Pick a common procedure, like a brain MRI, and look up what one insurance plan pays every provider in a single city. You'll rarely find one price. You'll find a spread, and the most expensive option is often several times the cheapest.
That's not an error in the data. It's how US healthcare pricing works, and machine-readable files have made it visible for the first time.
Five reasons prices vary
1. Where the service happens
The place of service is one of the biggest drivers. A scan, a colonoscopy or a minor surgery performed in a hospital outpatient department usually carries a facility fee on top of the professional fee. The same service at an independent imaging center or ambulatory surgery center often costs much less.
2. Market power
Large health systems that patients and employers consider "must-have" can negotiate higher rates than small independent practices. Research on hospital consolidation has repeatedly found that prices tend to rise when competition falls.
3. Each contract is negotiated separately
Every negotiated rate is the outcome of a separate contract between a plan and a provider. The same hospital can have very different rates with different insurers, and the same insurer can pay neighbouring hospitals very differently.
4. How the contract is structured
Some contracts set a dollar price per code. Others pay a percentage of billed charges, a percentage of a fee schedule such as Medicare's, or a per diem for each day of a hospital stay. Different structures produce different effective prices for the same service.
5. Professional and facility fees
A procedure can generate a professional fee for the clinician and an institutional fee for the facility. Some providers bill both, others only one, so a fair comparison means adding them up.
What this means for you
For employers, the spread is an opportunity. Steering employees toward high-value providers through plan design, navigation or centers of excellence can lower costs for the company and its employees at the same time.
For providers, knowing where you sit in your market's spread is the starting point for every contract negotiation.
Comparing prices fairly
When you compare rates, keep these constant:
- the exact billing code, including any modifiers
- the place of service
- professional vs. facility billing
- the plan or network
That's how every cost page on US Health.io will be built. Read how to interpret an in-network file, or see who else uses the data.