If you want to understand how medical billing works and why these ridiculously high bills get created, there's a lot of important context that this article unfortunately leaves out.
Large hospital systems accept patients who have a range of payers (Original Medicare, Medicare Advantage, various Medicaid plans, private insurance, and uninsured patients). On the aggregate, they want to make sure that their entire system is cashflow-positive - however, they do that in a rather roundabout way, because they only have the ability to negotiate with some of their payers, whereas the others are able to set their rates at whatever price they want.
Medicare and Medicaid set their reimbursement rates by fiat, and providers have essentially no ability to negotiate those. Except in critical access areas, Medicare actually reimburses much less than the marginal costs of care for its patients (7% in the aggregate)[0]. These rates are so low that Medicare actually has a separate program to pay extra money to hospitals that treat a lot of Medicare patients - otherwise, they would literally go under. The reason they provide this money as a separate program and don't count it in claims is entirely political.
As a result, providers present very large bills to everyone else (privately insured and uninsured patients) to make up for this loss - you can't stay in business if you're literally making a loss on every patient! Uninsured patients see the large bill and assume they have to pay the entire amount (they don't!), and private insurers end up negotiating that down to some multiple of what Medicare pays.
A typical insurer will negotiate an agreement like, "we'll pay 350% of what Medicare pays for this category of services".
[0] This is not looking at any markup that the hospital provides - we're talking about how much the hospital has to pay its suppliers. So, for a hypothetical vaccine that costs $100 wholesale, Medicare might reimburse $93, which doesn't even cover the cost of the equipment, let alone the entire hospital infrastructure (wages, etc.).
We're talking about how much the hospital has to pay its suppliers
Except suppliers can engage in their own fiat prices, as the OP demonstrates.
But your narrative does show the basic situation - where you have an elaborate digraph of buyers and sellers, most of which have a more or less monopolistic position. These monopolistic suppliers initially/formally set their prices based on "what they could possibly imagine getting", expecting regulators/down-stream-buyer to be the ones who will push things back into sanity (or not).
American health care, of course, has bounced from regulatory regime to another, with all of the players having to adjust. And moreover, all the players are now adept at adjusting, able to switch gears to leverage whatever ad-hoc cost reductions might go with any new system (cautious enough to lay-low when the new system comes since they know the politicians need to point to gains but will move on - see the way Obamacare worker great for two years, etc, etc).
And with all the bouncing, the situation has gotten only broadly more catastrophic. Health care was ~18% of GDP a year or two ago and no doubt is higher still.
Not only does health care have a problem but the four or eight cycle of ad-hoc fixes to health care has itself broken. Which might relate to the general breakdown of the countries political system, and so-on. I assume when (part of) Rome fell apart, no had seen an empire disintegrate on quite those terms (where a lot of civilization still remained on higher terms than Rome's neighbors). Perhaps our descendants will look back on this era in similar terms.
> Except suppliers can engage in their own fiat prices, as the OP demonstrates.
Those aren't fiat prices by any stretch. Aside from the fact that there is a competitive market of providers, patients don't have the obligation to pay the entire billed price (a key point which this article does not mention). That's neither a monopsony nor a monopoly.
Medicare, on the other hand, is a legal monopsony over its patient population and does set its prices by fiat. (There is no competitive market; patients can opt to receive their Medicare benefits privately, but they cannot opt out of Original Medicare entirely. Similarly, most providers cannot legally opt out of accepting Medicare, in practice).
(in high population areas it doesn't make sense to comply with the limits imposed by the program, for instance, only having 25 beds, that's why there aren't any in Connecticut and such)
(Just adding a bit of info, I think CAHs are pretty high jargon)
For surgery centers, the Affordable Care Act has limited a lot of plans to daily center maxes (on the facility side) so in theory the doctors are being paid market rates for their services. But the differences in prices between Medicare rates and out of network are significant.
Large hospital systems accept patients who have a range of payers (Original Medicare, Medicare Advantage, various Medicaid plans, private insurance, and uninsured patients). On the aggregate, they want to make sure that their entire system is cashflow-positive - however, they do that in a rather roundabout way, because they only have the ability to negotiate with some of their payers, whereas the others are able to set their rates at whatever price they want.
Medicare and Medicaid set their reimbursement rates by fiat, and providers have essentially no ability to negotiate those. Except in critical access areas, Medicare actually reimburses much less than the marginal costs of care for its patients (7% in the aggregate)[0]. These rates are so low that Medicare actually has a separate program to pay extra money to hospitals that treat a lot of Medicare patients - otherwise, they would literally go under. The reason they provide this money as a separate program and don't count it in claims is entirely political.
As a result, providers present very large bills to everyone else (privately insured and uninsured patients) to make up for this loss - you can't stay in business if you're literally making a loss on every patient! Uninsured patients see the large bill and assume they have to pay the entire amount (they don't!), and private insurers end up negotiating that down to some multiple of what Medicare pays.
A typical insurer will negotiate an agreement like, "we'll pay 350% of what Medicare pays for this category of services".
[0] This is not looking at any markup that the hospital provides - we're talking about how much the hospital has to pay its suppliers. So, for a hypothetical vaccine that costs $100 wholesale, Medicare might reimburse $93, which doesn't even cover the cost of the equipment, let alone the entire hospital infrastructure (wages, etc.).