[rgoddard]

Another cause of this is that services are generally not priced on a case by case basis. Hospital inpatient claims are priced based off of DRGs (Diagnostic-related group). An insurance company is not charged on a line-by-line basis. Rather the entire claim is submitted to the insurance company, who will process the claim and assign a DRG to that claim based off of the procedure codes, diagnoses and other factors. It might also assign a severity level. Based off of the DRG and severity level and the negotiated fee schedule a price will be assigned. This price might be a per day amount or a price to cover the entire span.

So you have an added layer of abstraction between what the service is costing and what the hospital is being paid. This system was put in place to simplify the pricing procedure so that it did not have to be done on a case by case basis. But it limits most hospitals to only really caring to this higher level of detail.