Hospital Sticker Pricing Versus Reality

How does a hospital’s billed charge compare to what they actually receive from various payers? Is there a public data base that provides this information? Perhaps a visit to would be productive in your search for the truth.

We keyed in on Valley Baptist Hospital in Harlingen, Texas to check statistics posted on this website. We have no idea if the information is accurate, but let’s assume it is.

The payer mix at Valley Baptist is 45% Medicare, 25% Medicaid and 30% “Other”.

Most of us have been conditioned to believe that hospitals lose money on Medicare and Medicaid patients. Therefore, we are told, private payers, in this case we assume that to be the “Other” class of payers, pay more than other patients. While the former may not be true in all cases, the later is certainly borne out in the numbers here.

According to this website, all payers in the aggregate pay 72% off billed charges. Medicare patients pay 77% off billed charges while Medicaid patients pay 85% off billed charges, specific to Valley Baptist Hospital. That must then be true that “Other” payers pay a lower percent off billed charges, i.e., pay more than do government health plans. If you have a mathematical background, it is easy to come up with the average % off billed for “Other” payers.

How does this compare to Cost Plus Insurance? ( ) Cost Plus payment methodology is based on the greater of Cost Plus 12% margin or Medicare +20%. Under  Cost Plus statistics show the percentage off billed charges ranges from 70% to as high as 88%, sometimes more.

Hospitals do not lose money on Cost Plus reimbursement formula. They make a 12% margin.

This is useful information and is illustrative of hospital billing practices in comparision to what payers actually pay.

Thus, the fallacy of PPO discounts is exposed.


Editor’s Note: Proponents and supporters of the 50% Club now look like patsies – Molly Mulebriar, in a rare press release issued this morning, announced the formation of The 70% Club. She welcomes  and encourages 50% Club members to join. Membership is free and the savings are greater.