Seven Tough Questions

Every Insurer Must Ask

About your Next Hospital Contract

A White Paper for Health Insurance Executives

Seven Tough Questions Every Insurer Must Ask 1

 Contents
Executive Summary 3

Question 1: 4
-WXLMWLSWTMXEPWIXXMRKTVMGIWXSFSSWXTVS½XWSRWIPIGXIHWIVZMGIW#

Question 2: 5
,S[QYGLSJXLMWGSRXVEGX[MPPFITEMHSRFMPPIHGLEVKIWERH
LS[QYGLSR½\IHVEXIW#

Question 3: 6
(SIWXLMWWXSTPSWWGPEYWIGETXYVISRP]XLIXVYISYXPMIVWSV
HSIWMXEPWSIRLERGIXLILSWTMXEP´WVIZIRYIW#

Question 4: 7
-WXLMWLSWTMXEPTVS½XMRKYRVIEWSREFP]JVSQSYXPMIVEHQMWWMSRW
SVEVI]SYVIMQFYVWMRKMXRIEVGSWX#

Question 5: 8
-WXLMWGSRXVEGXGSQTIXMXMZIGSQTEVIHXS1IHMGEVIVEXIW#

Question 6: 9
;LEXQEVKMRWHSIWXLMWGSRXVEGXKMZIXSXLMWLSWTMXEP#

Question 7: 10
%VI]SYEPPS[MRKJSVXLMWLSWTMXEP´WSRKSMRKQEVOYTWMR]SYV
HMWGSYRXVEXIW#

Conclusions 12

© 2009 by Health Plus Technologies Inc.

 %PPVMKLXWVIWIVZIH
www.HealthPlusTechnologies.com

Seven Tough Questions Every Insurer Must Ask 2

 Executive Summary

;LIRELSWTMXEPGSRXVEGXGSQIWEGVSWW]SYVHIWOJSV
ETTVSZEP]SYREXYVEPP]JSGYWSRSRIEPPMQTSVXERXUYIWXMSR
±,S[QYGL[MPPXLMWGSWXYW#²

-X´W]SYVNSFXSEWO %WERMRWYVERGIGSQTER]I\IGYXMZIMX´W]SYVNSFXSEWOXSYKLUYIWXMSRWEFSYX]SYV
RI\XLSWTMXEPGSRXVEGXERHXSQEOIWYVI]SYVTISTPIHSXSS
XSYKLUYIWXMSRW 8LIWIUYIWXMSRWWLSYPHHVMPPHS[RMRXSEVIEWPMOIXLIratio between discounts
SRFMPPIHGLEVKIWERH½\IHGLEVKIW... the real impact of the stop-loss
about your next clauseERHXLIEGXYEPTVS½XQEVKMRWTVSZMHIHF]XLMWGSRXVEGX

hospital contract... %RHXLIRXLIVI´WXLIXSYKLIWXUYIWXMSRSJEPP-WXLILSWTMXEPWIIOMRKXSIRLERGIMXW

VIZIRYIWEX]SYVI\TIRWI#
ERHQEOIWYVI]SYV 1SWXMRWYVIVWEVIR´XEWOMRKXLIWIUYIWXMSRWXSHE]SVEXPIEWXXLI]´VIRSXKIXXMRKXLI
full answers.
TISTPIHSXSS
8LEXQIERW]SYQE]IRHYTSZIVTE]MRKGIVXEMRLSWTMXEPWERHWLIPPMRKSYX
VIMQFYVWIQIRXWXLEXEVIYRVIEWSREFPIYRNYWXM½IHERHYRJEMV
0MOIMXSVRSX]SYVGSYRXIVTEVXWSRXLILSWTMXEPWMHIQE]FIFIXXIVTVITEVIHXS
RIKSXMEXI8LI]QE]LEZIQSVIGSQTPIXIRYQFIVWQSVITS[IVJYPWSJX[EVIERH
aggressive consultants coaching them on how to maximize the revenue cycles from
each contract.
8LI]EVIHI½RMXIP]XEVKIXMRK]SYVGSRXVEGXXSKIRIVEXIQSWXSJXLIMVTVS½X
FIGEYWIXLI]ORS[XLI]GER´XKIXER]QSVIQSRI]JVSQ1IHMGEMH1IHMGEVISVXLI
YRMRWYVIH
8LEX´W[L]]SYS[IMXXS]SYVGSQTER]XSEWOWSQIXSYKLUYIWXMSRWERHKIXWSQI
clear answers.
8LMW[LMXITETIVHIWGVMFIWWIZIRSJXLIWIUYIWXMSRW
 -WXLMWLSWTMXEPWIXXMRKTVMGIWXSFSSWXTVS½XWSRWIPIGXIHWIVZMGIW#
 ,S[QYGLSJXLMWGSRXVEGX[MPPFITEMHSRFMPPIHGLEVKIWERHLS[QYGLSR½\IH
VEXIW#
 (SIWXLMWWXSTPSWWGPEYWIGETXYVISRP]XLIXVYISYXPMIVWSVHSIWMXEPWSIRLERGI
XLILSWTMXEP´WVIZIRYIW#
 -WXLMWLSWTMXEPTVS½XMRKYRVIEWSREFP]JVSQSYXPMIVEHQMWWMSRWSVEVI]SY
VIMQFYVWMRKMXRIEVGSWX#
 -WXLMWGSRXVEGXGSQTIXMXMZIGSQTEVIHXS1IHMGEVIVEXIW#
 ;LEXQEVKMRWHSIWXLMWGSRXVEGXKMZIXSXLMWLSWTMXEP#
 %VI]SYEPPS[MRKJSVXLMWLSWTMXEP´WSRKSMRKQEVOYTWMR]SYVHMWGSYRXVEXIW#

Seven Tough Questions Every Insurer Must Ask 3


Your payouts can
MRGVIEWIHVEQEXMGEPP]
since the biggest
increases fall on the
most costly services.
Seven Tough Questions Every Insurer Must Ask
Tough question #1:
-WXLMWLSWTMXEPWIXXMRKTVMGIWXSFSSWXTVS½XW
on selected services?
(SIWXLIMR¾EXMSRVEXIJSVXLMWGSRXVEGXETTIEVPS[IVXLERMXVIEPP]MW#
-WXLILSWTMXEPVEMWMRKTVMGIWSRWSQIWIPIGXIHWIVZMGIWQYGLQSVI
XLERSRSXLIVW#
Background
8SLIPTGSRXVSPGSWXWQSWXGSRXVEGXWMRGPYHIEGETSRXLIXSXEPMRGVIEWITIVQMXXIH
JSVMR¾EXMSRWYGLEW &YXXLMWTIVGIRXEKIGERFIQERMTYPEXIH
0MOIMXSVRSX]SYVGSYRXIVTEVXWJVSQXLILSWTMXEPQE]FIFIXXIVTVITEVIHXS
RIKSXMEXIXLI½RITVMRXSJXLIGSRXVEGX8LI]PMOIP]LEZIFIXXIV½KYVIWSRGSWXWERH
QEVKMRWEXXLIMV½RKIVXMTW8LI]QE]LEZITS[IVJYPRYQFIVGVYRGLMRKWSJX[EVIXLEX
can compare numerous pricing scenarios.
%RHQER]LSWTMXEPWIZIRLMVIWIEWSRIHGSRWYPXERXWXSLIPTXLIQQE\MQM^IXLI
revenue cycles from each contract.
;MXLEPPXLMWLIPTSRXLIMVWMHIXLILSWTMXEPQE]WIIEGPIEVTEXLXSQSVITVS½X
&SSWXMRKJIIWJSVWIPIGXIHLMKLP]TVS½XEFPIWIVZMGIW
Hospitals seek to gain from selective fee increases in two ways.
*MVWXXLI]WIIOXSLEZImore services “carved out”ERHTEMHEXEHMWGSYRX
JVSQXLILSWTMXEP´WFMPPIHGLEVKIW8LIWIGLEVKIWEVIQYGLPIWWXVERWTEVIRXXLERE
½\IHJII
%RHWIGSRHLSWTMXEPWTVIWWJSVhigher reimbursements for selected
servicesTPERRMRKXSEKKVIWWMZIP]QEVOIXXLIWIWIVZMGIWMRXLIGSQMRKQSRXLW
*SVMRWXERGIF]MRGVIEWMRKGEVHMEGWIVZMGIWF] FYXIZIV]XLMRKIPWISRP] XLI
LSWTMXEPQE]PMQMXXLIEZIVEKIJIIMRGVIEWIMRERI[GSRXVEGXXSXLIWTIGM½IH 
&YXXLILSWTMXEPGERXLIRVSPPSYXEbig advertising campaign extolling the
ZMVXYIWSJMXWGEVHMEGGEVIERHTIVJSVQMRKQER]QSVIGEVHMEGTVSGIHYVIW[MXLMRXLI
term of your next contract.
8LMWGERGEYWI]SYVTE]SYXWXSMRGVIEWIHVEQEXMGEPP]WMRGIXLIFMKKIWXTIVGIRXEKI
increase falls on some of the most costly services.
8LMWWXVEXIK]MWLEVHXSHIXIGXNYWXF]PSSOMRKEXSRIRYQFIVJSVXLISZIVEPPMR¾EXMSR
VEXIEPPS[IHMRXLIGSRXVEGX
4
 Tough question #2:
How much of this contract will be paid on billed
GLEVKIWERHLS[QYGLSR½\IHVEXIW#
8LIGSWXSJER]GPEMQTEMHEXE½\IHVEXIMWQYGLIEWMIVXSTVIHMGX
XLERXLIGSWXSJEGPEMQTEMHEXEHMWGSYRXJVSQXLILSWTMXEP´WFMPPIH
GLEVKIW9RHIVXLMWGSRXVEGX[LEXTSVXMSRSJ]SYVTE]QIRXW[MPPFI
GEPGYPEXIHEXE½\IHVEXI#

Background

The cost of claims The single best metric for controlling your costs is the percentage of total
HSPPEVWTEMHEXE½\IHVEXI to a hospital.
TEMHEXEHMWGSYRX Knowing this number helps protect you against strategic price increases that are
GPIEVP]MRXLILSWTMXEP´WFIWXMRXIVIWXW
JVSQFMPPIHGLEVKIW
%W]SYORS[QSWXGSRXVEGXWWIXE½\IHTVMGI for certain hospital services such
MWLEVHXSTVIHMGX EWHIPMZIV]GEVHMEGGEXLIXIVM^EXMSRERHSFWIVZEXMSRWIVZMGIW=SYVXIEQ[SVOWLEVH
XSTIKXLIWIWIVZMGIWEXE½\IHVEXI8LIWIGSWXWEVIJEMVP]TVIHMGXEFPIWMRGIXLISRP]
ERHMQTSWWMFPIXS ZEVMEFPIMWLS[QER]XMQIWIEGLWIVZMGIMWHIPMZIVIH

control. &YXMRQER]GSRXVEGXWRSXLMRKIPWIMW½\IH7SWIVZMGIWPMOIGLIQSXLIVET]HMEP]WMW
MQTPERXEFPIWERHLMKLGSWXHVYKWEVITEMHat a discount from the hospital’s
charge master.
8LMWMRXVSHYGIWEWIGSRHZEVMEFPIRSXWTIGM½IHMRXLIGSRXVEGX,S[QYGLHSIWXLI
LSWTMXEPGLEVKIJSVIEGLWIVZMGI#
7SXLIGSWXSJGPEMQWTEMHEXEHMWGSYRXJVSQFMPPIHGLEVKIWMWQYGLLEVHIVXS
TVIHMGXERHMQTSWWMFPIJSV]SYXSGSRXVSP
'PIEVP]XLIQSVIWIVZMGIW]SYMRWYVIEXE½\IHTVMGIXLIPIWWVMWOSJ]SYVGSWXW
WTMVEPMRKYT[EVHWERHXLIJI[IVSTXMSRWJSVELSWTMXEPXSIRLERGIMXWVIZIRYIW
simply by increasing charges.

Seven Tough Questions Every Insurer Must Ask 5

 Tough question #3:
Does this stop-loss clause capture only the true
outliers, or does it also enhance the hospital’s
revenues?
The purpose of a stop-loss clause is to protect a hospital from losing
QSRI]SRXLIQSWXWIVMSYWP]MPPTISTPI&YXHSIWXLMWGSRXVEGXEPPS[E
LSWTMXEPXSQSZIQER]QSVITEXMIRXWMRXSXLIWXSTPSWWGEXIKSV]#

Background

-X´WGPIEVP]MRXLI %XEGIVXEMRXLVIWLSPHEREHQMWWMSRFIGSQIWERSYXPMIVKIRIVEPP]TEMHEXEHMWGSYRX
EKEMRWXFMPPIHGLEVKIW8LMWXLVIWLSPHMWKIRIVEPP]EWTIGM½GRYQFIVMRXLIWXSTPSWW
LSWTMXEP´WMRXIVIWX GPEYWIQSWXSJXIREVSYRH
8LIVEXMSREPIJSVXLMWMWGPIEV,SWTMXEPW[ERXXSTVSXIGXXLIQWIPZIWEKEMRWXPSWMRK
to classify as many QSRI]SREJI[TEXMIRXW[LSEVIKVEZIP]MPPERHRIIHEPSXSJWIVZMGIWSZIVEPSRK
stay. Fair enough.
EHQMWWMSRWEW &YX[L]WLSYPHLSWTMXEPWTVS½XSRXLSWIWEQIGEWIWEXXLII\TIRWI
possible SJMRWYVERGIGSQTERMIW#(SR´X]SYHIWIVZIWSQITVSXIGXMSREW[IPP#;L]RSX
RIKSXMEXIXSTVIZIRXXLILSWTMXEPJVSQQSZMRKQER]QSVIEHQMWWMSRWMRXSXLI
as outliers. SYXPMIVGEXIKSV]EX]SYVI\TIRWI#
-JXLILSWTMXEPGSRXMRYSYWP]FYQTWYTMXWGLEVKIQEWXIV°FYXXLIWXSTPSWWXLVIWLSPH
RIZIVQSZIW°SZIVXMQIXLIWIMRGVIEWIW[MPPTYWLQSVIEHQMWWMSRWTEWXXLI
XLVIWLSPHXSFIGSQISYXPMIVW
8LIRXLIKEQIGLERKIWWSXLILSWTMXEPMWTEMHSREHMWGSYRXJVSQFMPPIHGLEVKIW
-X´WGPIEVP]MRXLILSWTMXEP´WMRXIVIWXXSGPEWWMJ]EWQER]EHQMWWMSRWEWTSWWMFPIEW
outliers. %WTVS½XWSRSYXPMIVWQSYRXJSVXLILSWTMXEPPSWWIWQSYRX
for the insurer.
1IHMGEVII\TIGXWXLEXSYXPMIVWQEOIYT SJXSXEPMRTEXMIRXGSWXW&YXXLEX 
MWETTPMIHEGVSWWXLIIRXMVIW]WXIQRSXSRELSWTMXEPF]LSWTMXEPFEWMWEJXIVEPPXLI
[SVWXGEWIWEVIWIPHSQHMWXVMFYXIHIUYEPP]EQSRKLSWTMXEPW
7SERMRWYVIVWLSYPHIZEPYEXISYXPMIVGSWXWXLIWEQI[E]
(SR´XXV]XSPMQMXSYXPMIVWXS SJEHQMWWMSRWXSER]SRILSWTMXEPFYXHSGLIGO
XLITIVGIRXEKIEGVSWWEPPXLILSWTMXEPWMREVIKMSRXSQEOIWYVIMX´WRSX[MPHP]SYXSJ
proportion.

Seven Tough Questions Every Insurer Must Ask 6

 Tough question #4:
-WXLMWLSWTMXEPTVS½XMRKYRVIEWSREFP]JVSQ
outlier admissions, or are you reimbursing it
near cost?
Is the margin a hospital makes on outlier cases through the stop-loss
GPEYWILMKLIVXLERMXWQEVKMRSREPPSXLIVWIVZMGIW#-WXLMWTEVXSJXLI
GSRXVEGXJEMVERHVIEWSREFPI#

Background

If a hospital tries 4VS½XMWRSXEHMVX][SVH&YXWLSYPHLSWTMXEPWFIQEOMRKERI\SVFMXERX

YRVIEWSREFPITVS½XSVENYWXM½IHTVIHMGXEFPITVS½X#
XSMPPIKEPP]±KEQI² %PQSWXIZIV]SRIMRXLILIEPXLGEVIW]WXIQ[SYPHEKVIIXLEXoutlier cases
should be paid at close to costWSXLEXXLIIQTLEWMWJSVXLIWIEHQMWWMSRWMW
1IHMGEVI[SYPHR´X SRWEZMRKPMZIWRSXQEOMRKQSRI]

XLI]HSXLIWEQI &YX1IH4%'VITSVXIHYRYWYEPP]PEVKIMRGVIEWIWMRLSWTMXEPGLEVKIWMRERH
ERHWYWTIGXIHWSQILSWTMXEPWSJ±QERMTYPEXMRK1IHMGEVISYXPMIVTE]QIRXW²-R
XS]SY# 1IHMGEVIYTHEXIHMXWSYXPMIVTSPMG]XSGYVFXLMWTVEGXMGI1
Numerous lawsuitsLEZIFIIRPEYRGLIHXSVIGSZIVMPPIKEPSYXPMIVGPEMQWEKEMRWX
1IHMGEVI
*SVI\EQTPISRIGSRWYPXMRK½VQMR2I[.IVWI]TEMHQMPPMSREJXIVIRGSYVEKMRK
LSWTMXEPWXSMR¾EXIGLEVKIWXSWUYII^IQSVISYXSJ1IHMGEVISYXPMIVTE]QIRXW2
3XLIVWIXXPIQIRXW[MXLMRHMZMHYEPLSWTMXEPWLEZIXSXEPIHQMPPMSRQMPPMSR
QMPPMSRQMPPMSRERHQMPPMSR
8LEX´WQSVIXLERQMPPMSRMRSYXPMIVVIPEXIH½RIWMR alone. 3
,EZI]SYJEPPIRTVI]XSXLIWEQIXEGXMGW#
%JXIVEPPMJELSWTMXEP[MPPXV]XSMPPIKEPP]±KEQI²XLI1IHMGEVIW]WXIQ°TVSFEFP]
XLIQSWXLIEZMP]VIKYPEXIHTEVXSJSYVMRHYWXV]°[SYPHR´XXLI]HSXLIWEQIXSER
MRWYVERGIGSQTER]#
6IQIQFIVF]HI½RMXMSRERSYXPMIVMWEXXLIQSWXGSWXP]IRHSJXLIWTIGXVYQFIMRK
TEMHEXEHMWGSYRXEKEMRWXFMPPIHGLEVKIW
=IXXLIWIGEWIW°[LMGLEVIWYTTSWIHXSFISRP]XLI QSWXI\TIRWMZI
EHQMWWMSRW°VSYXMRIP]KIRIVEXI XS SJXLIXSXEPFMPPMRKWJSVGIVXEMRLSWTMXEPW
in any given year.
Are you protecting yourself against this type of unreasonable overbilling#

±,IEPXLGEVI7TIRHMRKERHXLI1IHMGEVI4VSKVEQ²1IH4%'.YRITEKI
±2.GSRWYPXERG][MPPTE]XSWIXXPISYXPMIVGEWI²1SHIVR,IEPXLGEVI1EVGL
4VIZMSYWMWWYIW1SHIVR,IEPXLGEVIVIXVMIZIH2SZIQFIV

Seven Tough Questions Every Insurer Must Ask 7

 Tough question #5:
Is this contract competitive, compared to
Medicare rates?
1IHMGEVIGSRWXERXP]VIZMI[WMXWTE]QIRXWXSWXE]GYVVIRX[MXLXLI
PEXIWXQIHMGEPTVEGXMGIWERHXSFPSGOYRVIEWSREFPITVMGMRKXEGXMGWF]
LSWTMXEPW,S[HSIWXLMWGSRXVEGXGSQTEVIXSXLIVEXIW1IHMGEVIMW
TE]MRKRS[#

Background

8LIHMJJIVIRGI %W]SYORS[1IHMGEVIMWXLIPEVKIWXWMRKPIFY]IVSJLIEPXLGEVIMRXLIGSYRXV]
VITVIWIRXMRKFMPPMSRSJGPEMQWMR4
between what 8SKIXXLIQSWXJVSQIZIV]XE\TE]IV´WHSPPEVMedicare’s goal is to reimburse
hospitals at cost4VS½XWEVIRSXWYTTSWIHXS¾S[JVSQXLILSWTMXEPWXE]WSJ
1IHMGEVITE]W WIRMSVGMXM^IRWYRHIV1IHMGEVI

ERH[LEX]SYTE]MW
XLILSWTMXEP´WTVS½X
8SQIIXXLMWKSEP1IHMGEVIVIWIEVGLIVWGSRWXERXP]VIZMI[LSWTMXEPJIIWERHQIHMGEP
TVSGIHYVIWMRGPYHMRKXLIPEXIWXEHZERGIWXLEXGERWLSVXIRLSWTMXEPWXE]WERHVIHYGI
costs.
)ZIV]UYEVXIV1IHMGEVIMWWYIWEHNYWXIHJIIWGLIHYPIWXSVI¾IGXMXWPEXIWX½RHMRKW
3ZIVXMQIQER]TE]QIRXWKSHS[RIWTIGMEPP]XLIRI[IVXIGLRSPSKMIWERH
TVSGIHYVIW
'LIGOMRKXLIWI1IHMGEVIJIIWGERTVSZMHI]SY[MXLYWIJYPFIRGLQEVOWJSVX[S
reasons.
*MVWX]SYGERGSRWMHIV1IHMGEVIJIIWan approximation of a hospital’s
costsTVSFEFP]GPSWIVXLER]SYGERKIX[MXL]SYVS[RVIWIEVGL7SXLIHMJJIVIRGI
FIX[IIR[LEX1IHMGEVITE]WJSVEWIVZMGIERH[LEX]SYVIMQFYVWIELSWTMXEPJSV
XLEXWIVZMGIMWVSYKLP]XLEXLSWTMXEP´WTVS½XQEVKMR
7IGSRH1IHMGEVIJIIWVI¾IGXXLIPEXIWXEHZERGIWMRXIGLRSPSK]ERHXVIEXQIRX
TVSXSGSPW[LMGLXLILSWTMXEPQE]RSXXIPP]SYEFSYX
3JGSYVWIMX´WRSXMRXLILSWTMXEP´WMRXIVIWXXSHMWGYWWER]reductionsMR1IHMGEVI
JIIW&YX]SY[MPPPMOIP]LIEVEFSYXER]1IHMGEVIVEXIWXLEXKSYT
*SVI\EQTPIHMH]SYORS[XLEX1IHMGEVIMWTVSNIGXMRKNYWXE GSWXMRGVIEWIJSVMXW
±QEVOIXFEWOIX²SJLSWTMXEPWIVZMGIWMR#5
%WXLIMRWYVIVMX´W]SYVVIWTSRWMFMPMX]XSstay up-to-date on the latest
Medicare research like this.
3XLIV[MWI]SYVMWOSZIVTE]MRK]SYVLSWTMXEPWJSVQER]WIVZMGIW

1IH4%'.YRITEKI
±6ITSVXXSXLI'SRKVIWW1IHMGEVI4E]QIRX4SPMG]²1IH4%'1EVGLTEKI

7IZIR8SYKL5YIWXMSRW)ZIV]-RWYVIV1YWX%WO 
 Tough question #6:
What margins does this contract give to this
hospital?
,S[QYGLQEVKMRMWXLMWLSWTMXEPQEOMRKSR]SYVFYWMRIWW#,S[
HSIWXLEXGSQTEVIXSWMQMPEVLSWTMXEPWMRXLIWEQIQEVOIXERHXSXLI
REXMSREPEZIVEKIW#

Background

-J]SYHSR´XORS[ -J]SYHSR´XORS[how much margin]SY´VIKMZMRKXSELSWTMXEPERHLS[XLEX

GSQTEVIWXSSXLIVLSWTMXEPW]SYHSR´XLEZIQYGLFEWMWJSVRIKSXMEXMSR
how much margin 8LEX´WVEXLIVPMOIXLVS[MRKHEVXWEXEHEVXFSEVHERHLSTMRKXLIRYQFIVWXYVRSYX
okay.
]SY´VIKMZMRKE %RHNYWXPSSOMRKEX]SYVPEWXGSRXVEGX[MXLXLEXLSWTMXEPMWRSXIRSYKLIWTIGMEPP]MJ
LSWTMXEPXLEX´WPMOI ]SYHSR´XORS[[LEXQEVKMR]SYTEMHMRXLITVIZMSYW]IEV
;I´ZIEPVIEH]WIIRLS[1IHMGEVIJIIWGERLIPT]SY^IVSMRSRELSWTMXEP´WTVS½X
XLVS[MRKHEVXWEXE margin.

HEVXFSEVH ;SYPHR´X]SYPMOIXSGSQTEVIXLILSWTMXEPMRUYIWXMSRXSWMQMPEVLSWTMXEPWMRXLI
WEQIQEVOIXTPEGI#
%RHXSXLIREXMSREPEZIVEKIWJSVLSWTMXEPWSJEWMQMPEVWM^IERHREXYVI#
/RS[MRKXLIWIRYQFIVW[SYPHFIEWQEVX[E]XSIZEPYEXIER]GSRXVEGXERHE
XIVVM½GRIKSXMEXMSRXEGXMG to protect you against over-paying.

Seven Tough Questions Every Insurer Must Ask 9

 Tough question #7:
Are you allowing for this hospital’s ongoing
markups in your discount rates?
*SVQSVIXLEREHIGEHIQER]LSWTMXEPWLEZIFIIRFSSWXMRKXLIMV
markups to help maximize their revenues. Does this contract protect
]SYJVSQMRGVIEWMRKQEVOYTWF]XLMWLSWTMXEP#

Background

3ZIVXMQI *MKYVIWJVSQXLI%QIVMGER,SWTMXEP%WWSGMEXMSRWLS[XLEXJVSQXLVSYKL
XLIEGXYEPGSWXWJSVLSWTMXEPWMRGVIEWIHF] E]IEV°]IXXLI]MRGVIEWIHXLIMV
GSRXMRYSYWNYQTW GLEVKIWF]EREZIVEKISJ E]IEV6
%HIGEHI´W[SVXLSJMRGVIEWIWEHHYT
in markup outstrip -RJEGX1IH4%'JSYRHXLEXXLIEZIVEKILSWTMXEPQEVOYT[EW MR7%RH
any reasonable MX´WGIVXEMRP]KVS[RWMRGIXLIR-RSXLIV[SVHWXLIEZIVEKILSWTMXEPMWRS[FMPPMRKEX
QSVIXLERXLVIIXMQIWMXWEGXYEPGSWXWEWWLS[RMR*MKYVI
allowance

JSVMR¾EXMSR  


%JXIVQSVIXLER

  ]IEVWSJQEVOMRKYT
 

GSWXWFI]SRHXLI


 
 MRJPEXMSRVEXILSWTMXEPW
 RS[GLEVKITEXMIRXW
 EPQSWXXLVIIXMQIW
 XLIMVEGXYEPGSWXW

          

Figure 2:,SWTMXEP1EVOYTW&I]SRH'SWXXLVSYKL
7SYVGIW%QIVMGER,SWTMXEP%WWSGMEXMSR%RRYEP7YVZI]SJ,SWTMXEPW1IH4%'

1IH4%'´WGSRGPYWMSRMWXLMW±1SVIVETMHKVS[XLMRGLEVKIWXLERGSWXWQE]VI¾IGX
hospital attempts to maximize revenues from private payers (who often structure
XLIMVTE]QIRXWEWEHMWGSYRXSJJGLEVKIW ²
-JXLILSWTMXEPMWFMPPMRK]SYEXXLVIIXMQIWMXWGSWXW]SYRIIHE HMWGSYRXXSKIX
back to its true costs.
8LIHMJJIVIRGIFIX[IIR ERH]SYVRIKSXMEXIHHMWGSYRXMWXLILSWTMXEP´WTVS½X
margin.
&YXVIQIQFIVIZIRE HMWGSYRXSJJE QEVOYTWXMPPKMZIWXLILSWTMXEPE 
TVS½X%R]PIWWHMWGSYRXPIEZIWXLILSWTMXEPIZIRQSVITVS½X
%WERMRWYVIV]SYVKSSHJEMXLMRSJJIVMRKEJEMVMR¾EXMSRVEXIGERFIYRHIVQMRIHF]
GSRXMRYSYWNYQTWMRXLIQEVOYTWXLEXLSWTMXEPWGLEVKI3ZIVXMQIXLIWIQEVOYTW
GERJEVSYXWXVMTER]VIEWSREFPIEPPS[ERGIJSVMR¾EXMSR
-J]SYEVIR´X[EXGLMRKSYXJSVXLIWIQEVOYTW[LSMW#

1IH4%'.YRITEKI
-FMH

Seven Tough Questions Every Insurer Must Ask 10

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*MRHMRKXLIWI Finding answers tip #1: Monitor Medicare’s market basket

answers will protect 8SERW[IVER]UYIWXMSRWXLEXXSYGLSR1IHMGEVI]SYGERGLIGOXLIGSWXWSJ

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your company in all assign one analyst to monitor MedicareERH[EXGLJSVER]WMKRM½GERX
fee changes that affect this market basket.
future negotiations.
Finding answers tip #2: Do more research in-house
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year’s worth of charges from the hospital.
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Finding answers tip #3: Add automated systems

Or you can bolster your internal resources with automated systems that
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8LIR]SYVI\TIVXWGERWTIRHXLIMVXMQITVSHYGMRKIZMHIRGIERHRIKSXMEXMRK
FIXXIVGSRXVEGXWMRWXIEHSJLYRXMRKJSVHEXEERHWIXXMRKYTWTVIEHWLIIXW
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whole new approach.
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company in all your future contract negotiations with hospitals.

Seven Tough Questions Every Insurer Must Ask 11

 Conclusions

8LMW[LMXITETIVLEWWLS[RWIZIVEPEVIEW[LIVIMRWYVIVWRIIHEdeeper,
more granular analysis of hospital contracts.
Most insurers %RHXLMWEREP]WMWRIIHWXSTIVGSPEXIYTERHHS[RXLVSYKLXLIVEROWSJ]SYV
entire company.
RIIHEQSVI =SYRIIHXSEGGITXXLIJEGXXLEXcertain hospitals deliberately try to
VI½RIHTVSGIWWJSV maximize their revenueYWMRKTVMGMRKXEGXMGWXLEXQSWXMRWYVIVWHSR´X
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reviewing contracts. 8STVSXIGX]SYV½VQJVSQXLIWIXEGXMGW]SYRIIHXSJSWXIVHIITIVEREP]WMW
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reviewing contracts.
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KIRIVEXIYRNYWXM½IHERHYRJEMVVIXYVRWJSVGIVXEMRLSWTMXEPWERHGYXHVEWXMGEPP]
into your company returns.

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contracts.
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sales@healthplustechnologies.com.

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Seven Tough Questions Every Insurer Must Ask 12