By Jay Eisenstock, Founder, JE Consulting
LinkedIn: Jay Eisenstock
Years ago, a friend introduced me to the concept of offering cash in exchange for a discount on products and services. He was a master of getting deals on everything from roofing to car repair. His mantra was you never know unless you ask. I’ve had good success with this approach as well.
Since 2021, the Hospital Price Transparency Rule has required hospitals to post prices for 70 common medical services so patients can compare costs and make more informed choices. The idea is that, just like shopping for appliances, competition can help reduce costs if patients are able to see the real prices. The evidence has been mixed, some patients who actively search for prices have seen modest price decreases.
In my article, “The Cost of Healthcare” I discuss how healthcare is unlike any other buying experience. People don’t want healthcare; they need healthcare and typically will follow the recommendations of their trusted physicians rather than seek the most cost-effective test or treatment.
A new trend is emerging where providers reach out directly to patients and offer a cash price to bypass insurance. While this can reduce the cost of care and simplify billing, it also raises questions about coverage, out-of-pocket costs, and whether payments apply to a deductible. Patients with high-deductible plans are usually the most likely to compare prices, yet cash payments typically don’t count toward meeting their deductible. Even so, paying cash is often cheaper for patients than using their insurance. Patients have been known to negotiate drug prices. For example, if a particular medication is not covered under their plan or their deductible is too high, they may ask the pharmacy if there is a cash price available.
Hospitals have long used multi-tier pricing — one set of rates for insured patients and another for those without coverage. Uninsured patients often face exorbitant “list prices” for services, a common factor contributing to medical bankruptcy. What many of these patients don’t realize is that hospitals are often willing to negotiate. From the hospital’s perspective, offering discounts or payment plans increases the likelihood of receiving payment while avoiding the financial and reputational downsides of pushing a patient into bankruptcy.
Providers are willing to offer cash prices because it lowers their administrative expenses and expedites payment. Health plans require them to submit documentation about the encounter, adhere to contracted fee schedules, and often subject them to the health plan criteria for treatment. Even with the benefit and speed of electronic payments, direct payment from the patient is quicker.
However, some states restrict providers from accepting cash payments from insured patients. These state regulations limit patient responsibility to copayments, coinsurance, deductibles, or non-covered services. Essentially, providers who contract with an insurer are prohibited from bypassing the plan and billing patients directly for services that are covered by an insurance plan. In addition, provider health plan contracts my also limit the ability of providers to offer cash discounts.
The option for patients to pay providers directly at a reduced rate is a growing trend that can benefit patients and promote greater price transparency. These payments do not need to actually be cash – providers will gladly accept a check, credit or debit card. Rather than wait for your provider to ask, take a lesson from my friend and contact them yourself.