The Problem with Contracted Provider Discounts

In a traditional insurance provider network, the network negotiates rates with providers on behalf of their members so that the insurer, employer and patient pay less for each visit or procedure. Often, these negotiated rates are contracted in terms of discounts—Provider A offers all members of XYZ Network 40% off of fees for care from that provider.

Sounds great, right?

When it comes to contracted provider discounts, the numbers can be misleading. When you take a closer look at that 40% network discount, it may be the largest discount available but not the lowest cost.

A False Sense of Savings

Although a 40% discount seems like a great deal, the contract usually doesn’t specify what the original cost of a visit or procedure is. Sometimes 40% off of one provider’s fee is still a higher price than 20% off of another provider’s fee for the exact same service. 

Additionally, a provider could bump up the price of its services or tack on additional costs without violating the contract. Because they’re still able to claim a 40% discount, it still feels like a win for payers.

Inaccurate Network Comparisons

That percentage can also be misleading when comparing the overall discount across networks. This problem is threefold:

1. Networks can calculate savings rates differently
2. A network can have a higher average discount if it uses more high cost/high discount providers
3. Some networks exclude high value/low discount providers

Let’s break this down by comparing three peer facilities:

In this sample comparison, comparing just based on the biggest discount wouldn’t give you an accurate picture of the lowest cost option.

No Transparency or Predictability

It’s notoriously difficult for consumers to “shop around” when it comes to healthcare costs. Because the discount doesn’t tell you the actual price, there is no transparency or predictability of the true costs until the bill is received.

No Inflation Protection

Beware of a contracted discount that offers no inflation protection for the employer or consumer. A provider is well within its rights to increase prices year over year, regardless of the discount. A contracted discount should cap the amount a provider can raise their rates.

The Better Cost Savings Approach

The more effective way to control costs is for networks to negotiate lower fixed costs for each visit or procedure a provider offers. This is the only way to provide true savings for employers and consumers, as well as accurate comparisons, transparency and inflation protection.

HPS wants to change the narrative in healthcare today, to deliver savings and simplicity to employers and consumers. We offer the most comprehensive, independent provider network in Eastern Wisconsin as well as our exceptionally simple one-statement billing experience for patients.

Here are a few ways we’re helping employers and consumers take control of their healthcare:

• 70% of our total claim dollars are via a negotiated fixed fee
• 97% of all our provider contracts have inflation protection built in
• Plus, we are partnered with high-quality, affordable, providers to offer bundled payments for common procedures like lumbar fusions and knee replacements, saving employers and patients thousands of dollars and delivering predictability and peace of mind.

Want to learn more about the HPS Network? Contact our Client Engagement Team anytime at client@hps.md.