Sarah Kliff at Vox highlights a great graph from a tremendous paper by Cooper, Craig, Gaynor and Van Reenan on the variation of pricing within hospitals by insurer for common, repeatable procedures.
The story is simple. In Hospital 1, Red X and Green Triangle (two different insurers) pay about the same for an MRI while the last insurer, Blue Circles, pays significantly more for the same procedure. In Hospital 2, Red X has an even bigger discount than it did at Hospital 1 compared to the average payment while Blue Circle pays about the average price and Green Triangle pays about almost 200% more than the average price.
There is massive price variation within a hospital for almost any service.
In urban hospitals, I would be shocked if any common procedure performed by the same clinician in the same room on the same day with the same code(s) will have a string of four claims with the same exact amount collected by the hospital. Medicaid Fee for Service pays differently than Medicaid Managed Care which pays differently than CHIP which pays differently than Medicare which pays differently than Medicare Advantage which pays differently than narrow network Exchange and Commercial which pays differently than broad network Exchange and Commercial which pays differently than national rental wrap-around networks.
Price segmentation gets even more complex as soon as we throw in tiered networks, Medicaid programs from other states, integrated delivery networks that are not strict closed gardens and cash-pay only policies and a dozen other variations.
A single procedure at a large academic medical center can often have two dozen or more contracted rates which are billed at least monthly. And those rates will be determined by the relative negotiating power of the insurer and the hospital/provider group.
Going back to the fourth or fifth week of Econ 101, perfect price segmentation which means that the maximum willingness to pay of each customer is the exact price that they face is one of the highest goals of a good seller as they can extract and enjoy the entire surplus generated by the transaction.
This graph is incredible but not unexpected.