Understanding Pricing for Healthcare Services
In November 2019, Medicare finalized policies following directives given by a
President Trump executive order. Its name, “Improving Price and Quality
Transparency in American Healthcare to Put Patients First,” summarizes
the intent of the order.
Before you view the pricing information for any hospital, we wanted
to provide you with some basic background information about:
The provided pricing information
How it relates to a final hospital bill or pricing information included in an
explanation of benefits (EOB) from your health insurer
While this information should help you compare prices from hospital to hospital, it
is unlikely that your final bill will exactly match the prices listed. We’ll explain more
about that later.
The Information You Will See:
Standard Charges & Shoppable Items
Standard Charges
Medicare has defined several different types of standard charges that should be available for patients to see.
They are:
Gross charges
Discounted cash price
Payer-specific negotiated charge
De-identified minimum negotiated charge
De-identified maximum negotiated charge
Here’s a quick overview of each.
Gross Charges
The gross charge is the full list price from the hospital chargemaster. Gross charges can vary, sometimes greatly, from hospital to hospital for the same procedure or service based on how each hospital manages its charges and costs. Charges can vary based on geography, physician supply and medication preferences, the kinds of services the facility typically provides, and the expertise required to deliver these services. External factors also play a role: The cost of living in a given area can have a significant effect on wages, which is a major factor in cost calculations for hospitals. Drug and supply costs also vary greatly depending on which (if any) group purchasing organization the hospital is part of.
Discounted Cash Price
The second type of standard charge defined by Medicare is called a discounted cash price, which is the price offered to patients willing to pay in cash at the time of service without involving insurers.
Payer-Specific Negotiated Charge
The payer-specific negotiated charge is the charge that a hospital has negotiated with a third-party payer for an item or service; this is sometimes referred to as the "allowed amount" on an EOB. This charge amount will likely vary from payer to payer and even between insurance plans for the same insurance payer.
Each hospital sets a “gross charge” for every individual service rendered to
patients within their "chargemaster" or CDM (charge description master). These
gross charges do not include any discounts that may be offered, and they serve as the starting point from which payment is negotiated with individual insurance
payers for specific insurance plans. As a patient receives services throughout
their visit, a charge for each service provided is generated on their account,
resulting in a claim that is submitted to the patient’s insurer.
You should know that patients will almost never pay the listed gross charge for
healthcare services. However, under federal law, all insurers, including Medicare
and Medicaid, must be billed the amount listed on the chargemaster for those
services. These charges are rarely paid in full due to the contracted payment
rates negotiated between hospitals and insurers.
The EOB provided by individual insurers details each patient’s actual cost for
services provided. Hospitals typically cannot publicly disclose the negotiated
rates, making it difficult to compare final prices from one hospital to the nextusing the gross charge information from the chargemaster.
De-identified Minimum Negotiated Charge
The de-identified minimum negotiated charge is simply the lowest charge that a hospital has negotiated across all insurers for an item or service.
De-identified Maximum Negotiated Charge
The de-identified maximum negotiated charge is the highest charge that a hospital has negotiated with all insurers for an item or service.
Shoppable Services
The high degree of variation in charging practices and differences in reimbursement methodologies between insurance payers make it difficult for patients to get the intended full-benefit of “pricing transparency.” Medicare wanted to give patients another way to compare prices, so they’ve also asked hospitals to create a list of shoppable services.
Medicare defines "shoppable services" as a service that typically can be scheduled by a patient in advance on a non-urgent basis. Medicare has identified 70 shoppable services that all hospitals should include and has asked hospitals to each choose at least 230 additional shoppable services that they perform most frequently.
Every shoppable service will contain an easy-to-understand description of the item or service and standard charges information, including the gross charge, discounted cash price, average negotiated charge for each insurance payer, de-identified minimum charge, and de-identified maximum charge.
You'll also see a specification for whether the procedure is done on an inpatient or outpatient basis, as procedures done on an inpatient basis may incur additional charges, such as room and board charges.
Where Can You Get More Information?
Calling your insurer is always a good idea if you're considering an elective procedure and want to get a general idea of your out-of-pocket costs. Your insurer can help you understand how your coverages and deductibles work as well as your current payment history as an essential first step. If you want to get a more general idea of costs or compare your likely costs to those incurred by others, there are a few public pricing resources to consider:
The Centers for Medicare & Medicaid Services
Medicare releases annual payment information for inpatient and outpatient procedures. For more information, visit cms.gov.
All-Payer Claims Database
Some states have large-scale databases that collect medical, pharmacy, and dental claims, as well as eligibility and provider files from private and public payers. For more information, visit apcdcouncil.org.
FAIR Health Medical Cost Look-Up
This is a consumer-oriented tool that provides information on out-of-pocket costs to consumers. For more information, visit fairhealthconsumer.org.
If You Have Questions
If you have questions about pricing or paying for procedures or services, we urge you to contact Becky DeChano at 814-723-4973 ext. 1698 or email:
We will be happy to help you with any questions you may have and want to help you understand your costs for care received at our facilities.