Be Wary of Hospital Pre-Pay Requirements


Buyer beware! More and more hospitals are apparently using the tactic of collecting pre-payments in part or in full for non-emergency services rendered at their facility.

While this makes good business sense for the hospital, and is probably warranted given the potential for non-payment by patients after treatment, you should be aware of these practices, what you can or should do if asked to pre-pay, and some of the potential pitfalls.

This story recounts our brief experience with pre-payment last December and my research into the topic.


The birth of our second child was very smooth, as smooth as you could expect for major trauma to a woman’s body. There was only one major and unexpected hurdle to cross, when the hospital asked us to pre-pay the estimated costs for our C-section before the procedure was performed.

We had less than a week’s notice, and though we were more than ready financially to cover the costs, I was unprepared for the idea of pre-paying for services. The most important question was probably the question anyone would have in the same situation:

What happens if it costs less than what I’m pre-paying?

The answer is not as straightforward as it would seem.

My research led me to a lot of horror stories. A number of people had problems getting money back from the hospital. Of course, the hospital is under no incentive to refund you money as soon as possible. On the contrary, they would like to hold on to it for as long as they can.

Some of these horror stories translated into hospitals flat-out refusing cash refunds, and offering patients “future credits” instead, to be used as payment credits at the same facility for undetermined services in the future. In other words, if they got sick again and needed to go to the hospital, some of their trip charge would be covered. Hopefully…

Our Strategy

From personal experience, I know how unpredictable health care costs can be. Doctors and hospitals try to estimate the final costs all day long, but all they can really do is take an educated guess. The final cost will depend on the actual services used, and how much of the cost the insurance company decides to bear.

Our hospital estimated out-of-pocket costs at nearly $3,000. Using our AFLAC coverage as an excuse, we negotiated with the hospital to pay less than 40% of this, citing the fact that the remainder would come from our AFLAC payments a few weeks after the procedure. Surprisingly, they bought this without much of a fight.

In the end, I’m very glad we did that. My wife was feeling so good after a few days in the hospital that we checked out a whole day early, cutting our ongoing “stay” expenses by one-third (two nights at the hospital instead of the typical three after a C-section).

The final result is that we owed very little above our initial pre-payment, a few hundred dollars. Had we agreed to the hospital’s initial estimate, we might still be fighting to get money back.

Handling Pre-Payment

If I ever have a need to pre-pay for hospital services again, the same strategy will be in play. At the most, I’ll be willing to show good faith and pre-pay 50% of the estimated costs, but not a penny more.

The good thing about our area is that two hospital “chains” compete for business in close proximity. If I ever have to play that card, I’m willing to negotiate with both hospitals at the same time for services to see who’s willing to earn my business. Some might say that’s hard-ball, but we’re talking about a lot of money for something that’s otherwise a “need.” I, for one, am not willing to let the health care industry exploit that need to over-charge me.

Your thoughts? Have you ever experienced pre-payment at the hospital or doctor’s office, and how did you deal with it?

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