The Treatment With A 1300% Markup
How we helped a K2 client save $13K on an overbilled hospital treatment for a copperhead bite.
It began like any other afternoon... until he felt the sting
It started off just like any other summer weekend afternoon. Matt was helping his friend chop a tree that had fallen over the winter, splitting it into firewood. As Matt reached under some branches, he felt a sharp sting and realized he had been bitten.
It only took a minute to find the snake and it wasn’t what he was expecting - it was a 4½ foot copperhead. They immediately jumped in his friend’s truck and headed for the local rural hospital’s emergency room. Despite feeling dizzy, Matt was fortunate to remain conscious.
Fast forward and thankfully, everything regarding the snake bite turned out to be ok. The real nausea came when he got the bill and nearly fell over in his kitchen: $44,247.75.
The real nausea came when he got the bill and nearly fell over in his kitchen: $44,247.75.
Matt was in his late 30s, and rather fit, but the bill showed that he had been administered five vials of anti-venom. Each vial was listed on the bill for $7,725.
He doesn’t remember receiving more than two vials because he was asking about his treatment every step of the way, but there it was right on the bill: five vials, $7,725 per vile. He spent only one night in the hospital (not ICU), and this was billed at over $2,100. That would be a really nice hotel for one night!
This is a story of how to protect your health plan’s integrity just like you protect your 401K plan or risk serious consequences.
Here's how it broke down:
Claim payment: The Plan Administrator received the claim from the hospital and processed accordingly. When processing, The Plan Administrator applied all PPO discounts and referenced the prevailing fee clause within the Summary Plan Description. The Explanation of Benefits was then forwarded for payment of the $4,000 employer sponsored HRA.
Claim issue: The prevailing fee clause within the SPD is in place to provide accuracy within a bill. It doesn’t limit what facilities can charge, but it does limit payments from the plan to what previous payments were from other carriers (based upon claims data) for the same procedure/medicine within a geographical area. Similarly, in a court of law, precedent refers to a court decision that is considered as authority for deciding subsequent cases involving identical or similar fact, or similar legal issues. In this case, The Plan Administrator applied this clause and reduced the amount to reflect a balance owed of around $2,400 by Matt.
The Plan Administrator payment information:
1. The total charge from the hospital was $45,247.75.
2. The PPO Discount was $2,262.39
3. The Plan paid $22,203.27. The Employer paid $4,000. Matt paid his remaining $3,470.15
4. The remaining balance still needed to be worked out.
Attention to detail
It was important to make sure nothing would impact Matt’s credit while the remaining balance was being resolved.
We provided the credit agencies with further evidence to support Matt’s contention that his insurance responsibility is limited to his deductible, The Plan Administrator supplied a letter outlining the series of events behind this claim for Matt, and the Administrator asked for the bill to be audited, with line-item details including supporting invoices.
In short, when they produced their invoices for the files at Discovery, it turned out that each vial was purchased for $585 per the invoices. This resulted in a 1320% markup over cost, and something just didn’t add up.
Ultimately, the hospital recognized their error and the total savings for the plan was: $13,311.94.
The moral of the story is that medical bills contain errors. In fact, statistics show that 3 out of 4 bills contain some level of error in billing.
In fact statistics, show that 3 out of 4 bills contain some level of error in billing.
Make sure you know your auto adjudication rate, the percentage of bills that are being paid without human oversight. We also recommend auditing any bills over a certain amount, with $2,000 being our recommended threshold. And, be sure to include protective language in your SPD or you could be on the hook for a nasty bite.