Exposing Markups Key to Reducing Costs, Consultant Says

Bypassing third party payers isn't the answer to the conundrum of reducing healthcare costs,
management consultant Abhay Padgaonkar of Innovative Solutions Consulting wrote in a recent blog entry.

Patients would face astronomical markups for healthcare services without the bargaining clout of third party payers such as Medicare and private insurers, contrary to what Jeffrey Singer, MD, has suggested in an opinion piece in The Wall Street Journal, Mr. Padgaonkar wrote. Dr. Singer detailed the case of a patient who paid $17,000 less for a surgical procedure by negotiating the price with providers directly rather than relying on his insurance.

The real issue is the fact that the procedure got marked up from its true price of $3,000 to $23,000 for this particular patient. Mr. Padgaonkar wrote the patient's insurance policy lacking provider-network requirements and preferred-hospital requirements probably influenced the markup. Therefore, this example shows the need for powerful third-party payers, since without them patients are susceptible to these "absurd" markups, according to the blog entry.

Furthermore, Mr. Padgaonkar wrote not all patients are informed enough to analyze and negotiate their healthcare expenses. In the case in question, Dr. Singer helped the patient bargain for a better price.

Hospitals and providers should accept what Medicare pays as the "standard price" — rather than making marked-up prices the norm. Doing so would be a better way to contain costs and reduce the role of third-party payers than encouraging patients to directly take on the task of cost negotiation, Mr. Padagaonkar concluded.

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