Hospitals in the United States maintain chargemasters that contain the official list prices for all billable services. The prices vary widely across hospitals and are more than three times what hospitals are paid for treating a patient, on average. From this it is tempting to conclude that list prices are a strange, yet ultimately inconsequential, quirk of US health care. However, using both state and national data sets covering the period 2002-14, we found considerable evidence suggesting that list prices reflect hospitals' strategic behavior and have meaningful effects on payments made by and on behalf of patients. Specifically, we found that list prices varied predominantly across hospitals and within markets, were well predicted by observable hospital characteristics, and were positively related to prices actually paid by patients and their insurers. Moreover, analyses of data before and after the implementation of California's Hospital Fair Pricing Act suggest that high list prices causally increased payments from the uninsured. However, list prices had at most a limited relationship with care quality.
Keywords: Health Economics; Hospital Prices; Hospitals.
Project HOPE—The People-to-People Health Foundation, Inc.