We talk about this constantly, but it bears repeating: the standard rates that hospitals charge you have absolutely no bearing on reality. They average more than 4x their costs and in many hospitals are 10-20 times or more their costs. Imagine paying $150,000 for a brand new Honda Civic!
Anytime you receive a hospital bill, it’s important to check to make sure that you’re not getting price gouged. Hospitals don’t make this easy and many of them will pretend to be the good guys by offering a 25%, 30%, or even 50% “prompt payment” or “self-pay” discount (note if you don’t get offered a discount on your bill up front it’s probably worthwhile to call up the number on the bill and just ask – the worst they can say is ‘no’).
However – even with the discount you could still be getting overcharged. Below, we’ve listed the 5 ways to figure out how much you really should pay for your medical bills.
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Method #1: Look At Your Explanation of Benefits (EOB)
Note: this method only works if you have insurance. If you don’t have insurance, you won’t get an EOB.
Your Explanation of Benefits (EOB) is the document your insurance sends you to confirm what healthcare costs they have and haven’t covered. In this document, your insurance company will list out all of your hospital procedures, the hospital costs, the discount that they’ve negotiated with the hospital, the amount they’re paying, and the amount you owe.
The key here is to look at the discounted amount. Make sure that there is a discount (sometimes called a contractual discount). If not, you may be getting overcharged for your medical bills.
Method #2: Compare to Hospital Costs / Medicare Rates
When trying to negotiate pricing, it’s always a good idea to understand what it actually cost the hospital to provide their services to you.
Every hospital pays close attention to the charge/cost ratio. This is the ratio of total hospital chargemaster charges in a given year divided by the total cost to run the hospital in a given year. This tells you what their markup is. Every hospital that accepts medicare patients is required to report this information to the government every year, and the Center for Medicare and Medicaid Services publishes all of this information on their website.
Unfortunately, you need a degree in computer science and statistics to make sense of the data the way it’s published (we know – we’ve spent hundreds of hours digging into it in order to develop our Fair Price Analysis).
There is a workaround, however. Gathering the Medicare rate for all of your procedures will give you a rough idea of what it cost the hospital to provide those services (Medicare pays anywhere from 80% – 120% of costs, depending on how efficient the hospital is).
To do this – first, call the billing department and request an itemized bill. This is a bill that gives a line by line overview of all costs. Hospitals don’t like to give it out, but are required to provide it if requested. Each line in that bill should have a CPT or HCPCS code. These are the codes that we use to compare to medicare rates.
Once you have your CPT or HCPCS codes you can use a company like Find-A-Code or Supercoder to figure out what the medicare rate is. These websites allow you to type in a CPT/HCPCS code and a zip code, and will tell you what medicare would pay for that procedure.
Record all of this information and compare to the rate that the hospital charged.
Method 3: Compare to Health Insurance Rates
While the exact rates that a given hospital negotiates with a given insurance company for their services are a closely guarded secret (in fact, hospitals are currently suing the US Government to prevent having to reveal these rates), we can use some quick hacks to get a close approximation.
The first hack is to use the Center for Medicare and Medicaid Services Data mentioned in Method 2. In this data, you can calculate an average insurance reimbursement to charge ratio, and then combine that with your charge to cost ratio to determine what an insurance company pays on average. However, if you’re not a computer science/stats wizard, there’s another way.
Fair Health Consumer has an enormous repository of health insurance claims that can help you to see what hospitals in the area may have been paid by insurance companies for a given procedure.
After obtaining an Itemized Bill (as mentioned in Method 2, call up the number on your bill and request an itemized bill) head over to fairhealthconsumer.org. There you’ll be walked through a series of questions and prompts that will help you to determine what an insurance company would have paid on average to a hospital in your area.
Unfortunately, every hospital is different, and this average doesn’t mean this is what your hospital normally gets from an insurance company.
Method 4: Compare Pricing to Market Rates
All hospitals are required by law to post their standard chargemaster rates online. However, it can be a pretty monumental task to find all the hospitals in your area, look up their chargemaster rates, sort through 70,000 or more individual codes to find the exact ones you want, and then average and compare to the rate you’re being charged.
Luckily Healthcare Bluebook does this for you. You can go to their website, enter in either a CPT code or a description of the service provided and they’ll provide you a price range for that service.
It’s important to note, however, that this price range is based on hospital chargemaster rates, and not costs or insurance negotiated rates, which are almost always massively inflated.
Method 5: Work with Resolve
Resolve combines a thorough analysis of all of the data mentioned above along with decades of experience to determine a fair rate for the hospital bills we work on (this includes results from our own negotiations in addition to all of the methods listed above). In addition, our trained experts get to work on your behalf fighting to secure that rate, ensure proper insurance coverage, identifying and correcting billing errors, and fighting against balance billing.
If you’d like a free consultation to dig into your medical bill, give us a call at 877-245-4244.
Braden founded Resolve after experiencing first hand how unfair the system is for patients. Prior to Resolve, he built and ran Operations for a renewable energy company and then built and ran Product, Growth, and Operations for a VC-funded edtech company. He received his MBA from Dartmouth’s Tuck School of Business and BA in Philosophy from the College of William and Mary. When not trying to lower healthcare costs he can be found outdoors mountain biking, skiing, or hiking with his dog.