Since insurance rates are different than pay out-of-pocket rates who is setting the price for medical procedures?
In: Economics
Essentially, the insurance companies.
If you take insurance — and it’s very hard not to, in the US — then the insurance companies have the right to investigate your accounts to be sure you’re not charging cash-pay patients less than insurance companies pay.
Note, that’s not *less than billed to insurance*, that’s *less than the allowable amount under the contract with the insurance company*. This is the amount the doctor actually gets paid total: patient out-of pocket amounts (copay, co-insurance, or unmet deductible OOP) plus the amount (if any) that the insurance company pays.
If the insurance company finds you are regularly charging cash-pay patients less than that, then they get to declare that that is your “usual and customary” rates based on the evidence, and under contract they get to pay you less than that going forward. They need to be able to promise their customers that they get a better deal at the doctor, after all!
Even more painfully, they also may “claw back” a part of the payments they’ve already made to you over the last x months — or years — to match that rate you were fraudulently giving other patients. And then throw you off their insurance panel entirely, and there go a big chunk of your patients.
This also counts if you write off too many uncollected/uncollectable/unfair bills, don’t collect copays, etc.
So any medical practice is very careful to charge cashpay patients more than insurance, and *enough* more to not invite insurance audits. “You set your own prices” so it’s not collusion… but everyone knows what the driving force is.
A rule of thumb I’ve been given is to charge 1.3x the Medicare allowable (remember, the allowable is “what the doctor actually gets paid total for doing the procedure after all the discounts and policies and fuss”).
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