More explanation of the Explanation of Benefits (EOB)

A few weeks ago I parsed an Explanation of Benefits (EOB) I received from Blue Cross Blue Shield of Massachusetts after a visit to Sports & Physical Therapy Associates, an excellent physical therapy center with 14 locations in Greater Boston. The post (What does an Explanation of Benefits (EOB) actually explain?) generated a number of comments and questions on the Health Business Blog itself and when it was cross-posted at KevinMD. In particular:

• What would a cash paying patient be asked to pay?
• How is the $225 in "charges" derived? Is it determined by Medicare?
• Does the provider lose money on the Blue Cross contracted rate?

I'm not a billing expert so I sent an email to Sports & PT to ask them to respond directly. I was impressed with their informative and thorough response, which I am posting here with their permission.

Mr. Williams,

We would be happy to provide you with some insight into how insurance claims are processed.  Please find your questions with the corresponding answers below.When a patient first comes to our clinics, we provide them our Policy Disclosure document.  I think you will find it valuable in understanding the relationship between patient and provider, patient and insurance carrier, and lastly, provider and insurance carrier.  Here is the first paragraph:"Sports and Physical Therapy Associates (SPTA) is pleased to participate in your health care and we look forward to establishing a lasting relationship as your physical therapy provider. As part of this relationship, we wish to establish our expectations of your financial responsibility as outlined in our Financial Policy. Letting you know in advance of our Financial Policy allows for a good flow of communication and enables us to better satisfy you. Your medical insurance is a contract between you and your insurance company; we are not a party to that contract. We can often help with providing information about your benefits, but you are primarily responsible for knowing what type of coverage you have and for any charges that you have incurred as a patient with us. Please review and sign the following Financial Policy prior to your first visit."Questions:1. What I would have been charged if I didn't have insurance? Do you offer discounts to cash paying customers? If so, what do they have to do to get a discount? How much are the discounts?For patients with no health insurance we offer a "Self-pay" rate. Our self-pay rate is $100 for evaluations and $75 per visit for follow-up appointments. The rate is based on the average reimbursement we receive from our insurance carriers.For the most part patients utilize their insurance to cover their episode of therapy but may "run out" or exhaust their benefit prior to the doctor, patient, or therapist's desired end result. We offer this self-pay rate to all patients who must pay out-of-pocket for their services. In addition, if a patient's insurance reimburses at a lower-than-average rate we charge them the lower amount. For example, BCBS reimburses around $75-80 per visit but Tufts pays us $68 per visit. A Tufts patient whose insurance cuts him or her off could pay out-of-pocket for continued services and would not be charged more than his or her insurance was paying us ($68/visit). For those patients that are having financial challenges, we will set up a payment plan.2. How do you come up with the $225 in charges? Is that your price or is it do to with Medicare rules?Medicare sets the standard when it comes to reimbursement rates as well as billing/documentation guidelines; however, Medicare does not have anything to do with how much we charge for each procedure. The charged amounts are comparable to what other outpatient physical therapy practices are billing (for each procedure) in our region.Though we may bill $225 we do not receive $225 from our patients or their insurance carriers.  Each insurance has a different allowed amount. We never receive more than your allowed amount. Who we receive the allowed amount from is dependent on the patient's benefit (if you have a deductible you would be responsible for paying us what your insurance allows for the visit, if you don't have a deductible your insurance would pay, if you have a copayment they would pay everything except for the co-pay).Example from your EOB - Note: the actual procedure codes/descriptions are missing from your EOB causing you some confusion (I agree, this is frustrating).They allowed $81.31 (you pay $25 they pay $56.31 = $81.31), and we adjust off the remaining amount according to our contract with BCBS. For more information on the procedures and descriptions you'll have to consult with your therapist.3. Do you lose money on the Blue Cross reimbursement? Do you consider your contract with them a loss leader?We don't lose money because we never expected to receive more than the contracted allowed amount. However, if we didn't contract with BCBS (the largest health insurance carrier in the state) we would lose a lot of money. Why then charge more than we expect to receive? We bill over 200 insurance carriers and they all reimburse at different rates so it's easier to have a set charged amount for each procedure then make the contractual adjustment at the end.Please let me know if you have further questions.All the best,

[Billing Manager]