There are many reasons prices may differ between hospitals. Among them are the following:

Payer mix – As with other businesses, hospitals cannot survive if costs exceed revenues over a long period of time. Government programs (like Medicare, Medicaid, BadgerCare and General Relief) generally reimburse hospitals at rates that do not cover the costs they incur to provide care. Therefore, hospitals that have a relatively high percentage of government-program patients must recover a greater percentage of their operational costs from privately insured and self-pay patients through higher charges.

Hospital cost structures – Hospitals differ in their approach to pricing based on operational costs. Some hospitals try to spread the cost of all services and equipment among all patients. Others establish charges for specific services based on the cost to provide each specific service. Furthermore, some hospitals may decide, or be required, to provide certain services at a loss while other hospital operations subsidize the losses. Any of these situations can result in significantly different charges among hospitals for a given type of service.

New technology - The equipment hospitals use to provide services differs in age, sophistication, and frequency of use.

Staffing costs - Salary scales may differ by region and are typically higher in urban than rural areas. Shortages of nurses and other medical personnel may affect different regions differently. Where shortages are more severe, staffing costs, and, therefore charges, may be higher.

Intensity of care - Some hospitals are equipped to care for more severely ill patients than others. Patients within the same diagnosis or procedure category may need very different levels of service and staff attention, causing variation in charges.

Range of services provided - Hospitals differ in the range of services they provide to patients. Some may provide the full range of services required for diagnosis and treatment during the stay. Others may stabilize patients and then transfer them to another hospital for more specialized or rehabilitative care.

Service frequency – The per-patient cost of services is generally higher if the type of hospitalization occurs infrequently at the hospital. Furthermore, a single case with unusually high or low charges can greatly affect a hospital’s average charge if the hospital reported only a few cases in a given time period.

Differences in coding - Hospitals vary in their coding systems and personnel and in the number of billing codes they routinely include on a billing form. This may result in similar types of hospitalizations being classified differently.

Capital expenses - Hospitals differ in the amount of debt and depreciation they must cover in their charge structure. A hospital with a lot of debt may have higher charges than a hospital not facing such expenses. Furthermore, hospitals may choose to lease or purchase equipment or hospitals. The choices made about financing of capital projects may affect charges in different ways.

The out-of-pocket limit is the most you could pay during a coverage period for your share of the costs of covered services. Typically, a coverage period is one year, but your plan may be different.

The out-of-pocket limit typically does not apply to insurance premiums, out-of-network providers, non-preferred drugs, or any other limited or excluded services.

If you have already paid deductibles, copayments, and coinsurance during your current coverage period, those amounts would be applied toward your out-of-pocket limit.

For example:
 
If your health plan's out-of-pocket limit is $8,000 but the services you received from the hospital show total charges of $25,000, you will only be responsible for up to $8,000.

However, if you have already paid $2,500 toward your deductibles, copays, and coinsurance during this coverage period, the maximum you could pay for covered services during the remainder of your coverage period is $5,500 - even though the charges displayed in your selected services are much higher.

Out-of-pocket limits are designed to help you plan for your health care expenses; however, since out-of-pocket limits only apply toward covered services, it is critical that you understand which services are covered by your plan before you schedule your treatment. We encourage you to contact your insurance company with key questions covered in this Coverage Checklist.

Insurance and coverage can be confusing. To help ensure you get the best possible results, we have put together the following Coverage Checklist, which includes some questions to be sure to ask your insurance company's member services representative.