What Is a Negotiated Rate for Healthcare?

A negotiated rate for healthcare is the fee your insurance company has worked out with providers, and that negotiated rate affects how much you pay for care.

You may assume having health insurance assures you’ll pay the same fee for healthcare services at doctor offices and hospitals, as long as the medical facilities and providers are in network. But healthcare costs can vary even when your tests and treatments are in-network because of the negotiated rate, also called an adjusted rate or allowed amount.

What is the negotiated rate for healthcare?

When you visit healthcare providers who are in-network, meaning they accept your health insurance, the negotiated rate is for services your health insurance plan covers. Specifically, the negotiated rate is the amount an insurer contracts with hospitals and other medical facilities to pay for all the procedures and services a doctor, lab, imaging technician, or pharmacy provides, the Centers for Medicare and Medicaid Services (CMS) explains.

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How negotiated rates can save you money

For patients with healthcare coverage, the amount you owe for your care is based on the negotiated rate.

You should understand exactly which healthcare providers are in-network, your co-pay for services, and how much of your medical costs you must pay (your deductible) before your insurance plan pays part or all of your healthcare bill. You may be responsible for the full amount of a medical bill if you haven't met your deductible.

Typically, negotiated rates are below full price for medical fees. They can reduce what you have to pay out-of-pocket when you are treated by in-network doctors and hospitals if you have not reached your deductible yet, or if you have a plan with a high deductible, according to the CMS.

If you receive care from an out-of-network hospital or doctor, or you do not have healthcare coverage, you will not be paying the negotiated rate. Your bill will likely be far more costly than for an in-service provider (although you may be able to negotiate for a lower bill if you pay cash).

Price transparency may impact negotiated rates

A federal rule, which went into effect in January 2021, aimed at increasing price transparency in healthcare, compels hospitals and insurers to provide the public with easily accessible information about what care costs.

For the first time, hospitals must show (in a consumer-friendly, online format) the discounted negotiated rates they’ve agreed upon with insurers for all standard charges, as well as 300 “shoppable” services patients can schedule in advance, including imaging tests and Caesarean deliveries. The hospitals must also list the prices they pay to out-of-network doctors who may consult or work with in-network doctors at the hospitals.

In addition, hospitals must post the discounted payments they are willing to accept in cash from patients. The information must be included in an easy-to-find online location and organized by diagnostic codes.

The rationale behind the rule is that it gives you additional information to shop for affordable healthcare, and it may lead to lower prices as negotiated rates and other price information is disclosed.

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