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May 16, 2013

The Truth About Medical Billing

The federal Centers for Medicare and Medicaid Services recently released hospital data revealing the wide variation in medical billing. As reflected in an article from The New York Times and an article in TIME, there is, at best, a poorly documented relationship between prices charged and costs incurred in delivering services.

Hospital charge masters are designed to bring in revenues at a level the hospitals feel to be warranted. Similarly, physician charges seem to be more arbitrary than derived from an understanding of cost of inputs (labor, supplies, capitalization expense for technologies, indirect costs, etc.). Fee-for-service reimbursement hasn’t been based on what it costs to do the service, or to produce the desired health outcome. There is a healthcare cost crisis, in part, because we have no way to associate actual costs of producing the service with what is charged. Not surprisingly, the uninsured are punished the most by this billing design. We have an illogical and irrational system that the Affordable Care Act seeks to change.

David A. Ross, ScD

President/CEO of the Task Force for Global Health, former director of PHII