Understanding Hospital Charges
Allegheny Health Network (AHN) is committed to helping consumers understand health care costs. As of January 1, 2019, CMS (the Centers for Medicare and Medicaid Services) requires that hospitals post a list of their charges online. This list is called a “chargemaster.” It is a list of charges for medical items and healthcare procedures that you might receive at one of our facilities.
Historically, hospitals developed charge systems that were based on very detailed lists of items consumed during the medical stay or medical procedure. Over the years, third party payers, including Medicare and Medicaid, and commercial insurers, have independently contracted with hospitals, thereby limiting the relevance of hospital charge systems. Reimbursement under those circumstances is generally limited to negotiated fee schedules that are not dependent upon hospital charges. Today, hospital charge systems play a limited role in determining the cost of care paid by consumers or insurance companies.
Charges contained within the chargemaster list include an array of items such as room and board, charges for a hospital stay, supplies for care, and other items and services that you might receive while you are at the hospital. The charges listed in the chargemaster generally do not include charges for services you might receive from a doctor. Each hospital has its own unique list of items and charges. Charges for individual items contained in a chargemaster vary from hospital to hospital and often vary between hospitals that are members of the same hospital system.
Because all hospitals are now required to make available their entire chargemasters in a machine-readable form, you could compare one or more items contained in these chargemaster lists to similar items available at another hospital.
Unfortunately, comparing individual items in a chargemaster is not likely to be meaningful to a consumer when determining the difference in the cost of hospital services. Typically, a variety of individual chargemaster items are included on a single hospital bill. The exact number and variety of charge items and charges is based on exactly what has been consumed by the patient during the course of their stay. That varies with almost every patient. While this list is the basis for charges and charge amounts initially charged by the hospital, for most patients who are covered by some form of insurance, these charge totals are generally not used to determine the actual reimbursement paid to the hospital by Medicare, Medicaid and commercial insurers, except in limited circumstances. Likewise, these charges generally are not used to determine the portion of the bill paid by an insured patient.
How does it work?
Hospitals have contracts with insurance companies. These contracts are a result of the hospital and insurer agreeing to a price for each service. When a patient with insurance has that service, the insurance company will pay the hospital whatever the negotiated price is for that service, regardless of the charges generated on the patient bill. For instance: The chargemaster might generate charges for a given procedure of $1,000. One insurance company may contract with us to pay $500 for that service, while another insurance company will contract to pay $450 for that same service. In both cases, charges do not determine the amount paid by the insurance company to the hospital. The difference in charges generated by the chargemaster and the expected contract reimbursement is accounted for by the hospital as a contractual discount. Similarly, CMS also has predetermined prices that it will pay a hospital for services to patients.
Does the chargemaster affect what I will pay as a consumer?
Charges generally do not determine what your out-of-pocket cost will be. What you pay in out-of-pocket cost depends on your insurance coverage. Your particular insurance benefit determines your portion of the total payments made by you and your insurer to the hospital. So, in our previous example, if your insurance company negotiated a rate of $500 for that service, you may have to pay all, part, or none of that $500, depending on the benefit contract you have with your insurance company and relevant factors such as your annual out of pocket maximum. Our patient counselors work with patients to gain an understanding of their insurance benefit and to estimate the amount of the patient’s out-of-pocket cost. Charges can be more relevant for insurers, patients who do not have insurance coverage or insured patients whose benefits have been exhausted. If you do not have insurance, we are here to help. Find out more about our financial assistance policy.
What if I have more questions?
Check out this short video on the chargemaster and how it works
You can always give us a call if you have questions about your out-of-pocket costs, a bill that you have received, or how to get financial help. Find the correct phone number for your question here: ahn.org/financial-assistance-ahn-bills#FA-FinServices.