Cost-shift pricing, which is also frequently referred to as financial expediency-driven pricing or simply as cost-shifting, is a situation where different customers may purchase the same goods or services for different prices. In health care, specifically, this means charging an insured patient more as compared to an uninsured one for identical procedures. A scheme of that kind allows for covering costs without raising the average price (Nowicki, 2017, p. 214). Put that simply, the patients who have health insurance pay for the financial losses the health care facility incurs when providing services to those who do not. Such an approach is beneficial for the reasons that are listed in what follows. First, hospitals acquire a possibility to compensate for their expenditures, hence stay in business. Second, patients without insurance receive medical aid at relatively stable prices. By contrast, it is worth mentioning that insured patients mostly do not accept higher payments, which is actually the main sticking point.
A financial statement of a health care facility that applies cost-shift pricing in an appropriate way apparently shows a minimal effect on collections. It results from lowering prices of cost-based procedures with a parallel increase to the ones that are not dependent on expenditures. By means of that, it is possible to generate a total collection that exceeds the true total cost (Nowicki, 2017, p. 214). The algorithm presupposes that the amount of cost-shifting correlates with that of private insurance patients. Also, hospitals generally rely on the higher payments from the insured “to help offset sagging public payer reimbursements” (Masterson, 2018). This brings cost-shifting to the list of the most debatable issues in the health care industry.
Masterson, L. (2018). Hospitals performed small amount of cost-shifting, study finds. Health Care Dive. Web.
Nowicki, M. (2017). Introduction to the financial management of health care organizations (7th Ed.). Health Administration Press.