medical providers over-bill for services because they want to get the maximum insurance reimbursement, and it is too hard to keep track of insurance payment schedules. That's what they have told me, anyway.

This comment says that there are other reasons:
Marking down hospital bills is known as “claims repricing”. It exists because gigantic unpaid bills are profitable to several groups in unexpected ways. Here’s a doctor (who owns a hospital) explaining it.

Basically, when a bill of $558 is marked down to $89 (-$469):

– Hospitals claim a $469 “accounting loss” to maintain their fiction of being a non-profit tax-exempt org (while paying directors multi-million$ salaries).

– Hospitals get a partial rebate on “losses” from Washington via Medicare/Medicaid payments (the bigger the loss, the more they profit!).

– Insurers back-charge large policy holders 35% of the $469 “savings” they “negotiate” (much more profitable than just charging a % on top of what they pay out, which most people presume how insurers work).

– Lawyers seek hospitals with the biggest sticker prices when suing for damages, because the amount awarded is independent of what their client ends up paying.

Wow, I did not know this. If this is right, then you are doing the provider a favor when you refuse to pay an inflated bill.

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