HPS Employer Blog

The Problem with Contracted Provider Discounts

The Problem with Contracted Provider Discounts

As you know, a provider network’s job is to negotiate rates with providers throughout the network, so that you and your employees pay less for each visit or procedure. Often, these negotiated rates are contracted in terms of discounts—ABC Provider will give all members of XYZ network 40% off of fees for care from that provider.


Wisconsin, we have a (few) problems


A false sense of savings

40% may sound like a great deal, but the contract doesn’t usually specify what the original cost of a visit or procedure is—and sometimes 40% off of one provider’s fee is still a higher price than 20% off of a different provider’s fee for the exact same service. Also, a provider could bump up the price of its services or tack on additional costs without violating the contract. But when you look at the bill, you’ll still see the 40% off and it will feel like money saved.


Inaccurate comparisons

Another problem arises when you try to compare networks are based on overall network discount. This problem is three-fold:

  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

Average billed charge comparison for major joint replacement

Facility Name

Average Charge

Discount     

Total Allowed Amount

Peer Facility #1

$53,982.00

33.0%

$36,167.94

Peer Facility #2

$65,854.00

40.0%

$39,512.40

Peer Facility #3

$27,500.00

0.0%

$27,500.00

In this sample comparison, comparing just based on 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 you and your employees. 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 + NOVO

HPS wants to change the narrative in healthcare today, to deliver savings and simplicity to employers and consumers. (Not familiar with HPS? 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 NOVO Health 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 HPS’ network, billing experience or partnership with NOVO? Contact our Client Engagement Team anytime at client@hps.md.