5 charts that show hospital pricing is even wilder than you think

Topics: Finance, Costs and Prices, Medical Bills and Debt, Providers, Hospitals, Politics and Policy

By Jackie Kimmell, senior analyst

You've read the news stories: A $108,951 bill—after insurance—for an emergency department visit. A $5,751 bill for a patient who declined medical care.

For patients confronted with these bills, they can present an unexpected—even shocking—financial blow. But even as journalists and lawmakers are increasingly digging into stories about "surprise medical bills," they often leave a root question unexamined: Where did those hospital prices come from in the first place?

The answer is complicated, of course, but it's often linked to a hospital's chargemaster, which can list prices over 1,000% greater than the price set by Medicare. Hospitals have wide latitude to set the prices for any procedure or test that they want, and each hospital determines their price differently, leading to a remarkable amount of variation between providers. 

It should be said that very few people actually pay these prices. Hospitals will often argue that listing these charges is misleading, as Medicare, Medicaid, and private payers don't pay these list prices. Yet while these pieces aren't what most patients pay, they are often the starting point for hospital negotiations with private insurers, and serve as a baseline for determining cost for those who are uninsured or out-of-network.

To see how much variation truly exists in these numbers, we've analyzed Medicare's data files to see the range of average covered charges (the list price billed by the hospital) at every hospital in the United States. View the variation in cost for five common conditions (DRGs) below by selecting the DRG of interest in the drop-down list on the graphic below.

  1. Major joint replacement without major complications (470)
    • Minimum list price: $8,930
    • Maximum list price: $267,726
    • Average list price: $62,622
    • Average Medicare reimbursement: $12,244

     

  2. Heart failure & shock with major complications comorbidities (291)
    • Minimum list price: $6,081
    • Maximum list price: $453,199
    • Average list price: $42,537
    • Average Medicare reimbursement: $9,415

     

  3. Septicemia or severe sepsis (without mechanical ventilation, >96 hours, with multiple complications) (871)
    • Minimum list price: $7,903
    • Maximum list price: $281,370
    • Average list price: $52,168
    • Average Medicare reimbursement: $11,492

     

  4. Stroke (intracranial hemorrhage or cerebral infarction with multiple complications) (64)
    • Minimum list price: $9,646
    • Maximum list price: $300,831
    • Average list price: $57,579
    • Average Medicare reimbursement: $11,198

     

  5. Spinal fusion except cervical without multiple complications (460)
  • Minimum list price: $15,084
  • Maximum list price: $469,924
  • Average list price: $117,784
  • Average Medicare reimbursement: $24,565