The healthcare industry has previously been reluctant to share prices (charges). This reluctance was a result of huge variation in insurance plans as well as lack of understanding of what charges truly mean. The Affordable Care Act (ACA) and most recently the Centers for Medicare and Medicaid Services (CMS) added guidelines to encourage hospitals to engage in consumer friendly communications of their charges to help patients understand what their potential financial liability might be for services and to enable patients to compare prices across hospitals. CMS has just taken this one more step forward requiring all hospitals to post information about their standard charges by January 1. While BCHC agrees with the goal of price transparency, we are very concerned about the misinformation that posting our charges will create. However, to comply with the law, our hospital will post our complete charge-master to our website, updated on an annual basis. The goal of price transparency is to allow the consumer to make a choice not only based on clinical criteria but also financial criteria. While posting our charge-master may seem like a good first step, the consumer must also understand what charges mean. To help a patient understand their financial liability, we need to understand the difference between charges, insurance payments, and patient out of pocket responsibility.
- Price/Charge is defined as the retail dollar amount set by the hospital for a particular service or supply needed for the medical treatment.
- Insurance payment is what the hospital actually receives from Wellmark, Medicare etc. Each insurance company negotiates with healthcare providers and never pay full charges. These discounts are known as network savings.
- Patient out of pocket responsibility – The amount predetermined by a patient’s insurance plan that the patient will owe to the hospital after receiving the insurance company’s contractual discount and payment. Some of the key terms to understand related to patient out of pocket responsibility are:
- Deductible – The amount you pay for services before health insurance begins.
- Co-insurance – The patient’s share of the costs of health care services after you have paid your plan’s deductible
- Out-of-pocket maximum – The maximum total amount a patient will pay for deductibles, co-insurance, and co-payments for the fiscal year.
The most important takeaway here is that while charges may seem high, they do not reflect actual reimbursements that hospitals receive. The following is an example of the transactional process through the healthcare industry. Example: A typical patient having cataract surgery with insurance may get charged $5,300 for the procedure. When the charge is submitted through insurance, the hospital receives the discounted amount after Network Savings are applied. In our example, we’ll assume the Network Savings are 40%, but understand that these rates can vary widely. Depending on the patient’s insurance, they may be required to pay all of the balance less network savings if their deductible has not been met or if their deductible has been met, they may pay a co-insurance. For our example, we will assume the following background information:
- Patient has a $1,500 deductible, a 20% co-insurance, and a $5,000 out-of-pocket maximum.
- Patient has paid $1,000 of the $1,500 deductible due to previous services the patient received leaving a $500 balance.
- Patient has paid $1,250 of their $5,000 out of pocket maximum.
The $5,300 charge claim would be handled the following way:
- Hospital would write off $2,120 of the charge (the Network Savings) leaving expected payment of $3,180.
- Patient pays the first $500 of the bill due to the remaining $500 deductible
- After the deductible is met, the patient would pay their co-insurance of 20% for the services rendered less the deductibles per the following formula:
- $3,180 due payment minus $500 (deductible) = $2,680 left to be paid. 20% Co-Insurance of $2,680 = $536. Total between the deductible and co-insurance the patient responsibility for this service is $1,036.
- The remaining balance of $2,144 ($3,180 minus $1,036) is paid by the patient’s insurance company.
- Patient’s current balance of their out-of-pocket maximum is now $2,286 of $5,000.
As you can see from the example above, the process is complex. To make it even more complex, every patient has different insurance plans with different deductibles, co-insurance, out-of-pocket maximums, and co-pays. To understand the true picture of your individual plan and patient responsibility, please call our patient financial services department (319-332-0999) and request a patient responsibility estimate free of charge. Our patient financial services department will review your insurance information, estimate the charges for services and then provide an estimate of what your responsibility will be. At that time, they can look at payment options along with reviewing other services our hospital offers. Our goals is to not only provide the highest level of care for you, but to put your mind at ease with understanding the financial impact this may have on you.
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