Charges Vary Widely From Hospital to Hospital: FAQ
But economist William Custer, PhD, director of health services research at the Institute of Health Administration at Georgia State University, says these factors can't explain the cost variations.
"Hospitals have historically set prices based on their own methodology. One hospital can set prices three times greater than another; there's no real pattern," says Custer. "If we had a healthy health services market, you would expect those prices to be much closer aligned."
What does the publication of hospital pricing mean for the average person?
The bottom line: not much. The charges made public are for Medicare patients, and Medicare pays standard amounts for care. If you're covered by Medicare, the deductibles and co-insurance you pay for hospitalization are also set amounts.
For people who carry private insurance -- a PPO or HMO -- the pricing may also not be relevant to what they pay for inpatient care as long as they're in-network. That's because hospitals charge private insurers a rate they negotiate between themselves. Very few people have traditional insurance plans in which they pay the difference between what the hospital charges for a service and what the insurer will pay.
There are still other rates for people without health insurance. They need to negotiate with the hospital themselves. Knowing what Medicare pays is a good place to start negotiations.
If they aren't going to be paid what they charge, why do hospitals even set prices?
The hospital charges, theoretically, reflect the cost of providing a service. Some insured people have higher out-of-pocket costs that could be affected by the rate a particular hospital charges, and uninsured people might be able to use the data to get a baseline cost for an inpatient procedure, according to an HHS spokesperson.
The release of the pricing data was intended to get people to ask providers about the cost of their own health care, according to HHS. Ultimately, the agency believes that having the information will empower people and pressure health providers to make procedures more affordable.
Will this practice be the same when the Affordable Care Act takes effect?