Steven Brill wrote a very good article on our health care system recently in Time Magazine. If you haven’t read it, you might want to take a look. The information can profoundly effect your finances if you ever need hospital care.

In the hospital where I worked twenty years ago, we technologists went to Central Service and got the supplies we needed. Central Service wrote down the cost of the items and charged them back to the department – (Radiology). Today, everything that is used on or for you is charged to you via a system called chargemaster.

Scripps Hospital, a private, nonprofit health system in San Diego, California says . . . “chargemaster is a comprehensive and hospital-specific listing of each item that could be billed to a patient, payers or other health care provider. Most procedures are comprised of multiple components – your hospital room charge, laboratory charges, diagnostics, pharmacy, therapy, etc.”

The price of every single item used, ie, a needle, a piece of gauze, a catheter, is computed by chargemaster in some magical way and billed to you.

Jeff Pilato, director of revenue cycle at coding firm HRS explained that chargemaster . . . “is the hospital’s electronic list of all services, procedures and supplies charged to payors. [It], is the central mechanism of the revenue cycle. All charges for services and supplies, whether inpatient or outpatient, reside in the chargemaster.”

I went to the medical billing answers website for further clarification. It told me to take a look at this page to see an example of how the codes can be broken down. When I clicked on the link this is what came up.

404 – 找不到檔案或目錄


Seriously – though Chinese, not Greek.

To add to the confusion, Mr. Pilato explained that every charge must be connected to ICD-10, International Classifications of Diseases. (The 10 refers to the number of times this has been reviewed.) A big problem arises because often, inpatient chargemaster codes don’t match the ICD codes.

To complicate matters even more, the chargemaster charges are totally unrealistic For example, you may be charged $1.50 for one aspirin, (100 at Walgreen’s for $5.99) – or $333 for a $23 bedside chest x-ray. Not for profit hospital administrators rationalize these outrageous charges by saying the excesses covers the cost of charity patients. This, of course, is nonsense. We taxpayers do that.

Steven Brill found there seemed to be no rhyme or reason why chargemaster came up with the prices it assigns to items . . .”that are the basis for hundreds of billions of dollars in health care bills.”

The government and insurance companies negotiate the cost of drugs and equipment for patients covered by Medicare. What if you aren’t yet 65? Even if you have insurance, it may prove inadequate, and you will be billed and required to pay all the charges, (unless you can find someone who knows how to arbitrate those bills.)

In addition, I could find no correlation between what drug companies charge the hospital for medications and what the hospital charges you.

I won’t even go into the question of why doctors order many more cash-generating, expensive tests than needed or the why some hospitals refuse to share multimillion dollar pieces of equipment such as  MRI, CT  and PET scanners.

Finally, chargemaster charges are not regulated. They are different in every hospital. Some hospital administrators call them irrelevant and another says they can’t explain them but that they seem to go up automatically. Is chargemaster simply a cash cow allowing administrators to draw million dollar paychecks?

Steven Brill writes that hospitals are . . . “supposed to be government-sanctioned institutions accountable to the public.” He believes chargemaster should be outlawed.

I think so, too.



8 Responses to CHARGEMASTER

  • Cathy Thomas says:

    Wow, Betty! This is very informative. I’m wondering what to do about this. It seems like we’re the fools who take what’s dished out to us. I’ve always accepted the argument that outrageous charges for aspirin, etc. were to cover charity patients. I assumed that there was an amount hospitals set aside to write off. Could you explain more about how taxpayers cover those costs? I was surprised to read that the charges were different in each hospital. That makes sense in different cities, I guess – NY would be more expensive than KC. But, within a city, would it be more expensive in a suburb vs inner city? Or is it just arbitrary? I’d love to hear more about this subject, Betty. Thanks!

    • beth says:


      Steve Brill couldn’t find out how individual hospital’s chargemaster systems come up with the prices it imposes, and it appears hospital administrators have little interest in finding out because all hospitals make a profit, even the ‘not for profit’ ones.


  • Bob Chrisman says:

    Betty, I may have an answer to the question about charges at different hospitals in the same city for the same service. My doctor scheduled a test at a Plaza hospital. It cost almost $3,000 and my insurance wouldn’t pay much ($750 was all) because it was not part of their preferred-provider network. When the doctor told me I needed the same test to see if the treatment was working, I had time to find out what hospital my insurance company covered. The same hospital but at their Northland campus was a preferred provider and the charge was only $2250 of which my insurance paid most. Same hospital, but different campuses and $750 difference in the initial cost. Go figure.

  • Bob Chrisman says:

    Hospitals within a system have different contracts with health insurance companies. Forgot to add that to the last post.

    Having just finished dealing with doctors and hospitals, they never ask if the patient will undergo a test. They usually just wheel them off to have it. There is no explanation of cost on anything. But, of course, doctors are gods/goddesses and their homes (the hospital, clinic, office) are sacred and not places to ask probing questions.

    A friend who paid cash for her cancer treatments negotiated a much lower rate with the hospital billing department simply because she paid cash and no insurance claims were necessary. That was an eye opener.

  • Bob Chrisman says:

    Blaming things on the poor seems like a good way of not explaining how a person, government, Congress, politician, hospital administrator gouges the public for money. “It’s the poor who are draining the system. It’s the poor who don’t pay their bills. It’s the poor. It’s the poor. It’s the poor.” I’m so tired of that excuse, but it appears to work.

    What we have are institutions (like Congress, hospitals, insurance companies, financial institutions and others) that have found legal ways to rob the American public and plead the need to do so because of limited money. I don’t buy it. We have enough to wage wars in two different countries where money pours into the pockets of dishonest people, but not enough to care for American citizens who pay the taxes?

    • beth says:


      Perhaps we’ve all had the glorified opinion that hospitals are simply in the business of saving lives. As it turns out, hospitals are also in business of making money — in some cases, lots of it. I understand that, but the lack of transparency bothers me. Some industries need regulating. This is one of them.


  • Theresa Hupp says:

    Many of your points about the irrationality of healthcare pricing are valid. But remember that every system is designed to get the result it gets. The whole healthcare system is designed to keep costs secret until after they are incurred.

    The problems with healthcare pricing are in large part due to the negotiation of discounts between healthcare providers (hospitals, doctors, labs, drug companies) and insurance companies. People with insurance pay the discounted prices negotiated by their insurers. The uninsured do not get the benefit of these discounts, and are the only people charged the “chargemaster” price.

    There is no price transparency, because both insurance companies and healthcare providers believe secrecy is to their advantage. So patients who need healthcare have no idea what medical products and services will cost until they get the bill. Most insurance companies now show on their statements to consumers the original cost, the discounted cost they negotiated, the amount they will pay, and the amount the consumer must pay — but consumers don’t see this information until after the service is incurred.

    Healthcare is the only area of our economy in which costs (and quality — a separate topic!) are kept secret. Imagine walking into a car repair shop and asking how much it would charge to replace a damaged fender. “Sorry, we won’t know until after it’s installed,” the technician might say. “And which insurance company do you have?” But we accept this for a doctor and hospital to replace a hip.

    I don’t agree with all your points – Why should hospitals share equipment? Do we expect manufacturers to share their equipment? You also over-simplify who pays for charity cases – the insurance companies, insured patients, wealthy uninsured patients all pay a part (as do taxpayers).

    You are right that the pricing of healthcare is hidden. The overall system would have to change to make pricing more transparent and therefore more rational. The Affordable Healthcare Act does very little to make healthcare more affordable, nor to change the non-transparency of healthcare pricing.

  • beth says:


    I totally agree with you. We need to fix the health care system, its secrecy, and hidden pricing.

    As to sharing equipment, you are correct. Maybe manufacturers don’t share their equipment, but hospitals waste resources by pumping millions into diagnostic (and other types of) equipment and then vastly under-use them.


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