The way healthcare insurance is viewed and paid for has evolved significantly over the last century and the law of supply and demand is the rule of the day.
The business of selling insurance is a multi-million dollar industry, the sole purpose of which is to make money for the company providing the services.
Patients no longer visit their local insurance provider to obtain coverage. Insurance is packaged and sold like cars and the latest deodorant through state-of-the art advertising agencies.
Supply and demand dictates that if there’s a consumer need for a service or product, someone will provide that product or fill that need.
The Law of Supply And Demand
Consumers mistakenly believe that as more customers enter the market and purchase insurance, the cost will eventually go down. In a capitalistic system, that’s not necessarily true. If the revenues to be made are great enough, the cost will continue to increase as insurance providers strive to make ever greater profits.
Healthcare insurance providers charge the maximum amount that the market will allow for premiums.
The result is that consumers pay more for their healthcare insurance and malpractice insurance continues to skyrocket for medical professionals. Practitioners must charge sufficiently for their services to cover these costs and make a profit, while remaining competitive enough to attract new clients.
Payments versus Actual Costs
Healthcare insurance typically pays hospitals, labs and medical providers a set fee for services. In many instances, that payment doesn’t cover the actual costs involved.
Medical professionals must then decide if they will accept the insurance reimbursement as full payment, bill the difference to patients and face additional costs involved in collecting the debt, or if they want to offer the service at all.
To offset costs, medical providers need to create multiple revenue streams. Depending upon factors that include geographic location, clientele, patient load and availability, clinicians can do this through a wide variety of means. They can charge parking fees, write a book, schedule speaking engagements, add new services or develop new products.
Playing the Money Game
The primary way practitioners are paid is through reimbursement claims, which is normally prepared by medical billing professionals, to insurance companies, but there’s a dirty little secret lurking in the shadows. Insurance companies invest the funds they collect from clients to make more money. Each month that the firm can retain those funds, the company makes more on its investments.
That means healthcare providers are often forced to wait for up to three months to be reimbursed for their services. Insurance providers have teams of specialists whose job it is to calculate the fair market price for medications, office procedures and surgical interventions.
Insurance companies say these teams are eliminating waste, but the truth is that their job is to identify ways to reduce reimbursements paid to medical professionals.
Clinicians who choose not to offer specific services run the risk of losing clients to competitors who do.
If they accept insurance company reimbursements as the total payment for services rendered, they lose money.
Increasing patient numbers is one way to grow a clinic’s revenues, but creating multiple revenue streams is the most desirable. Funds coming in from a wide variety of sources will benefit practices in times of feast or famine.
