Hospital-Insurance Contracting Part 2: Percent-of-Charge Discounts Explained.
Percent-of-Charge Discounts are what people typically think of when they think of an insurance 'discount' from a hospital.
Just as the name sounds, the discount is a percentage off of billed charges from the hospital.
For example, a 25% discount would result in the employer/insurance company paying 75% of billed charges.
Percent-of-Charge Discounts are highly favorable to hospitals, because hospitals have been known to artificially inflate their billed charges to increase their overall reimbursement.
For example, being paid 75% of $100,000 is a lot more than being paid 75% of $50,000... and the hospital does not need to renegotiate their contract. They just have to increase their billed charges.
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