Charges, payments and costs, oh my!

CMS last night released 2011 data on the charges and payments for the 50 most common hospital discharges for every hospital in the USA (Aaron McKethan put me onto this via twitter @A_McKethan). A quick primer and then selected comparisons for UNC, Duke and Wake Med hospitals.

  • Charges are a fantasy amount that no third party insurance company would ever pay. However, the uninsured might pay this amount (they would often be ‘charged’ this amount and go bankrupt trying).
  • Payments are the amount that is actually paid for care (in the data released it is combined amount paid by Medicare, other insurers, and patients).
  • Cost is a truly elusive concept in health care, but hospitals of course have systems that state their costs (and likely have many versions depending upon what is included).

Payments are sometimes greater than costs, but in other cases less; this differs by type of care and payer. And of course it depends upon what measure of cost you might use (does it include capital financing costs? If you build a new Cancer hospital, how broadly are those costs apportioned, etc.). Note that no data on costs was released. Charges and payments are an imperfect means of saying something about costs. Continue reading “Charges, payments and costs, oh my!”