Charges are irrelevant to the patient’s bottom line
By Pamela J. Gallagher
With increased calls for healthcare pricing transparency from consumers and government entities alike, hospitals’ chargemasters are moving from proprietary information to public knowledge. However, putting chargemasters under the microscope has not led to the clarity that patients are seeking regarding quality care at a price they can afford.
Nearly two-thirds of physician respondents in a 2019 NEJM Catalyst survey said that patients do not have enough information to affect the cost of their own healthcare–related decisions, and more than three-quarters of respondents say that assessing the total cost of care is extremely challenging for patients.
Rather than increasing understanding and empowering the consumer, hospitals’ efforts to be open with their charges have highlighted a fundamental misunderstanding between hospitals and payers, and the patients they serve: the definitions of the terms “charges,” “payments,” and “costs.”
A difference in terms
In public discussion of healthcare costs, these terms are used interchangeably, but in fact have completely different meanings to hospitals and insurers. A “charge” is the price listing internally for the hospital and the starting place for negotiations with insurance companies.
It is almost never the amount that an insured patient is billed—hospitals in the U.S. billed an average of 3-1/2 times what they received in payments for all of the services they provided in 2015, according to True Cost of Healthcare. The term “charge” is just the sticker price. While hospitals are getting better at reducing the actual cost of care-to-charge ratio, it isn’t reimbursed that way by insurance companies, which will be prohibitive in moves toward reducing the “charge” amount.
