How does a hospital decide how much you pay and what to bill you for?

Don’t pay that Hospital Bill INSTEAD hire a billing advocate,

What is a charge master?

The Charge Master
A Charge Description Master (CDM), also known as a “chargemaster,” is a comprehensive and hospital-specific listing of each item.
It’s this giant price list of every item that the hospital provides, ranging from an aspirin to the paper cup that you drink the water out of when you take the aspirin to, you know, a $10,000 wonder drug for cancer.
It’s every single item, and the thing about the charge master is that every hospital has completely different prices. They’re typically five to 10 times what it cost the hospital to buy those items or provide those items. And insurance companies get big discounts off of the charge master, but the discounts that they get are still not enough to keep these hospitals from making very high profit margins and from all the non-doctor administrators at these hospitals from making exorbitant salaries.
Patients are captive consumers who don’t know what they’re buying from hospitals or what things cost.

Hire a medical billing advocate.

For a fee, you can hire someone who has similar expertise as the payers to fight back, and often reduce these bills to a tiny fraction of their original amount. Eight out of 10 medical bills have mistakes on them. They either charge an hourly fee, ranging from $60 to $175, or they work on a contingency basis, earning a commission of 15 percent to 35 percent of the amount they save you. It’s mostly phone work, so they don’t have to be in your same city.

How does a Hospital come up with the charges on your bill?

The chargemaster is an enormous computer file that lists prices for thousands of products and services, and all hospitals maintain them.
Can your Hospital administrators  explain the basis of chargemaster prices. Prices appear to be unrelated to actual cost, they vary from hospital to hospital, and they go up automatically.
Most people never pay those prices. Medicare determines on its own what it will pay, and private insurers negotiate their prices with hospitals. But the chargemaster prices are so high that private insurers don’t negotiate down from there — they negotiate up 30 percent to 50 percent from the Medicare prices, Brill reported. Then insurers tell customers how much they “saved” them.
Health-care finance in the United States is complex and not always logical or fair. Hospitals tally charity care based on chargemaster prices. The actual cost is more like $3 billion, or less than half of 1 percent of the annual revenue of U.S. hospitals.
Nonprofit, tax-exempt hospitals have become hugely profitable businesses in the United States. Internal Revenue Service rules state that nonprofits may take in more money than they spend as long as no profits go to shareholders. Nonprofit hospitals are buying other hospitals, doctors’ practices, building their own labs and becoming monopolies in cities nationwide, Brill reported. Doctors and nurses aren’t getting wealthy, but hospital administrators earn hefty salaries. Keeping the hospital running plus an extra 11.5 to 12 percent in pure profit that goes to the non-doctor administrators at the hospital, who are making a million, $2 million, $3 million, $4 million, $6 million dollars a year in salaries.
Medicare, which collects data on what it costs hospitals to deliver all types of tests and treatments. Under the law, Medicare must reimburse hospitals for the cost of the services, plus factor in overhead, capital expenses, salaries, insurance, education of medical students and regional differences in cost of living.
Medicare has 600 or 700 government employees and about 8,000 employees from the private sector who do a terrific job administering the claims and running the program. Medicare buys its services much more efficiently, because it is the big player in the marketplace. None of the insurance companies have the leverage that Medicare has.
You could save taxpayers money, believe it or not, is if you lowered the age of Medicare and allowed more people in their 60s to join Medicare, as opposed to the Obamacare solution now, which is they’re all going to have to buy health insurance, but the government is going to subsidize their much more expensive private health insurance. Buyers don’t have any leverage. And Obamacare really does nothing to attack that.
“Currently, consumers don’t know what a hospital is charging them or their insurance company for a given procedure, like a knee replacement, or how much of a price difference there is at different hospitals, even within the same city,” Secretary Sebelius said. “This data and new data centers will help fill that gap.”
The data posted today on CMS’s website include information comparing the charges for services that may be provided during the 100 most common Medicare inpatient stays. Hospitals determine what they will charge for items and services provided to patients and these “charges” are the amount the hospital generally bills for an item or service.
To view the new hospital dataset, please go to:
To access the funding opportunity announcement, visit:, and search for CFDA # 93.511.
For more information on HHS efforts to build a health care system that will ensure quality care, please see the fact sheet “Lower Costs, Better Care: Reforming Our Health Care Delivery System,” at
To read a fact sheet about the Medicare data showing variation in hospital charges, please see:

RESOURCES That’s the website for the Medical Billing Advocates of America. Among other things, they offer a state-by-state guide of patient advocates.