Question: A hospital that performs diagnostic tests for its inpatients and outpatients has asked to expand its Under Arrangement Agreement - which is limited to Medicare and Medicaid patients - to all "private pay" patients. The transferring hospital would buy the service from the receiving hospital, and would bill the private payer for the purchased service. This is the required process under Medicare, but would there be any harm in expanding the Under Arrangement Agreement to all private payers?
Florida Subscriber
Answer: To find out whether expanding the agreement would be a smart idea, you'll have to know the policies of each payer. Some commercial payers prohibit "under arrangements" billing, especially if the arrangement involves an ambulatory surgery center (ASC) or free-standing diagnostic center.
Commercial payers generally reimburse free-standing facilities at lower rates because these facilities usually have lower operating costs (in comparison to outpatient surgery or diagnostic services at a hospital).
Also, most managed care contracts require that subcontractors be credentialed by the plan, thereby arguably creating a notice requirement that triggers payer review.
Additionally, before committing to something like this, check your state statutes regarding billing and/or insurance fraud. If both hospitals are in-network providers, you probably won't raise a payer's ire, but it's helpful to know where you stand ahead of time.
