History

• Offering discounts to insurance companies began as a way for hospitals to guarantee certain reimbursement from insurance companies. By becoming a licensed provider of that carrier, they charged them a certain percentage less, but the insurance company would encourage patients to utilize that particular facility.
  
  

Reasoning

• By being paid a particular amount for given procedures, the hospital would know in advance the overhead costs and be able to control its own profit margin. Currently, insurance companies are seeking many ways to get out of paying, thereby making this an ineffective billing strategy.
  
  

Considerations

• As a private pay, you always can contact the billing department directly and negotiate the "preferred rate" and sometimes even lower rates. Billing prefers to do this as it gives them a guaranteed payment and a schedule they can count on.