# Chargemaster

In the United States, the chargemaster, also known as charge description master (CDM), is a comprehensive listing of items billable to a hospital patient or a patient's health insurance provider, with highly inflated prices at several times that of actual costs to the hospital. The chargemaster typically serves as the starting point for negotiations with patients and health insurance providers of what amount of money will actually be paid to the hospital. It is described as "the central mechanism of the revenue cycle" of a hospital.

## Quotes

    Alphabetized by author
* JPS doesn't publicize its costs or charges. Its chargemaster, which lists prices for thousands of different services, is public information for anyone requesting it. But chargemasters are written in codes that are hard to understand. And it wouldn't provide a comparison of prices of another hospital.
** Yamil Berard (April 29, 2008). "Aggressive price hikes at JPS hurt many - In pursuit of government payments, hospital sends some charges soaring". Fort Worth Star-Telegram (Texas): p. B6.
* 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.
** Bloomberg View editorial board (February 24, 2013). "Bringing Down Health-Care Costs Isn’t Always Complicated". Bloomberg View. Retrieved on March 7, 2013.
* 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.
** Jack O. Bovender, Jr., Chairman and Chief Executive Officer, Hospital Corporation of America (June 24, 2004). "House Hearing, 108th Congress -A Review of Hospital Billing and Collections Practices - HCA'S Hospital Billing and Collections Practices". House Hearing, 108 Congress, From the U.S. Government Printing Office: p. 95-446; Hearing before the Subcommittee on Oversight and Investigations of the Committee on Energy and Commerce; House of Representatives; One Hundred Eighth Congress; Second Session; Serial No. 108-107. Retrieved on March 7, 2013.
* However, I quickly found that although every hospital has a chargemaster, officials treat it as if it were an eccentric uncle living in the attic. Whenever I asked, they deflected all conversation away from it. They even argued that it is irrelevant. I soon found that they have good reason to hope that outsiders pay no attention to the chargemaster or the process that produces it. For there seems to be no process, no rationale, behind the core document that is the basis for hundreds of billions of dollars in health care bills.
** Steven Brill (February 20, 2013). "Bitter Pill: Why Medical Bills Are Killing Us". Time (Time Warner). Retrieved on March 4, 2013.
* The higher the chargemaster markup over cost, the greater the potential for profit.
** T. Neil Davis (2008). Mired in the Health Care Morass. Ester Republic Press. p. 66. ISBN 0974922145.
* Handing consumers hospital chargemasters to help them 'shop' for the best deal is about as useful as handing them a scalpel and telling them to perform their own bypass surgery. Yet, the state of California in 2003 enacted a law requiring all hospitals to make their chargemasters publicly available.
** Paul Ginsburg (November 19, 2007). "Patients can't do it alone; For transparency to work, insurers need to take the lead". Modern Healthcare 37 (46).
* Do you have any idea how much your hospital laboratory charges for an outpatient urinalysis? I didn't until recently, when my daughter showed me a copy of the bill my hospital was sending to her insurer. The charge for urinalysis, culture, and sensitivities was $491. When I ordered a follow-up a week later, it was $273. How could that be? This inquiry about one urine test is symbolic. There are 20,000 items in the hospital's Chargemaster computer billing program. This massive list comprises the healthcare problem in America. In light of this, I decided to spend time as an amateur economist. The first question I asked: Where is the hospital lee schedule published? Not on the hospital website.
** Richard R. Grayson (February 6, 2009). "Who cares about overcharging? How one urinalysis reflects the state of U.S. health care". Medical Economics 83 (6).
* California is a unique state in that all hospitals are required to submit a copy of their chargemasters, which the state then posts online for all consumers and patients to see.
** Bob Herman (July 16, 2012). "Report: Surgery Prices Vary Wildly at California Hospitals". Becker's Hospital Review (ASC Communications). Retrieved on March 4, 2013.
* 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.
** Indianapolis Business Journal staff (October 24, 2011). "Judge slaps IU health over billing uninsured patients". Indianapolis Business Journal (Indianapolis Business Journal Corp.) 32 (34): p. 13A.
* 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.
** Peter Kongstvedt (2009). Managed Care: What It Is and How It Works. Jones & Bartlett Publishers. p. 212. ISBN 978-0763759117.
* Of particular importance, other than in Maryland, hospitals are generally free to charge whatever they want in their chargemaster.
** Peter Reid Kongstvedt (2012). Essentials of Managed Health Care. Jones & Bartlett Learning. pp. 114–115. ISBN 1449604641.
* 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.
** Chris Lyle and Monica Shultz (May 2009). "Health economic analysis: what needs to be considered when designing a clinical trial for medical technology?". Applied Clinical Trials 18 (5).
* 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.
** Medicine & Health staff (May 14, 2007). "Picking on the poor: hospitals charge uninsured patients more: self-pay patients pay 3 times more than Medicare-allowable costs". Medicine & Health 61 (19).
* Several hospitals have made initial, defensible pricing investments to eliminate the most egregious perceived offenses--e.g., the $100 aspirin--item from their chargemasters. However, few hospitals have designed or adopted a charge-code-by-charge-code pricing methodology that is auditable, logical, and defensible.
** Michael E. Nugent (June 2009). "Beyond the "pay me more" strategy: more and more provider-payer contract negotiations are turning into an adversarial "pay me more/pay you less" exchange. To excel in an emerging value-based purchasing environment, providers need to partner with their top payers". Healthcare Financial Management 63 (6).
* 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.
** Dr. Sreedhar Potarazu (February 28, 2013). "ObamaCare Gold Rush: The winners and losers". FOX News. Retrieved on March 7, 2013.
* Much ink has been spilt bemoaning that incomprehensible foundation of hospital cost accounting and prices, the redoubtable chargemaster.
** James C. Robinson (2007). "Price Transparency Begins at Home". Frontiers of Health Services Management 23 (3): 25-28. Retrieved on March 7, 2013.
* 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'.
** Roswell Daily Record staff (March 14, 2010). "Lawsuit alleges hospital unfairly bills uninsured". Roswell Daily Record (New Mexico).
* 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.
** The Star-Ledger editorial board (January 3, 2005). "Post hospital prices". The Star-Ledger (Newark, New Jersey): p. 14.
* Perhaps worst of all, billed charges can be perceived as shocking, or even punitive, to the uninsured. As hospitals increasingly raised their charges and set prices by negotiating discounts from their chargemasters, those with the least bargaining power received the smallest discounts. An unfortunate consequence of this system is that self-payers, including the uninsured, were usually forced to accept the charges that hospitals stipulated. This created, probably inadvertently, a rather pernicious outcome in which patients who had the least ability to pay for their health care were charged the highest prices. This has resulted in considerable problems for some patients with very high health care personal debt, aggressive efforts at collection, and avoidance of needed services.
** Christopher P. Tompkins, Stuart H. Altman and Efrat Eilat (January 2006). "The Precarious Pricing System For Hospital Services". Health Affairs 25 (1): 45-56. DOI:10.1377/hlthaff.25.1.45. Retrieved on March 7, 2013.
* [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.
** United States Senate Committee on Finance staff, cited in: Naples Daily News staff (September 23, 2007). "Nonprofits hope IRS more responsive to them". Naples Daily News (Florida).
* 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.
** Rebecca Vesely (July 1, 2004). "Sutter Health sued for overcharging". Tri-Valley Herald (Pleasanton, California).
* 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.
** Sandra J. Winterhalter (2011). "Economic factors converge: force hospitals to review pricing strategies". Journal of Health Care Finance 37 (4).

## See also

* Debt
* Economics
* Healthcare
* Medicine

## External links

* Database of hospital chargemasters in California, Office of Statewide Health Planning and Development, State of California