[United States Senate Committee on Finance] Staff views it as inappropriate for a hospital to seek payment from a patient by sending a bill, (and) when payment is not received, to seek to recharacterize that debt as charity care. In addition, staff has found that the decision by some hospitals to include bad debt which often consists of very high charges from the (chargemaster list) provides a misleading and inflated accounting of a hospital 's charity care to policymakers and the public.
Chargemasters contain laughably high prices that hospital administrators don’t even try to justify. (They don’t seem to know how they were set to begin with, and argue that they’re misleading because insurance companies always negotiate lower ones.) Yet people without insurance, or with too little insurance, often end up paying chargemaster prices.
To put it simply, the chargemaster system on which hospitals rely to set pricing and billing codes has a forty-year history of changes that has distorted the relationship between price and cost.
The higher the chargemaster markup over cost, the greater the potential for profit.
It has been common for hospitals to raise their chargemaster rates substantially each year in an effort to win higher reimbursement rates from health insurers. But the practice falls hard on uninsured patients, because most hospitals give no more than a 20-percent discount to the uninsured.
What a hospital is actually paid by an MCO, Medicare, or Medicaid is rarely even close to what is listed on the chargemaster. In fact, only the uninsured are subject to those charges.
Of particular importance, other than in Maryland, hospitals are generally free to charge whatever they want in their chargemaster.
Hospitals use a chargemaster to list the items involved in procedures performed at the hospital. A chargemaster contains the prices of all services, goods, and procedures for which a separate charge exists and is used to generate a patient's bill. chargemaster information has traditionally been kept proprietary, but California via the Payers Bill of Rights has recently made its chargemaster available to the public.
In addition to patients without insurance, hospitals also charged international visitors and patients with health plans through insurers that haven't negotiated hospital discounts approximately two and a half times the price offered to health insurers with discounts, the report estimates. These inflated bills base their prices on a hospital's chargemaster file, an undiscounted master list of the prices hospitals set for services.
There are no current measures in ObamaCare that will help Medicare and the private market gain better transparency on the "chargemaster" of hospitals and until this happens, there are many hospital executives who will continue to bring in enormous salaries at the expense of the market and consumers.
Much ink has been spilt bemoaning that incomprehensible foundation of hospital cost accounting and prices, the redoubtable chargemaster.
Hospitals readily admit that chargemaster prices are inflated. That's because they are the starting point for negotiating the discounts given to private insurance plans in return for the volume of patients they send to a hospital. Those bloated chargemaster prices, however, are the numbers used to bill uninsured patients - many of whom will struggle to pay those bills and will get nasty collection letters if they don't.
These gross prices are listed on spreadsheets called chargemasters, and are typically used as a starting point in negotiations over fees in much the same way the sticker price of a car is the initial bargaining point at an auto dealership. The chargemaster prices are typically negotiated downward to reasonable reimbursement rates for private insurers and public programs such as Medi-Cal and Medicare, according to the suit. Not so for uninsured patients of Sutter hospitals , who are billed the full sticker price, which can be 80 percent higher than the industry standard, according to the suit.
Bills that include chargemaster prices are not a true reflection of actual price and if paid at the chargemaster list price would yield extremely large profits for the hospital. (50) It can be argued that because hospitals accept different payments from different payers for identical services, hospitals engage in price discrimination--the practice of charging different customers different prices for identical goods or services.
The Sisneros suit is a counterclaim to a civil case filed by ENMMC against him, for failure to pay a $12,730 hospital bill for treatment. The counterclaim accuses the hospital of inflating its chargemaster rates, or the standard costs for any given procedure, in an effort to engage in 'turbocharging'.