Hear me out on this one.
For decades, we’ve all been exposed and educated to the benefits of PPO Networks. Comparing big discounts between insurance companies and network access has always been the norm – even though we really don’t know what the contractual discounts are. Nonetheless, this has always been the standard when shopping for a better deal between insurance companies. Who has the best discounts and least disruption? After all, this is what brokers and consultants have always done to earn their pay.
Here is why PPOs don’t work anymore. While most insurance companies purport big discounts, the problem is that the discounts are rendered significantly diluted and almost meaningless when hospitals (which account for 60-65% of the total medical claim dollars) continue to increase their prices at unprecedented rates. They are not subject to any rules, regulations, or laws as to what their prices can be They can charge whatever they want.
- When prices go up by 10-20% per year, and PPO discounts stay the same – we all pay more.
Understand this, your insurance costs will never go down if you use a PPO. Your utilization my take a dip, but the costs will continue to go up. If you think they will ever go down, then you don’t understand the problem. It’s like going to a Department Store where they jack-up their prices prior to offering a “big” sale.
A recent Colorado Supreme Court ruling this past May is changing this – even across the Country. The ruling is leading the way to alternative payment methods to providers – either Reference Based Pricing (RBP) or Cash Payments and can avoid the contractual PPO “discount off of what”. RBP uses a medicare Plus or Cost Plus methodology and Cash Payments can provide 60-70% discounts to providers and are even supported by HHS and the Office of Civil Rights. Providers who get their cash in advance of a procedure are eager to negotiate.
If you’re content with a business strategy to accept rate increases year after year – which probably is more than your revenue increases – then you belong with a PPO. On the other hand, if you want to do something about this enormous expense and all the benefits that can be achieved through savings, then you should explore what works best for your organization.
