Price Transparency

The price of healthcare services is achieved by calculating the total operating expenses of a provider and the cost of delivering a specific treatment to the patient / healthcare consumer. Hospitals use a Chargemaster, which is a comprehensive list of all items that can be billed to either a patient or an insurance provider.

Chargemasters are extensive, often containing tens of thousands of items, or health care services, depending on the facility. While the full charges associated for each item are rarely paid due to the discounts negotiated by private insurers, hospitals use them as a starting point for billing purposes in order to avoid a violation of the Social Security Act, which requires hospitals to charge all patients at the same rate.

Deductible means the amount the patient needs to pay for health care services before the health plan begins to pay. The deductible may not apply to all services.

Copay means a fixed amount (for example, $20) the patient pays for a covered health care service, such as a physician office visit or prescription.

Coinsurance means the percentage the patient pays for a covered health service (for example, 20% of the bill). This is based on the allowed amount for the service. You pay coinsurance plus any deductibles you owe.

A patient’s specific health care plan coverage, including the deductible, copay and coinsurance, varies depending on the patient’s plan. Health plans also have contracts with differing networks of hospitals, physicians and other providers. Patients need to contact their health plan for this specific information.

Total charge is the amount set before any discounts. Hospitals are required by the federal government to utilize uniform charges as the starting point for all bills. The charges are based on what type of care was provided and can differ from patient to patient for similar services, depending on location, facility type, complications, or variances in treatment plan.

Cost – For a hospital, it is the total expense incurred to provide the health care. Hospitals have higher costs to provide care than freestanding or retail providers, even for the same type of service. This is because a hospital is open 24 hours a day, 7 days a week and needs to have everything necessary available to cover any and all emergencies. Non-hospital health care providers can choose when to be available and typically would not provide services that would result in a loss.

• • A hospital’s cost of services can vary depending on additional factors such as:
    • Types of services it provides since many vital services are provided at a loss such as trauma, burn, neonatal, psychiatric, ambulance transports and others.
    • Providing medical education programs to train physicians, nurses and other health care professionals, again provided at a loss.
    • More patients with significantly higher levels of illness, yet payment doesn’t cover.
    • A disproportionately high number of patients who are on public assistance or uninsured and unable to pay much if anything toward the cost of their care.

Total Price is the amount actually paid to a hospital. Hospitals are paid by health plans and/or patients, but the total amount paid is significantly less than the starting charges.

Medicare and Medicaid pay hospitals according to a set fee schedule depending on the service provided.

Indian Health Service organizations are the principal health care providers and health advocates for Indian people, and provides a comprehensive health service delivery system for American Indians and Alaska Natives. IHS organizations are paid under a unique methodology referred to as an all inclusive rate for outpatient services. Sometimes the all-inclusive rate is more than the total amount billed. This can be confusing because the patient’s responsibility amount is based on the allowed amount, which in this case is the all-inclusive rate.

Health insurance plans such as workers’ compensation and commercial health insurance, do not pay total charges. Instead, they pay a set price that has been pre-determined or negotiated in advance. The patient only pays the out-of-pocket amounts set by the health plan.

Charge information is not necessarily useful for consumers who are “comparison shopping” between hospitals because the descriptions for a particular service could vary from hospital to hospital and what is included in that service.

It is difficult to try to independently compare the charges for a procedure at one facility versus another. An actual procedure is comprised of numerous components from several different departments, room and board, laboratory, other diagnostics, pharmaceuticals, therapies, etc.

There are three different types of cost depending on who is paying for the service:

Costs to Patients – The cost to patients often includes the total amount of premium payments, deductibles, and co-insurance paid to healthcare providers and health insurance companies for a patient’s healthcare coverage. The cost to patients also includes healthcare supplies and services received within the coverage period. Healthcare services not covered by insurance can be another type of cost, commonly referred to as out-of-pocket costs.

Cost to Providers – Providers are paid by insurers for the services they deliver to patients, but they also incur a considerable amount of operating costs which often get lost in the equation. These costs can include the amount paid for land, buildings, equipment, supplies, wages & benefits, laundry & housekeeping, electronic medical records, as well as services used when delivering care to patients. Providers also absorb the cost of delivering care to patients who are unable to pay for their own care.

Cost to Payors – Payors in the healthcare system include both private insurance companies and government insurance programs. The cost to healthcare payors is the total amount they distribute in patient claims. The second major cost to payors is operating costs such as wages & benefits, supplies, and administrative costs.