How Hospital Reimbursement Does and Does Not Work

Monday, March 9, 2015

Source: MD&DI

For the last ten years, I have been in the unique position of helping national health plans such as United HealthCare and Blue Cross/Blue Shield negotiate hospital contracts. At the same time, I have been active in coaching medical device sales people in the field. My expertise in these two areas comes from a sales and sales management career at American Hospital Supply/Baxter Healthcare and negotiation consulting experience based on principles outlined in my 2009 book “You’re Killing Me Here!” When Win-Win Negotiation Doesn’t Work.

In my fieldwork, the most common objection used by hospital economic decision makers to avoid committing to the purchase of new capital equipment or diagnostic tests is, “We can’t add your product because our inpatient reimbursement is based on a fixed diagnosis-related group (DRG) payment.” With a few exceptions, this statement is patently false.

First of all, the only inpatient cases that are reimbursed on a DRG basis are pure Medicare patients, which are becoming more rare as Medicare pushes its members to join Medicare Advantage plans. Medicare is trying to reduce administrative costs by shifting this burden to the Blues, United HealthCare, and other commercial health plans. Knowing that commercial insurers have deeper pockets than the government, hospitals are negotiating higher reimbursement rates as a means of “cost-shifting” from less-profitable government programs.

View All News »

How Hospital Reimbursement Does and Does Not Work

Sunday, March 1, 2015

Source: MD&DI

For the last ten years, I have been in the unique position of helping national health plans such as United HealthCare and Blue Cross/Blue Shield negotiate hospital contracts. At the same time, I have been active in coaching medical device sales people in the field. My expertise in these two areas comes from a sales and sales management career at American Hospital Supply/Baxter Healthcare and negotiation consulting experience based on principles outlined in my 2009 book “You’re Killing Me Here!” When Win-Win Negotiation Doesn’t Work.

In my fieldwork, the most common objection used by hospital economic decision makers to avoid committing to the purchase of new capital equipment or diagnostic tests is, “We can’t add your product because our inpatient reimbursement is based on a fixed diagnosis-related group (DRG) payment.” With a few exceptions, this statement is patently false.

First of all, the only inpatient cases that are reimbursed on a DRG basis are pure Medicare patients, which are becoming more rare as Medicare pushes its members to join Medicare Advantage plans. Medicare is trying to reduce administrative costs by shifting this burden to the Blues, United HealthCare, and other commercial health plans. Knowing that commercial insurers have deeper pockets than the government, hospitals are negotiating higher reimbursement rates as a means of “cost-shifting” from less-profitable government programs.

View All News »