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    The fallacy of claims data and the negotiated rate

    Editor's Note: Welcome to Medical Economics' blog section which features contributions from members of the medical community. These blogs are an opportunity for bloggers to engage with readers about a topic that is top of mind, whether it is practice management, experiences with patients, the industry, medicine in general, or healthcare reform. The series continues with this blog by Jonathan Kaplan, MD, MPH, a board-certified plasic surgeon based in San Francisco, California. The views expressed in these blogs are those of their respective contributors and do not represent the views of Medical Economics or UBM Medica.


    The stated goal of many price transparency companies is to use claims data to better predict the consumer's negotiated rate. Let's first explain what those two terms mean and then explain why that goal is misguided.


    MORE FROM DR. KAPLAN: Bundled pricing is the only true transparency in healthcare


    The difficulty in providing good price transparency data to consumers prior to receiving a service or procedure is due to complex variations in healthcare policies. Each consumer's health insurance varies with the individual or employer's policy.

    The out-of-pocket maximum or deductible varies among policies, as does specialist copays or drug copays. And, for that reason, it's not always clear how much an individual will pay out of pocket for any given procedure. It depends on the negotiated rate between the provider or provider's representative (read: whomever "owns" the provider or facility and negotiates on their behalf) and the insurance company.

    But here's the thing. The negotiated rate isn't even that good of a rate for the consumer. And it's certainly not an adequate amount of money for the provider to then quibble over and appeal to the insurance company to get reimbursed. That's right, the negotiated rate agreed upon by the provider and insurance company—the insurance company tries not to pay it!


    BLOG: This is why listing healthcare prices as a menu is dumb


    From the consumer's perspective, the negotiated rate isn't the lowest rate they could pay for a service. Somewhere along the way, we've been led to believe that the negotiated rate is synonymous with the least expensive rate. A negotiated rate may be less than an out-of-network insurance rate, but it's far from the least expensive rate.

    Next: How are claims data helpful?


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