Negotiating Medical Payment with your Doctor
With insurance premiums rising, more and more people are opting not to purchase insurance or are reducing their benefits and coverage. Patients without insurance believe they are at the mercy of their providers; however, if you believe the prices are set in stone, you are being fooled. The truth is, doctors and facilities make more money from patients that don’t have insurance than they do from the insurance companies - obtaining payment is usually the problem.
If you are uninsured, you should be negotiating payment rates with your doctor. If you don’t think it is appropriate to negotiate, read further, because I am going to explain how your provider gets reimbursed from insurance companies versus you, the cash-pay patient. It’s also important to understand insurance reimbursement if you are going to attempt to negotiate rates.
Insurance companies negotiate rates with every provider of service they refer their clients to-- often referred to as in-network providers or preferred providers. There are several different ways insurance companies base their payment methodologies to different types of providers. I am going to focus, specifically, on physician office visits.
Physician Office Visits
The amount of reimbursement from an insurance company usually depends on two factors:
- Insurance Company Bargaining Power. For example, Blue Cross has a lot of bargaining power because they have so many people covered under their plans. Several Blue Cross plans have the ability to “underpay” services (I use underpay lightly because, the rate is still reasonable in most cases). Because Blue Cross insures so many, its provider base is extremely large, and it is easy for Blue Cross to exclude a provider. Providers would rather not be excluded from Blue Cross, because it is a large portion of patients with insurance.
- Person Negotiating Rates. Each provider has someone that takes care of negotiating contracts, and, depending on that person’s ability to do their job, they can enter into poor, fair, or exceptional contracts for reimbursement. This is a two-way street. The insurance carrier also has someone in charge of negotiating contracts, and, often, some insurance companies over-compensate reimbursement rates.
Types of Reimbursement:
Many insurance companies reimburse physicians based on UCR—usual, customary, and reasonable charges. UCR reimbursement is statistical data an insurance company considers - how much the services cost based upon geographical location and type of doctor you are seeing. For example, a general practitioner in the boonies of Kentucky would receive less payment than an orthopedic surgeon in Los Angeles.
The UCR reimbursement rate will vary by insurance companies. For instance, Blue Cross might negotiate 85%, (called a rate reduction) of the UCR rate, while United Healthcare will negotiate at 100% of the UCR rate.
Another common way insurance companies reimburse doctors is based on the Medicare physician fee schedule and adding an additional percentage. For example, an insurance company will agree to pay Medicare rates plus 20%. Another might agree to pay Medicare rates plus 40%. Some insurance companies just say 140% of Medicare rates. Others will pay straight Medicare rates. Most doctors complain that Medicare rates are too low, but, personally, I believe they are fair; it’s just that Medicare rates do not over-compensate medical services like some other payment methodologies do--this is one of the reasons why premiums are increased so often.
For example, let's say that $114 is the UCR reimbursement at 100% for a visit of medium complexity, usually lasting 15 minutes. If a doctor sees 4 patients in an hour at that rate, he is making $456 an hour. The same level of service* at Medicare rates is approximately $40 and, even though substantially less, the doctor is making $160 an hour if he sees four Medicare patients in an hour.
To ensure that the doctor doesn’t get underpaid by an insurance company--because insurance companies will never pay more than the billed charges--physician fee schedules will reflect the highest reimbursement rate plus a little more, because insurance companies often review their reimbursement rates and apply increases on a yearly basis. Also, contrary to what you might think, a doctor is never limited on how much he is able to charge for a service--only limited to what an insurance company will pay as the negotiated rate.
So, let’s say that your physician’s lowest reimbursement for a specific visit is $45, and the highest reimbursement rate for that doctor’s visit is $130. Let’s say they add 25% so they don’t have to review and adjust their charges on a routine basis. The fee charged is now $162.50. So the cash-pay patient is paying $32 more than the highest reimbursement and $117 more than the lowest reimbursement.
There lies the bargaining power to the patient. As you can see, you shouldn’t feel at all bad about asking for at least a 10% discount on charges if you are paying cash. You can even get really sly with them, and ask if they will accept Medicare plus 30%. This would total $52 for a visit usually reimbursed at $40 by Medicare. (Information on how to obtain Medicare rates at the end of the hub.)
Level of Service:
Now, notice I starred the level of service a few paragraphs above. I wanted to include information I feel is important. There are four to five levels of service codes, or procedure and/or CPT codes, for office visits that the physician has an option to bill for: 99201 thru 99205 for new patients or 99212-99215 for patients who have been seen before--established patients.
As the code gets higher, so does the cost of the visit. The code can be determined by time--from 10 minutes to 60 minutes (new patient) and 10 minutes to 40 minutes (established patient)—or by the nature of the problem and the medical decision making involved from problem-focused and straightforward to comprehensive and complex.
This is something that is important to know, because if you go to see your doctor for 10 or 15 minutes, and he is constantly billing an office visit with a procedure code of 99214 or 99215, he is most likely up-coding your visit. Up-coding is considered to be fraud and/or abuse by insurance companies.
I have discussed simple office visits, meaning you have just seen your physician and have had no procedures performed. If you need an injection, any lab work, a physical exam, etc, there are other charges that will be incurred; however, insurance companies don’t often pay for many of these items separately—they are inclusive or bundled services. Unfortunately, the cash-pay patient usually will pay for all items that have been charged, even those items that an insurance company considers inclusive/bundled.
Below is a list of services that are bundled together by insurance companies and are not paid for separately, but are commonly and, too often, paid by the cash-pay patient. I mention this to further substantiate the need for negotiating rates with your provider:
Office Visits and Procedures Done on the Same Day:
This is the biggie. If you are going to see the doctor because of an accident that requires stitches, the office visit is not payable by the insurance company; only the procedure for stitching you up. Why? Because the physician typically just takes a quick look at your gash and confirms that you need stitches. A different circumstance, but with the same no payment rule for an office visit, would be a planned procedure like a mole removal. You go to see your physician to show him a funny mole, and the doctor says that you need it removed. You pay for that office visit and schedule the removal at a later time. When you go in to get the mole removed—only the procedure should be charged—not an office visit in addition to the procedure.
Supplies and Materials:
This charge would include a surgical tray and all the instruments used for a minor office procedure, including gauze and stitches. Also, ear lavage equipment for removal of impacted cerumen (earwax) would be included in this category. A specimen cup, blood drawing tubes, the strep test kit, and other various supplies would also be included in this category.
Insurance companies do not pay for these materials. It is considered inclusive or bundled with the procedure. And since a doctor’s office doesn't have a list of every supply cost, a good round number is typically assigned to supplies, like $25-$50.
This is exactly what it says, a charge to collect your bodily fluid; urine, blood, mole, and even the spit on the back of your throat during a strep test. Insurance companies do not pay for collection charges; they are inclusive to the test.
Injection for Anesthesia:
Often referred to as a digital block or local infiltration, anesthesia (sometimes the medication can be reimbursed, but it is a small reimbursement) for minor office procedures is considered bundled.
Keep in mind that, like office visits, each insurance company reimbursement rate is different for procedures, so the charges are not only above what the reimbursement rate is, but it also considers those small items that the physician utilizes to perform the service. So not only are cash-pay patients being charged at a higher rate for office visits and procedures, but they are, often, also paying for items that are not paid for separately by insurance companies.
(Some providers do receive reimbursement for the above mentioned services for two reasons: in error, and the money should be returned and it often is not returned; or purposefully--due to some creative way the office has figured out to receive payment for it. This is considered fraud and/or abuse by insurance companies.)
You might think the doctor is getting ripped off by the insurance companies, but all of the above items are taken into consideration when the insurance company determines the rate of reimbursement for procedures—it is considered a package price.
Think of it as ordering food from a restaurant. You are not charged separately for the silverware, the napkin, the cup, the knife the cook used to slice and dice your food—all of that is taken into consideration with the price of your dish. Another good example would be for anything you purchase at a store. You are not paying for the packaging as a separate charge—it is figured in with the cost of the item you buy.
Unfortunately, patients don’t have the luxury of enforcing billing regulations and guidelines and can only hope that the physician’s office applies these same ethical guidelines to cash-patients, though some don’t. But, understanding how insurance reimbursement works should make the cash-pay patient feel a little less ashamed about asking for a discounted rate from their physicians.
Finally, my personal advice would be to approach the physician directly and not the office staff when requesting a discounted rate. First of all, the office staff doesn't normally have the authority to negotiate rates with patients. Second of all, the doctor is there to treat patients, and even though he is concerned with his reimbursement, he is also concerned about the health of his patients, keeping his patients, and obtaining referrals, (especially the cash pays).
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Medicare Reimbursement Rate Link
- CPT Search
Look up Medicare reimbursement on AMA website