How Do Hospitals Set Prices?

Overview

The goal of ClinicPriceCheck is to increase price transparency in healthcare. There are three ways to search the site:

1. Searching for health procedure prices at local hospitals
2. Comparing hospitals
3. Estimating a 'good' price for a health service

1. Search for procedure prices at local hospitals

You can search for the price of a medical procedure at local hospitals by clicking the "Find Prices Now" link on the home page. Clicking on the "Find Prices Now" button will take you to list of categories.

From there, you can then select a category and procedure to price compare at local hospitals.

The 'Are you a Medicare Patient?' button displays a window with average Medicare reimbursement rates for a procedure.

2. Hospital quality and cost comparison

Next, you can compare hospitals. In basic search, you can then click on the hospital name in the price list to take you to the hospital page.

The hospital page provides information about a hospital's quality along a set of eight metrics, ownership, markup and other general information.

3. Estimate a good price for a procedure

To search for a 'good' price for a health procedure, you can click on the underlined service name at the top of the price list page to get an overview of 'fair' or good pricing. Here is service page for CT scan of the Head. The service page will provide pricing estimates for both self-pay and insured shoppers.

Types of Hospital Prices

To understand medical pricing, let’s discuss the different types of medical prices that most hospitals have:

Chargemaster or List Price:

A hospital chargemaster is a price list for all hospital services and supplies. There is currently no standardized format for these chargemaster lists. On January 1st, 2019, hospitals were required to post these lists in a machine readable format to there website, via this federal registrar rule. These prices can be thought of as the maximum price that you can pay for a service. If you are insured, on average a patient pays 15 cents more for every dollar increase in the chargemaster.

Medicare/Medicaid Reimbursement:

Medicare pays hospitals a flat rate for in-patient services (or hospital stays). The flat-rate is based on diagnoses or formally called disease related groups (DRGs). The reimbursement rates for medicare and medicaid are often different with medicaid being less than medicare reimbursement. “Are you a Medicare Patient?” box shows the medicare reimbursement for both physicians and facilities fees by CPT code. The medicare reimbursement price is set based on calculating costs for providing procedures. They include physician's costs, practice expense, and liability expenses.

Cash Price At Time of Service:

Hospitals will often give a cash price discount on the chargemaster price. This ranges from 0-95% of the chargemaster list price. The median cash price discount in California for hospitals was over 50% of the chargemaster price. Smaller facilities usually have a smaller discount and a lower chargemaster price, while larger hospitals and hospital systems usually have a higher discount on a higher chargemaster price. This site will provide cash prices paid at time of service.

Cash Price After Service:

If you pay for services in cash, you will often get a discount even after the service was rendered. These discounts are often lower after you have received services. Ideally, you want to pay prior to receiving services.

Third Party Insurer Prices:

If you have insurance, your insurer has an agreement with the hospital to pay a certain price for services. If you have a high-deductible plan and have not reached your deductible (a fixed amount that you must pay before the insurer will start paying for services), then you will usually pay the balance after the insurance adjustment. The average insurer adjustment is 30% off the chargemaster price, but can be as little as 5% or over 50%. It can be useful to compare your insurer adjustment to the cash price.

Charity Care:

If you have a low income (as high as 350% of the federal poverty line), you might qualify for charity care or income subsidized care. Most hospitals have a department or financial counselor focused on providing charity care. Some departments provide charity care for all income groups (this is a cash discount through the backdoor). For income subsidized care and charity care, you often have to submit pay stubs to validate income.

All data on this site is publically available or crowdsourced. All hospital chargemaster or list prices are based on health provider websites and government websites. The Medicare pricing data and hospital quality metrics are based on 2018 data from the Centers for Medicaid and Medicare Services (CMS) and The Office of Statewide Health Planning and Development for California (OSHPD). All cash prices are estimates and are not guaranteed in any way.

The Current Procedure Terminology (CPT) coding system available on the service listings and detail pages is under copyright through the American Medical Association. CPT codes are provided purely for informational and educational use on this site.

California regional differences in cash and list prices

• Northern California has higher list and cash prices, than Southern California.

• Compared to urban areas, rural areas have lower list prices. In addition, even though list prices are lower in rural areas, many rural hospitals still offer cash pay discounts that can make prices very close to Medicare reimbursement rates. Please note, in terms of price the best rural hospitals in terms of price are often those unaffiliated with a large hospital systems with centers in Los Angeles or the Bay Area.

• Los Angeles has some of the best cash rates in California. If your a self-pay patient, you can pay the Medicare rate or a low multiple (1-2 times) of the Medicare rate in LA. There are also hospitals in LA which cap the cash prices for surgeries at under $6000-7000 for cash payers, which can be quite a good deal.

• In the Bay Area, the cash discounts are substantial. Cash discounts generally range from 50-80% off the list prices for health providers, not in the Sutter Health system. However, in the Bay Area list prices are very high. The list prices are often 10 to sometimes 20 times the Medicare rates, so even a 50% discount does not approximate the Medicare rate like in the Los Angeles area.

• In the rest of California, including San Diego, there is less competition. Thus, the cash discounts are lower than in the Los Angeles area. On a positive note in San Diego, the list prices are also lower than the Bay Area and Los Angeles.

The American Healthcare system has no federally mandated prices, which means individual health providers or larger health provider systems set their prices. Centers for Medicaid and Medicare (CMS) reimburse hospitals for patients who have Medicare and Medicaid. These reimbursements are often a good way to measure the cost of providing the service along with the cost-to-charge (CCR) ratios which hospitals publish yearly. You’ll find both of these pricing estimates for most procedures on this site. The primary goal of this site is to help you to understand the “true” cost of these services and pick health providers with the lowest markup.

For a number of reasons, it's difficult to anticipate healthcare costs. Some include that some hospital prices are proprietary, health providers are often less than forthcoming on pricing, anticipating services can be difficult, and there are literally millions of prices for roughly 15,000 services in just in the state of California. American hospitals have defacto price discrimination which means different groups or individuals can pay vastly different prices for roughly the same services depending on insurer status, income and the decision to self-pay.

There has been a push for more transparency at the state and federal level. California was a head of the curve and in 2004 passed a bill requiring hospitals to submit their chargemasters along with the 25 most common services to the Office of State Health Planning and Development (OSHPD). The Trump Administration is also trying to increase price transparency. As of January 1, 2019, the Centers for Medicare and Medicaid Services (CMS) issued a new rule requiring all hospitals to post their price lists (called chargemasters) on their websites. Also in July of this year, CMS proposed a rule to display insurer prices for hospital services. If these prices become available in the future, this site will display them with the hospital chargemaster and cash prices.

There are some procedures that have two or more prices at the same hospital. Multiple prices can occur because of any one of these three reasons:

1. CPT codes for procedures might have modifier codes. A modifier code is a secondary code included to clarify the procedure. The different modifiers may denote slightly different procedures and thus different prices. The modifiers are difficult for us to categorize due to the fact that many hospitals do not provide this data. The next version will make an attempt to rectify this problem.
2. Health providers may have two prices for the same procedure because they charge different groups of patients different prices. For instance, one California hospital’s Chargemaster had a $10 metabolic panel and $1000 price for a metabolic panel. A $990 price difference for a metabolic panel could not be explained by modifier.
3. Our algorithm could have misclassified the price and it should be classified under another procedure. Please downvote misclassified prices. The hospital description is in the blue highlighted area of the price box. If the hospital description does not match with the description at the top of the price list. This is the problem. We are working to improve this.

   There are some services that have two or more prices for the same procedure at the same hospital, due to three issues:

   1. CPT coded procedures might have modifier codes, so the modifier for those two prices might be different. The modifiers are difficult for us to categorize due to the fact that many hospitals do not provide this data. The next version will make an attempt to retify this problem.

   2. Health providers may have two prices for the same procedure that they are using to bill different groups of patients (one California hospital in their chargemaster had a $10 price for metabolic lab and $1000 price for a metabolic lab, this could not be explained by modifier).

   3. Our algorithm is wrong and one of the prices should be under another procedure. Please downvote these prices if you see this. The hospital description in the blue highlighted area of the price box. If the hospital description does not match with the description at the top of the price list. This is the problem. We are working to improve this.

   

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