Perhaps you’ve heard that retailer Linen’s & Things is going out of business and that they are in the process of selling off their inventory. Currenty they are running a massive sale with most items between 15-40% off. According to this story and others, before the store put the items on sale, they raised their prices by putting price stickers on top of the already marked merchandise. Shoppers are reporting seeing an item with a sticker tag of $14.99. Once they peel back the sticker, they see the original price of $12.99. This got me thinking about how many medical providers employ similar tactics even though they are not going out of business.
Before preferred provider organizations (ppo’s) were formed, each medical bill over a certain dollar threshold submitted to insurance was reviewed for accuracy and necessity. PPO’s were formed with the idea that the insurance company could save money by negotiating the prices of services before they were rendered. Today, many ppo contracts are written that reimbursement is a certain percentage (say 30%) off of billed charges. A 30% discount seems like a wonderful savings and the price of heatlhcare should decrease. Actually, the cost of healthcare has skyrocketed to almost $7,500 spent per person a year. By 2017 that figure is expected to almost double. For comarision sake, in 1970, well before ppo’s were formed, yearly per capita spending on healthcare was $356.00. Why has this occurred?
As mentioned earlier, many ppo contracts are written that the insurance company can take a percentage off the amount billed. The amount billed is set by the medical provider. In order to stay in business, many medical providers have had to join ppo networks in order to get new patients. In doing so, they agree to accept the discounts the ppo network takes. To stay profitable, many medical providers have increased they billed amounts. For example, a pediatrician has a rate of $115.00 for an office visit. He joins a ppo network which reimburses at a 30% discount. When the pediatrician sees a patient belonging to this ppo, he receives $80.50; $34.50 less than his normal rate. If the pediatrician were to raise his billing rate to $140.00, he would receive $98.00 which is much closer to his normal rate. The pediatrician will make up much of this loss by seeing an increase in new patients who are enrolled in the ppo network. Much like Linen’s and Things, the pediatrician is raising his fees and having a sale, which is increasing the amount we all pay in healthcare costs.
Posted by medicalbill 
