[draz]

I generally agree with your sentiment. However, here's something to consider - medical practices mostly over-charge to avoid insurance fraud. Wait, what?? Yes, here's how it works: if they were to ask you, "what insurance do you have" and then charge you differently (i.e. one insurance pays them better than the other, so they'd charge more), they'd be committing a crime.

So, instead, they charge EVERYONE a crazy amount, and then they get X% of the amount billed from one insurance, Y% from another insurance, etc. Fair? Not really -- if you don't have insurance, you get hit with the FULL amount (since you don't have the negotiating power the insurance company has). So while company X paid $200 for an MRI, you'd pay out of pocket $2500 without insurance.

In reality, what happens? Normally, people without insurance are an underserved population. They send them letters, and they don't pay. At the end of the day, the hospital/private practice just ends up writing this amount off, and they call it a day. It ends up being a silly game where they bill knowing they won't get paid, and then spend more money on trying to collect rather than give more realistic prices.

I, therefore, welcome this transparency.

source: I work for one of the largest and prestigious medical/research institutions in the US, and I used to do Analytics for their financial data warehouse.

[maxerickson]

Do they actually negotiate deals with insurance companies where they lose money on some procedures?

If they don't, then the problem is that they want the revenue from the higher paying insurance, not worries over fraud.

[draz]

Yes, they want more money from higher paying insurance. But if they were to officially have a menu of prices for different entities (self pay, insurance A, insurance B, etc), that'd be against the law. So they come up a "catch all" number, and they grab as much as they can get from each entity.

[maxerickson]

My point was that there is some matter of perspective in there. They could just as well offer a single price that reasonably covered their costs, but instead they are engaging in revenue maximization. So the menu is a rational tradeoff of revenue maximization and fraud avoidance, but it isn't the only one.

"Insurance companies won't play the game that way" is sort of an answer, but it isn't very satisfying.

I guess fraud statutes might benefit from some rules about the ratio between average negotiated prices and stated prices (I'm a little uncomfortable telling entities how they are allowed to price things, but large medical institutions clearly have some dysfunction in this area).