Selecting providers based on cash bids could cut costs

Providers who give payers and patients cash-pay options for care can save all parties money, according to an opinion article in CFO Magazine.

Such cash-pay arrangements for elective non-emergent procedures could save money for employer groups, California-based healthcare economist Peter Boland said in the piece.

"With cash pricing, providers bid on a specific procedure for a specific patient in competition with other providers." 

In theory, Boland said such cash-pay medical procedures could be negotiated within 48 hours by an outside vendor contracted by an employer-sponsored health plan to solicit bids. In many instances, the cash bid could be a fraction of what a health plan has negotiated with a provider in advance--$22,000 for a knee replacement, compared to a negotiated rate of $65,000, for example.

Some payers already use a variation on cash pricing known as reference pricing, wherein the plan caps costs for a procedure at a certain cash amount--perhaps $30,000 for a joint-replacement procedure--and patients are responsible for any costs above that. Reference pricing saved the California Public Employees Retirement System $5.5 million on hip and knee replacement surgeries in recent years.

To encourage patients to use such services, Boland said providers could waive out-of-pocket costs such as deductibles and co-payments.

"Few employees in HDHPs realize a benefit from their coverage. It's in CFOs' power to preempt this situation with cash pricing," Boland wrote.

To learn more:
- read the CFO Magazine article

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