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    The fallacy of claims data and the negotiated rate

     

    I know this because hospitals and outpatient facilities have "prompt pay" discounts or cash-pay prices that are often less than the negotiated rates. That's why I argue for bundled pricing in this article here. Bundled rates are often the least expensive rate for the consumer. This facility, a member of the Free Market Medical Association, bundles the pricing for their spine care surgery center. 

     

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    It's beneficial to the doctor and facility to accept a bundled rate as well, because the consumer pays it directly to the provider without the unnecessary insurance middle man. Remember, the consumer with a high deductible health plan, which now make up more than 50% of employer-provided health insurance plans according to the Kaiser Family Foundation, is paying this money out of pocket regardless.

     So it’s better for the patient to pay out a lesser amount toward a discounted bundled pricing package than the out-of-pocket negotiated rate. Whatever the consumer spends, whether it's in network or out, can still apply to their deductible.

     How are claims data helpful?

    So we've pointed out the fallacy that is the negotiated rate. But in an effort to provide price transparency to consumers, companies attempt to determine the negotiated rate based on previous claims paid by insurance companies.

    In other words, they look at the claims' consumers make to insurance companies, how much the insurance company pays and how much is left to the consumer. This information is then made available to the consumer in the form of averages. The averages are based on claims data.

    However, this does not provide actionable information for the consumer. In this example, the consumer can see what many people have paid in the past in various health plans. But it's only a prediction of what they will pay when they need treatment.

     

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    Just as you don't want a prediction of what you'll pay for a house or car, knowing an average healthcare price isn't actionable. Does it provide education? Sure. But when paying thousands of dollars out of pocket before a deductible is met, I'd prefer actionable data over education that leaves me wanting.

    Simply put, we're focusing on the wrong thing here. The negotiated rate isn't the best price. So why bother averaging claims data to leave the consumer paying the more expensive negotiated rate? Stop focusing on approximations and encourage providers to show the discounted bundled prices they already have in place for self-pay patients without insurance.

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