The American healthcare system, for all involved, is a complex maze of transactions at every step of the patient-hospital relationship. One of the most important tools hospitals use to keep track of charges and maintain revenue is the chargemaster, an itemized list of each item charged to a patient or their insurance. Any chargemaster training emphasizes understanding how to best use the chargemaster to maintain revenue.
The Importance of Mark-ups
Chargemasters dictate what price hospitals charge for their services, and are not subject to any kind of external regulation. Hospitals, therefore, can charge significantly more than the items actually cost, sometimes as much as twenty times more. The purpose of this is two-fold: maximizing revenue as much as possible, and compensating for negotiations with private insurance companies.
Hospitals, like any business, have to make enough money to stay open. Even public hospitals have to have enough money to pay their staff. Chargemasters are essential to tracking and monetizing internal transactions, and the inflated prices they use help hospitals continue to serve their communities.
Of course, patients rarely pay the listed chargemaster price for any item or service. Insurance companies serve to negotiate both how much the company pays and how much the hospital can charge their client. Insurance can end up paying as much as 80 percent of a patient’s medical costs, and these prices will be lower than what the chargemaster lists. By marking up prices at the outset, chargemasters guarantee that hospitals are able to make ends meet, even after insurance companies lower prices.
The chargemaster is an essential part of hospitals’ internal system, determining how much hospitals charge before they negotiate with insurance companies. By maintaining a list of each item and service they charge for, hospitals can maximize their revenue as efficiently as possible.