Whale Season
How Hospitals Engineer and Harpoon $800,000 Patients
If you spend your days helping self-funded employers rein in runaway healthcare costs, drop what you're doing and go listen to Episode 472 of the Relentless Health Value podcast. In fact, make a double espresso, sit down with a notepad, and prepare to get smarter.
Dr. Eric Bricker, healthcare truth-teller and internal medicine physician turned healthcare finance decoder, delivers what may be the single best breakdown I've heard in a year on hospital pricing manipulation, particularly as it pertains to high-cost claimants. This episode is a masterclass in how large, consolidated hospital systems construct revenue pipelines that plan sponsors never see coming—until the invoice lands with a seismic thud.
The Problem: 1% Drives 40%
The opening salvo is familiar to those of us in the trenches: less than 1% of plan members account for up to 40% of total healthcare spend. But what Dr. Bricker does is pull the camera back to show how hospitals are anything but passive recipients of this financial anomaly. They engineer it.
These aren’t just random high-dollar cases. Hospital execs need a handful of these "whales" every month to hit their revenue targets. If they fall short, the red ink flows. If they land a couple extra, champagne corks pop. So what’s their strategy? It’s not just happenstance. It’s a deliberate, three-pronged playbook.
The Hospital Playbook, Step-by-Step
Step 1: Negotiate Provider Stop-Loss Provisions
Hospitals negotiate with carriers for a little-known contract element called "provider stop-loss." This isn’t the same stop-loss that employers purchase. This one kicks in when the hospital’s charges exceed a certain threshold for a specific procedure. For example, let’s say a coronary artery bypass graft (CABG) is usually paid at a fixed rate of $40,000. But the hospital has negotiated that once charges exceed, say, $200,000, they get paid 70% of billed charges.
It sounds reasonable—what if the surgery goes sideways and costs balloon, right? The problem? it’s always triggered.
Step 2: Engineer the Chargemaster
This is where the sleight of hand happens. Hospitals don’t wait for complications to breach that stop-loss threshold. They bake it in. They adjust their chargemaster—that Byzantine internal pricing list of every swab and aspirin—so that the average, run-of-the-mill CABG blasts past the $200,000 mark – Every. Single. Time.
So now, instead of getting $40,000, the hospital is routinely getting paid 70% of $200,000 or more. Bricker cites real-world examples of $800,000 CABGs with no complications. This is not theoretical. It’s happening. And those of us whose healthcare isn’t handed to us via some governmental program are paying for it.
Step 3: Control the Steerage
Once the financial booby trap is set, the hospitals need a steady stream of patients to trigger it. Enter strategic (probably better named manipulative) steerage. These systems don’t just buy random physician groups; they buy specific groups, such as cardiology groups. Then they buy or partner with primary care providers. The result? If you’re a patient with chest pain, you see a primary care doctor who refers you to a hospital-owned cardiologist, who refers you to the hospital’s cardiac surgeon. Boom. Whale harpooned.
But this isn’t just opportunism — it’s design. Hospital systems strategically acquire or align with referral sources upstream to create a predictable flow of patients into their highest-margin services. They don’t aim for volume in general; they aim for profitable volume. The specific goal is to capture patients likely to fall into targeted billing categories — billing categories where they’ve strategically increased their reimbursement percentages with carriers.
It’s not just cardiac. Another hospital across town may choose trauma. They negotiate sweetheart stop-loss terms for trauma codes, over-engineer the ER charges, and build glossy emergency departments to attract ambulance traffic. The front doors aren’t just wide — they’re designed to funnel the right kind of revenue through them.
The Hidden Cost to Employers
Carriers report average network discounts or use studies like RAND's to suggest that commercial allowed amounts hover around 240% of Medicare. The problem is, those averages mean nothing. The true cost lies in volume-weighted reimbursement.
One $800,000 CABG (at 1200% of Medicare) gets buried under 7,000 dermatology visits reimbursed at 110% of Medicare. So when the carrier says, "Hey, your average is 240%," it's a statistical smokescreen. The volume flows through the overpriced codes.
Worse, self-funded employers are the ones footing the bill. Carriers happily concede insane commercial reimbursements to hospitals in exchange for more favorable Medicare Advantage terms. After all, carriers don’t carry the risk—the employers do in self-funded plans.
And let’s not forget the other half of the insured equation: fully insured plans governed by the Patient Protection and Affordable Care Act (ACA). Under the ACA's medical loss ratio (MLR) rules, carriers must spend 80% to 85% of premiums on claims. Sounds good, right? But it creates a perverse incentive: the higher the claims, the more revenue the carrier can generate. Because if you’re capped at 15% of spend for admin and profit, you might as well make that 15% a slice of a much bigger pie. So when hospitals crank up charges, carriers don’t necessarily fight it. They might even welcome it.
Taken together, whether you're looking at the self-funded or fully insured market, there is a glaring lack of incentive for carriers to keep provider reimbursements in check. On one hand, they’re risking nothing for self-funded clients and can even let those hospital contracts balloon in exchange for leverage in other lines of business. On the other, the ACA's MLR rules make inflated claim costs a means of boosting top-line revenue. If you ever wondered why your carrier isn't hammering the hospitals during negotiation, it’s because they don't benefit from lower costs. They benefit from higher ones.
So What Should Plan Sponsors Do?
Start with this: if you’re not steering your employees, someone else is. And that someone has an eight-figure P&L target and a consulting firm whispering strategy into their ear.
Bricker's advice is clear:
Wake up thinking about your high-cost claimants.
Embrace direct contracting, particularly for elective procedures like ortho, spine, and cancer care.
Build steerage early through primary care relationships, on-site or near-site clinics, or DPC models.
The key is to own the referral path. Don’t wait until your employee is in a surgeon’s office with a white coat and a calendar. By then, the financial bear trap is already poised to snap on them.
On Transparency and Trust
One of the most pointed moments in the episode is when Bricker contrasts the rosy language of "Centers of Excellence" with the raw financial tactics happening behind the scenes. These maneuvers aren’t shared openly. You don’t see a sign next to the cardiac wing that says, "Warning: This CABG may cost your plan $800,000."
In fact, you often don’t see the game until after it’s played—when the EOBs roll in and the CFO starts dry-heaving into their keyboard.
If you’re a nonprofit hospital operating under the premise of community benefit, these tactics should make your board squirm. If you're a fiduciary plan sponsor, they should make your blood boil.
Final Thought: Don’t Be Outgunned
What makes this podcast so valuable is not just Bricker's clinical and financial insight. It's that he spells out what many of us have suspected for years but couldn’t prove: that hospital revenue engineering is intentional, systematic, and largely hidden.
This episode should be required listening for every employer, consultant, and stop-loss underwriter in the country. If you're in the business of protecting employers from waste, deception, and carrier apathy, this is the blueprint.
Hats off to Stacey Richter and Dr. Bricker. This was, without question, the best podcast I've heard on hospital pricing practices in the last year. Maybe longer.
And if you're reading this and still haven't listened? Turn off LinkedIn. Turn up the volume. Class is in session.