The chargemaster: where prices start
Every hospital maintains a chargemaster, a master list of every billable item and service with an associated price. Chargemaster prices are set by hospital administrators and have historically been opaque. They bear little relationship to the actual cost of delivering care.
A study by the Johns Hopkins Bloomberg School of Public Health found that hospitals charge an average of 3.4 times what Medicare pays for the same services. Some hospitals charge 10 times or more. These markups are the starting point for negotiations with insurers, not prices that patients actually pay.
How insurance contracts constrain prices
Insurers negotiate contracts with hospitals that set specific allowed amounts for each service. These contracted rates are typically 30% to 70% below chargemaster prices. Hospitals agree to accept the contracted rate as payment in full from in-network patients.
Medicaid rates are set by state governments and are generally the lowest rates hospitals receive, often below the actual cost of providing the service. Medicare rates are set by CMS through the fee schedule and inpatient prospective payment systems. Hospitals cannot bill Medicare patients more than the Medicare rate for covered services.
Price transparency requirements
The Hospital Price Transparency Rule, effective January 1, 2021, requires all hospitals participating in Medicare and Medicaid to publish: a machine-readable file with prices for all items and services, and a consumer-friendly display with prices for at least 300 shoppable services. The file must show the chargemaster rate, the negotiated rates with each payer, and the de-identified minimum and maximum negotiated rates.
Hospitals that do not comply face civil monetary penalties. CMS has enforced the rule against non-compliant hospitals, with penalties scaled to hospital bed size, up to $2 million per year for large facilities.
What this means for uninsured patients
Uninsured patients who do not negotiate are often billed the full chargemaster rate. This is the highest possible price. Hospitals are not legally required to give uninsured patients the same discounts they give insurers, though the ACA's Section 501(r) limits how much nonprofit hospitals can charge patients who qualify for financial assistance.
Under 501(r), nonprofit hospitals cannot charge patients who qualify for financial assistance more than "amounts generally billed" to insured patients. This provides an implicit cap on what qualifying uninsured patients can be charged.
Using published prices in negotiations
Hospital price transparency data is publicly available. You can use it to see what your hospital charges other payers for the service you received, and use that information to negotiate as a self-pay patient.
Tools like CMS's Hospital Compare and third-party aggregators of transparency data make it possible to compare prices across hospitals in your area. For elective procedures, shopping across facilities can produce savings of thousands of dollars for the same procedure.
Frequently asked questions
Are hospitals required to tell me the price before I receive care?
Under the No Surprises Act, providers must give good faith cost estimates to uninsured and self-pay patients before scheduled services. For insured patients, the requirements are less specific, but hospitals must provide the publicly posted prices.
Why does the same hospital charge different amounts to different patients?
Because hospitals have different negotiated rates with every insurer, set a separate self-pay rate, and have a chargemaster list price. For the same procedure, a hospital might receive $800 from Medicaid, $1,400 from a commercial insurer, $2,200 from another insurer, and bill $6,000 to an uninsured patient.
How do I find a hospital's published prices?
Go directly to the hospital's website and search for "price transparency" or "patient estimates." CMS also provides links to hospital transparency files at cms.gov/hospital-price-transparency. Third-party tools like RAND Hospital Price Transparency Tool aggregate this data.
Can hospitals charge different rates based on where you live?
Hospitals set one chargemaster and negotiate different contracts with different insurers. The variation is based on the payer, not the patient's geography. However, different hospitals in different regions have different chargemaster rates, so where you receive care matters enormously.