Can We Please Stop Fixating on Hospital Chargemasters?
Across the country, states want to address health care costs that are too high and growing too rapidly. Knowing what hospitals list as charges for their services – featured in a list called a hospital chargemaster – isn’t the answer.
The call for chargemaster transparency was spurred by the writings of Stephen Brill, a lawyer, journalist, and entrepreneur who founded The American Lawyer magazine and the cable channel Court TV, who highlighted both the outrageous levels of some hospital charges and the variation in those charges from one hospital to another in his book The Bitter Pill.
In response, some states began collecting that information. The Trump administration reinforced the public interest in hospital chargemaster lists by issuing a rule in 2018 that required hospitals to publish their chargemaster prices online. However, this attention to hospital chargemasters is misplaced because the chargemaster rates hospitals use are nearly meaningless.
What is a chargemaster?
A hospital chargemaster is the collection of standard list prices for hospital services. Chargemaster rates are essentially the health care market equivalent of Manufacturer’s Suggested Retail Price (MSRP) in the car buying market.
Hospital chargemaster rates are the equivalent of Manufacturers Suggested Retail Price or MSRP in car buying markets. They are little more than the price a seller would ideally like to charge a consumer. Hospitals set their own chargemaster rates – there is no legal requirement or set formula a hospital must follow when establishing the basis between chargemaster rates and costs. As a result, chargemaster rates are unlikely to be accurate reflections of actual hospital expenses.
Recently, The Montana Office of the Commissioner of Securities and Insurance examined the ratio between 10 acute hospitals’ expenses and chargemaster rates.