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Hospital Charges for Purchased Supplies

for Traditional Products

  1. WHAT IS THE ISSUE INVOLVING HOSPITAL CHARGES FOR PURCHASED SUPPLIES?
    • A review of specific claims submitted to TPAC Underwriters, Inc. has identified a problem with hospital charges for purchased supplies such as cardiovascular implants, prosthetic devices and orthopedic hardware. The hospital purchases the item from a medical supply company and then bills the patient an amount that may range from 200% to 700% of the purchased price. Such a billing mark up without added services (no value added) is unreasonable.
  2. WHAT IMPACT DO THESE CHARGES HAVE ON EMPLOYER BENEFIT PLANS AND STOP LOSS POLICY COVERAGE?
    • A recent newspaper article indicated that one of ten Americans have been recipients of these implanted devices. This suggests significant exposure and a serious financial impact on medical plans. All plans require that charges be reasonable in order for them to be considered for reimbursement. If the charges in question are paid as presented and not tested against a plan’s reasonable and customary requirements a mark up occurs without any added value that adds unexpected and unnecessary medical costs to the plan which will inevitably increase stop loss policy premiums.
  3. WHAT IF A HOSPITAL BILL HAS ALREADY BEEN REPRICED BY A NETWORK?
    • How networks address purchased supplies varies. Some have special repricing arrangements while others simply apply routine repricing. Whatever methodology is used in repricing, the result must still be tested against the plans reasonableness requirements.
  4. HOW ARE THESE CHARGES IDENTIFIED?
    • These charges appear on hospital bills a variety of ways. They may show up on a hospital bill within another charge such as Operating Room Supplies or individually as prosthesis, implant or orthopedic hardware charges.
  5. WHAT IS REQUIRED FOR REIMBURSEMENT OF THIS TYPE OF CHARGE?
    • The charge (as with all charges) must be tested for reasonableness. The best way to accomplish this test is by the hospital providing you with a copy of the invoice from the supplier that would reflect hospital cost. Sometimes the hospital is reluctant to provide the invoice and it may be necessary to contact the manufacturer or the supplier direct.
    • If it is determined that the hospital’s charge for the supply in question is reasonable, then the charge would be allowable and reimbursed in accordance with the Plan Document.
    • If it is determined that the hospital’s charge for the supply in question is not reasonable the hospital should be contacted with the expectation of reaching a mutually acceptable reasonable charge and agreement from the hospital to accept the charge without balance billing the patient.
    • If agreement cannot be reached then a payment should be a made based on the information available. TPAC Underwriters, Inc. believes charges up to 150% of purchased price are reasonable and will reimburse up to that amount.
    • The establishment of a reasonable charge can be handled by either the administrator or by TPAC Underwriters, Inc.
    • Any compromise settlements on billed charges needs to be reviewed by TPAC Underwriters, Inc. prior to payment of the claim to preclude any reduction of the requested stop loss reimbursement.