Q: We are a niche DME provider trying to set a patient pay rate for those who are either under insured, don’t have insurance or are out-of-network. What would an industry standard discount off-billed charge look like for those without benefits and when we don’t incur the cost to bill the third party?
A: Regrettably, there are no industry-wide KPIs for either the acute-care or the DME segments of the industry. The best approach would be to base your private pay discount on your Medicare and managed care reimbursement rates. Thus, you would calculate the average discount off gross charges that Medicare claims receive and make the same calculation for managed care claims.
For most providers, the Medicare discount would be more or higher than the managed care discount. Once you understand that range, the next step would be to calculate or estimate your billing cost per claim. You would do this by taking the total annual revenue cycle costs (labor, direct expenses, IT costs, outsourcing, statements, etc.) and dividing that figure by the total annual claims. As a guideline, the common cited figure for hospital claims is $30 per claim.
Now comes the policy-decision step. Senior management will need to decide:
– What discount percentage to offer. Medicare? Managed care? Something in-between? Something higher or lower than either?
– Whether to discount further by taking off the cost per claim.
Once you’ve made these decisions, you should write a formal policy statement and have it adopted by the board and finance committee. This adoption should be noted in the minutes. Next, you need to communicate your policy to your patients. Finally, you should apply your new policy uniformly and fairly to your entire patient population.
David Hammer answered this question