In the early 90's the administration at the hospital where I worked decided that there needed to be a uniform manner for determining how charges for supplies were determined and set (which I thought was a good idea). Without the benefit of any input that I am aware of, the administrator responsible for the purchasing department sent out a memo to all department heads and managers indicating that supplies of any nature used throughout the hospital were to be charged at the rate of 300% of the actual price - no exceptions. I pitched a fit at the very next department head meeting.
As background (in my field of nuclear medicine) Medicare knew exactly how much vendors were charging for the more expensive radiopharmaceuticals and the hospital reimbursement for the more expensive radiopharmaceuticals was tightly regulated. At that time a new therapeutic radipharmaceutical, Strontium-89 chloride, had just been released. The vendor charged everyone a uniform price of $2000 for a single dose. It was a one time administration so only one dose was used for each patient that required the therapy. There were no discounts for anyone from the vendor.
Under this administrator's nutbag idea of a policy we would have had to charge $6000 for this therapy radiopharmaceutical! I explained to the group that Medicare would only reimburse $2000 and that it didn't matter how much we charged - there was an upper limit on what Medicare would reimburse. I said that Insurance companies would know what the Medicare reimbursement rates were and would tend to adjust their reimbursements accordingly. At that time insurances did tend to reimburse more than Medicare. But the clincher was that the uninsured individual who had terminal cancer would get hit with the full $6000 bill for the radiopharmaceutical. This made my head spin around. I said that I thought that $2000 for the isotope was an unconscionable charge to begin with but I couldn't control that. I could influence what we charged the patient though.
The end result is the policy was put on hold and was rather quickly forgotten about. The rationale for how charging decisions are made can get fairly complicated and often, like the case I describe, don't make sense. Then you start looking at how charges are rationalized and vary from institution to institution you can begin to see how sometimes wide disparities in charges develop. I'm not making excuses for this situation, but rather I'm describing my experiences.
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