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AP/David Goldman
Prepare for a hefty bill.

American hospital pricing is completely divorced from reality

By Max Nisen

One of the signature components of US health care reform, sometimes overshadowed by fights over Medicare expansion and the individual mandate, is an increased emphasis on data and transparency. And one of things the data show is how strange hospital pricing is.

Yesterday, the Department of Health and Human Services released 2012 data on hospital prices and payments. It shows that depending on where you go, hospital charges vary wildly, in some cases with gaps as large as hundreds of thousands of dollars for a single procedure. Medicare, private insurers, and individuals typically pay much less than the charged price and within a narrower price band, but these numbers help mark the starting point for private insurance negotiation, and can carry through to the under and uninsured.

Here are the 10 most expensive hospitals, based on average charge for joint replacement, one of the most common inpatient procedures for Medicare beneficiaries:

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And here are the least expensive:

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As documented extensively in Steven Brill’s investigation (paywall) of hospital prices for Time, not only are prices inconsistent and marked up massively over cost, hospitals provide little justification for why that is. People without insurance sometimes get saddled with bills much higher than what Medicare or private insurers would pay.

Hospitals argue these prices are misleading, because relatively few people pay them. But at the very best, the pricing and billing is confusing. At the worst, it can bankrupt people (paywall), and decouples health care spending from outcomes and the procedures true cost.