The Mystery Behind Hospital Charge Masters – Is Pricing Enforceable?

Hospitals maintain a price list of services they provide, called a Charge Master. An interesting lawsuit  (Hospital Charge Master) contends that a certain hospital’s charge master “is not an independent, objective, or verifiable means of determining charges.”

According to the lawsuit, “hospital costs are marked up by a mathematical formula designed to produce a targeted amount of profit for the hospital.” The lawsuit also states that the hospital updates their charge master weekly (THIS IS IMPORTANT TO UNDERSTAND – CONSULTANTS COMPARE PPO PERFORMANCE BETWEEN ONE PPO NETWORK AGAINST ANOTHER PPO NETWORK OVER A LENGTH OF TIME, BUT DO NOT TAKE INTO ACCOUNT THE EVER CHANGING CHARGE MASTER – THIS WILL COME OUT IN THE BROWNSVILLE INDEPENDENT SCHOOL DISTRICT VS HEALTHSMART LAWSUIT – SEE PREVIOUS POSTINGS ON THIS LAWSUIT).

The contention put forth is “the price term in the agreement (assignment of benefits signed by the patient) is indefinite and the agreement is therefore unenforceable.”

However, the finding continues “under quasi-contract principals, HCA Donelson Hospital is entitled to reasonable value of the medical goods and services it provided.”

Editor’s Note: If it is true that “hospital costs are marked up by a mathmatical formula designed to produce a targeted amount of profit for the hospital”, than one can call a Charge Master a Cost-Plus document. We strongly support the Cost Plus concept of reimbursing hospitals for services rendered. But, Cost Plus 500-1000% does not seem to be fair and reasonable to us. We like cost plus 1% as used by Medicare currently on two pilot projects with over 200 hospitals nationally. Our clients pay cost plus 12% and have cut their hospital expenses significantly. Our clients save money, and hospitals are guaranteed a 12% profit margin. A win win for both sides.

Jeff Barber- Congressional Testimony