The TL;DR Summary is that in the past, insurance providers have negotiated rates with in-network providers. Basically, the $$ they'll pay for a specific procedure or service.
In many cases, those rates were not available to the public, or even to providers.
When I was working to setup a private medical practice a while back, a billing company we worked with gave us the advice, "If you ever get paid 100% of what you bill for a procedure, you need to raise your price for that procedure."
So, as an example, imagine that you were, say, a GP billing to remove a skin tag in your office.
You can look up Medicare's "allowable" for the procedure, which is about $45 (though can be different based on a while host of other factors. The "rule of thumb" for simple provider billing is to add 15% to the Medicare Allowable. So, you'd set your fee schedule at ~$52.
A patient comes in with commercial insurance, and you bill $52, and typically you'd get paid somewhere between $45 and $52 for that procedure. However, if a commercial insurance ever paid the full $52, you know that their actual rate is higher than $52, so you'd be smart to raise your fees to make sure you capture that provider's whole allowable.
So, you maybe raise your rate to $62 - and the next time you have a patient who needs the same procedure and is covered by that provider - you see if they pay the full $62 or a portion of it.
This is basically the "why" behind a good portion of inflated medical billing. Medical providers are required to have a fixed fee schedule and essentially bill every patient the same amount for every procedure, regardless of who that patient is covered by.
Of course, most providers have a "cash" rate for patients who are uninsured as well.
You can see how at the very least, opaque pricing leads to inefficiencies in the system. This is an absolute step in the right direction that I expect insurance companies to fight against tooth and nail.
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[ 2.5 ms ] story [ 9.6 ms ] threadIn many cases, those rates were not available to the public, or even to providers.
When I was working to setup a private medical practice a while back, a billing company we worked with gave us the advice, "If you ever get paid 100% of what you bill for a procedure, you need to raise your price for that procedure."
So, as an example, imagine that you were, say, a GP billing to remove a skin tag in your office.
You can look up Medicare's "allowable" for the procedure, which is about $45 (though can be different based on a while host of other factors. The "rule of thumb" for simple provider billing is to add 15% to the Medicare Allowable. So, you'd set your fee schedule at ~$52.
A patient comes in with commercial insurance, and you bill $52, and typically you'd get paid somewhere between $45 and $52 for that procedure. However, if a commercial insurance ever paid the full $52, you know that their actual rate is higher than $52, so you'd be smart to raise your fees to make sure you capture that provider's whole allowable.
So, you maybe raise your rate to $62 - and the next time you have a patient who needs the same procedure and is covered by that provider - you see if they pay the full $62 or a portion of it.
This is basically the "why" behind a good portion of inflated medical billing. Medical providers are required to have a fixed fee schedule and essentially bill every patient the same amount for every procedure, regardless of who that patient is covered by.
Of course, most providers have a "cash" rate for patients who are uninsured as well.
You can see how at the very least, opaque pricing leads to inefficiencies in the system. This is an absolute step in the right direction that I expect insurance companies to fight against tooth and nail.