Healthcare Hullabaloo: Bizarro #2

While composing my points on Bizarro #2, I recalled a story told to me by my friend Scottie, and how he was able to eat dinner with his family one special night.
Scottie is one of the nicest people you could ever meet, He lives with his wife and children out on Long Island, and he works in lower Manhattan on Wall Street. Scottie commutes on the Long Island Railroad, which connects to the New York City Subway. This is an easy commute, and it allows Scottie to get home at a decent hour and have dinner with his wife and kids.

This commuting arrangement worked well for Scottie, until one Tuesday morning, when he realized that he might not be able to have dinner at home that evening.
You see, that Tuesday morning, a few blocks away from where Scottie worked, two airliners crashed into the World Trade Center.

September 11, 2001 was not a day to be in Manhattan, especially not in the downtown area. Chaos was the norm that day, as you might imagine. All public transportation has shut down. Hundreds and hundreds of thousands of New Yorkers had to walk home that day, many wearing business suits and uncomfortable dress shoes.

Not Scottie.

Scottie found someone with a car, a stranger no less, and that stranger drove Scottie back to Long Island, where he was back in plenty of time to eat dinner as usual, with his family.

How did Scottie accomplish this? How did he persuade this stranger to drive him all the way back to Long Island?

Actually, this was quite easy.

Scottie simply traded with the stranger, exchanging the car ride for miniature monochromatic portraits of dead patriots. In fact, Scottie gave this stranger a matched set of 5 portraits that looked just like this:

The moral of this story is simple: Cash is King.

On 9/11/2001, hundreds of thousands of New Yorkers had to walk all the way home. Their Visa Debit Cards, their Mastercards, and their insurance cards were useless to them on that awful day.

Literally, on 9/11/2001, Cash talked and everybody else walked.

Which brings me, in a Paul Harvey kind of way, to the rest of the story…

Bizarro #2 – The King is Dead

In the world of health care, Cash is dead. Well, maybe not 100% dead, but it certainly is not doing very well. In the world of health care, if you are paying cash, you are heavily penalized for doing so. And it is in no way a small penalty – in some instances, cash patients can pay almost twice as much as those who pay through their insurance companies.

This is so important to the whole health care problem, so pivotal, and so bizarre, let us not glance this over. In fact, I’ll repeat myself. So here, in parentheses, capital letters, quotated, read the following words:

(“CASH PATIENTS CAN PAY ALMOST TWICE AS MUCH AS THOSE WHO PAY THROUGH THEIR INSURANCE COMPANIES”)

(Thanks, Arlo)

It’s like this – medical offices sign contracts with insurance companies so that they can be “in network”. Part of these contracts stipulate that the office agrees to lower rates for services billed to the carrier. But the contracts also stipulate that the office cannot offer discounted rates to other non-contracted (non-insurance company) entities. If the office violates this agreement, they face severe penalties, financial and other.

The modern medical office is the only place on the face of the planet where paying in cash causes you a distinct major, disadvantage.

Bizarre. Heck, even Exxon gives you a discount for paying cash.

Think about the logistics of it all. Consider an office procedure that costs $500.00. An insurance company might have negotiated a rate of $260.00 for that procedure, and that’s what they (and their members) pay for it. For that $260.00, the office needs to employ people to take down the patient’s insurance information, fill out forms, and submit the claim to the carrier. Often they pay a third party company (or clearing house) to process the claim electronically. Often the carrier will reject a claim, and the office will need to figure out why the claim was rejected, fix it, and then resubmit it. Carriers often ‘misplace claims, so offices need to be diligent and track open claims and then follow up on ones that the carrier ‘lost’. All of this effort takes manpower – manpower that has to get paid a salary, and needs a place to work.

With a lot of effort, and a little luck, the office will collect their $260.00 4 to 6 weeks after the services were rendered.

Contrast this with someone paying for the same visit out of pocket. At the end of the visit, they’re handing the office a credit card or a check that the office can deposit that day – no further collection efforts are needed. As much time as this saves the office, the office will collect the full $500.00 fee from them – no exceptions. Because of the possible repercussions of accepting a discounted fee, the office most likely won’t even discuss the possibility with you (after all, you could be a ‘plant’ from an insurance company who is trying the catch them giving a discount).

Even if Scottie walked in and offered to pay in greenbacks, they still couldn’t offer him a discount. He could explain to them that they could even just put the bills in their pocket, and not tell the IRS, the doctor’s ex-wife, or anyone else about the cash, but his plea would fall on deaf ears – if you are a cash patient, there is no soup (or discount) for you.

Lots of astute business people offer discounts – often substantial ones – when you pay in cash. Only in the world of health care are you penalized for it.

Bizarro.

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