Why the big price gaps in hospital bills for surgeries and procedures?

One reason is most people with insurance do NOT pay the posted rates. The insurance companies negotiate rates with hospitals, so in your example, the patient’s insurance would have paid the $182,000 hospital just $30,000, and that would be it.

The man who had to cover the 20,000 difference has a pretty good claim against the insurance company, especially if it was an emergency, which most appendicitis situations are. That usually only happens if you go out of network and don’t get pre-approval.

But t get back to your original question, hospital accounting is bizarre, and has to do with capitalization of the facility. So the cost of the ER and the room may be much greater at one hospital than another. When I spent time in the hospital, I understood paying for all the services, but the total cost of the services sure wasn’t $2,500 a day. The professionals spent about an hour and a half with me all day.

It’s the result of applying free-market principles to the provision of health care. Also, the exhorbitant prices charged by some are a bargaining chip, as @zenvelo says, they know they will not get that amount either from the insurance companies or the patient so they start ridiculously high.

There are many things that can cause disparity in billing between medical facilities. Federal law requires medical providers to establish a uniform charge master list that sets forth their rates for each service. The US Congress looked into the various rates at different medical facilities.

Some of the things that caused the difference in pricing were, as @zenvelo was getting at, the providers’ need to make up for very big discounts from master prices for third party health plans, the reimbursement for Medicaid and Medicare and for self-pay patients. The cost of living in areas can cause prices to vary. There are many reasons.

There is a lot of gaming in health care pricing and it comes from many places. One, as @zenvelo mentioned, is the difference between charges and actual payments. Insurers negotiate different rates than what appears on the actual bills. I think it’s generally around one-fifth of charged amounts.

So, except for self-pay patients, who can usually least afford it, what appears on a hospital bill is a fantasy amount. Hospitals will pump it up in an attempt to get insurers to pay more, so the bill goes ever higher and insurers pay an ever smaller portion of the bill. Pity the poor uninsured patient.

Medicare and Medicaid, generally pay even less than private insurance does. There is some rule about what they can negotiate because Congress doesn’t want them to use their power to save taxpayers money. They just want to cut back the services covered. Make poor and elderly people pay more. Preserve the private market you know. (That was heavy sarcasm if you didn’t catch it).

All this is called cost shifting and it is how Americans pay for the best and worst health care system in the world. Best if you have good insurance. Worst if you are not poor enough to be poor and not rich enough get insurance and have the bad fortune to get hit by an uninsured motorist at an intersection or to get some chronic disease.

There is only one workable solution. Single payer. Obama’s plan, while good intentioned, justed has too many holes in it and too many weaknesses that hard-hearted, uncaring conservatives will take a whack at. Conservatives, God knows why, want to see fewer people with access to health care. In the process, they want to drive the cost of health care even higher than it is. Makes no sense, but nothing they do makes sense to me.

Single-payer is what they do in Canada. Most of the Canadians here will attest that they really like their system. Most Europeans will do the same about their systems. Only in the US do we do things in a different way from the rest of the world, and for purely ideological reasons, we fight to keep on doing it the stupidest way possible.

In theory, conservatives want free enterprise and competition to keep prices down. Unfortunately, in order to have free enterprise in health care, you have to be able to refuse to care for people who can’t pay, and right now, that’s against the law. I would hope no one would seriously advocate to be able to let folks die on hospital door steps, but that is the only way the conservative vision of health payment can have a chance of working.

Given that that is politically unfeasible, no system that includes private insurers can be efficient. We end up with the cost shifting that causes appendicitis treatment to run from $1500 to $150,000. So our only option is the single-payer system, just like…. hey! The rest of the world!

But don’t hold your breath. Americans can be very, very creative in trying everything else that doesn’t work before they get around to trying the system that is proven to work. My advice? Don’t get sick. But if you have to get sick. Work some place that gives you good health insurance. And if you can’t do that. Don’t get sick.

Because the American system sucks. Some states have limits on how much can be charged for certain things in hospitals, caps on the amount that can be charged to the patient above what the item’s price is at cost, but many states don’t. Free market means you can charge whatever the market will bear. It’s disgusting related to healthcare. My hospital bill for two days (I was hospitalized a month ago) is so far $30k, almost $20k is imaging, which is ridiculous.

Insurance and free market sound like they might be about security and liberty, but in practice in the USA they end up being more like institutionalized corruption and exploitation.

@Zaku Corruption is something that you’ll get in any kind of people-related endeavor. You’ll find it in any economic system. Anyway, that’s freedom for you. You get all kinds.

@Nullo Yes, but when the government is corrupt everyone wants to fix it (well, except those profiting from it) when businessmen are corrupt, it seems quite a lot of people want to protect them and call it capitalism and democracy,

@Nullo Nice attempt at spinning. The US insurance industry is extremely craptastic. Extremely craptastic is not “something you’ll get in any kind of people-related endeavor.”

@Zaku I’m not spinning, though. If the insurance industry were built and/or operated by people who were not attempting chiefly to line their pockets, it would be a happier place.