But now Illinois patients are getting a little more clout. Signaling an industry-wide shift toward more consumer-friendly practices long common in other businesses, the state’s largest health insurer will soon begin refusing to pay for bad service.

Mistakes To Cost Hospitals”, Chicago Tribune (August 7, 2008)

The trend toward refusing to pay medical providers for services where the insurer deems the invoice unjustified may not be as helpful to consumers as has been claimed. The strategy is described as follows:

Large employers, lawmakers and the Bush administration have been pushing in recent years to get hospitals to commit to apologizing for “never events”—medical errors that should never happen—and waive the costs to their customers.

I see potential problems here.

First, it isn’t always a simple matter to separate legitimate treatment that would have been required in any event from disputed charges. Second, medical providers will not simply agree with the insurer in all cases for a number of reasons, some related to a bona fide disagreement and others related to the legal implications of admitting error.

In any event, it is not at all clear that the patient account department or billing office will coordinate their collection efforts with the negotiations over the so-called “never events” that are in dispute. The patient will bear the burden of the non-payment if the dispute gets nasty, and yet, the patient has little upside if the medical provider agrees to rescind the billing since the benefit flows principally to the health insurer.

Furthermore, in a coordination of benefits setting, other insurers or payers may find that the failure of the primary insurer to pay simply means a shift of billing to what would otherwise be secondary coverage. Thus, it remains to be seen who the real beneficiaries will be for the new “never events” strategy being adopted by some payers.