It’s Time to Revisit the Reasonable Value of Medical Care – Part II
Sunday, August 22, 2021
by: Jean Homan, Tacoma City Attorney’s Office

Section: Summer 2021

Jean Homan has been a Deputy City Attorney with the City of Tacoma, handling tort defense, for twenty-four years. Working for a self-insured entity, City of Tacoma litigators handle all tort matters for the City, in all courts and all phases of litigation. Jean’s primary client is the Tacoma Police Department, its command staff and its officers, and her practice focuses heavily on civil rights claims. Additionally, Jean has litigated personal injury, wrongful death and unique municipal claims, such as roadway liability and permitting claims. Over the course of her career, Jean has litigated cases in state and federal court, and has appeared and argued before the Washington State Court of Appeals, the Washington Supreme Court and the Ninth Circuit Court of Appeals. For the past twelve years, Jean has overseen the City’s tort litigation for the City, in addition to her own caseload, and has managed the City’s claim for damages process. Additionally, for the past two years, Jean has served on the Washington Defense Trial Lawyer’s Board of Trustees.
Part I of this article outlined a different way to approach the reasonable value of hospital services, based on the hospitals’ own billing and collections practices.  Even though hospitals bill hundreds of thousands of dollars in gross billed charges, no patient ever pays the gross billed charges, and instead, many hospitals write off up to 75% of their gross billed charges every year1.  Part I recommended that defense counsel conduct specific discovery with the hospitals to establish the factual basis for arguing that the gross billed charges do not represent the reasonable value of the care provided, since no patient ever pays that amount.  Part II of this article addresses the necessary corollary, which is the method plaintiffs usually rely upon to carry their burden of proving the reasonable value of the medical care provided.  Any defense attorney who has ever deposed any of the commonly-retained plaintiffs’ experts who address this issue is familiar with their habitual refrain:  “the amount billed by the hospital is reasonable because that is the amount billed by all hospitals for these services.”  As it turns out, that assertion is not actually true. A study done in Washington clearly demonstrates that there is significant variability in what hospitals charge for the same services, sometimes as much as 600% or 700%.  Moreover, recent changes to a federal regulation provide an additional avenue to develop the factual information necessary to rebut the time worn contention “but that is what everyone charges.”

It’s Reasonable Because That’s What Everyone Charges

In most cases, plaintiff’s experts’ opinions as to the reasonable value of the medical care boil down to one conclusory statement: the amounts billed for plaintiff’s past medical treatment is reasonable because those amounts are consistent with what hospitals routinely bill for such services2. This is often accompanied by the assertion that the expert has done this type of work in Washington for years and therefore “knows” what other hospitals are charging for the same services, and that the charges in the instant case are consistent with what other hospitals charge. Plaintiff’s experts, however, never provide a foundation for their opinion. They do not identify the other hospitals or medical providers that they are using as comparators and they do not provide any evidence as to what other hospitals and medical providers routinely charge for providing the same services as those provided to the plaintiff in your case.  As a matter of practice, plaintiffs’ experts on the issue of reasonable value should be asked these very questions to highlight the lack of a factual foundation for their opinions.  

Contrary to plaintiffs’ experts’ bald assertion, the gross billed charges for medical care vary widely between Washington hospitals.  This undeniable disparity in hospital pricing was the subject of a 2014 report, Hospital Sticker Shock: A report on hospital price variation in Washington State, from the Washington Health Alliance (WHA)3.  This study was funded by the U.S. Department of Health and Human Services, and in this report, WHA documents an extraordinary variation in the gross billed charges by hospitals in Washington State:  “For acute care hospitals in Washington state, the average sticker price for almost all of the 100 most common inpatient treatments varies from 300% to 700%.”  Hospital Sticker Shock, p. 4.  For example, the gross billed charges for DRG 0664 (stroke) varied 300%, with Multicare’s Tacoma General charging on average $37,066, as the highest, and Olympic Medical Center charging on average $10,835, as the lowest.  Id. at p. 13. Similarly, the gross billed charges for DRG 313 (chest pain) varied 400%, with Multicare’s Good Samaritan charging $28,509, as the highest, and Yakima Valley Memorial Hospital charging $7,703, as the lowest.  Id. at p. 19.  This documented disparity in gross billed charges undermines the simple assertion that plaintiffs commonly rely upon to establish the reasonable value of the hospital charges.

While the WHA study is helpful to refute the conclusion that there is consistency in what hospitals charge for their services, information about what other hospitals actually charge for the specific services provided to the plaintiff in your case can be extremely helpful in undermining the plaintiff’s experts’ opinions.  Recent changes to a federal regulation require hospitals to make all such information publicly available to consumers and thus, with a little research, you should be able to develop specific comparators for the charges at issue in your case.

The Hospital Price Transparency Rule

The Centers for Medicare & Medicaid Services (CMS), a part of the federal Department of Health and Human Services, is responsible for adopting regulations that pertain to hospitals serving Medicare and Medicaid patients.  As part of the Affordable Care Act, hospitals have been required to make public a list of the hospital’s standard charges for items and services provided by the hospital, and to update this list annually.  For years, hospitals complied with this statutory requirement by publishing their chargemaster rate sheet, a behemoth spreadsheet that includes tens of thousands of entries and was almost indecipherable.  Ultimately, CMS became concerned that the chargemaster rate sheet was not helpful to patients and in November of 2019, CMS promulgated its final rule – “Price Transparency Requirements for Hospitals to Make Standard Charges Public” (hereinafter Hospital Price Transparency Rule). See 45 CFR 180 – Hospital Price Transparency5.  

This new rule – which became effective January 1, 2021 – requires all hospitals who serve Medicare and Medicaid patients (essentially, all large hospitals) to make their “standard charges” publicly available in two formats.  First, the hospital must produce a single “machine-readable digital file” (think Excel spreadsheet) that contains the hospital's “standard charges” for all items and services provided by the hospital.  45 CFR §180.50.  Second, the hospital must provide a consumer-friendly list of 300 “shoppable services,” services that can be scheduled in advance.  This list must contain plain language descriptions of the services, group each service with any ancillary services, and then provide the “standard charges.”

The real teeth of this regulation are in the definition of “standard charges.”  Under the rule, hospitals are required – for each item offered and each service provided – to disclose the following information under the rubric of “standard charges:”
  • gross charges:  the charge for an individual item or service that is reflected on the hospital’s chargemaster, absent any discounts6;
  • discounted cash prices:  the charge that applies to an individual who pays cash or a cash equivalent for a hospital item or service7;
  • payer-specific negotiated charges: the charge that a hospital has negotiated with a third-party payer for an item or service;
  • de-identified minimum negotiated charges: the lowest charge that a hospital has negotiated with all third party payers for an item or service; and
  • de-identified maximum negotiated charges: the highest charge that a hospital has negotiated with all third-party payers for an item or service.

By requiring hospitals to provide all of these elements as part of the “standard charge” for a particular service, it becomes very easy to ascertain the maximum fee that any patient pays for a particular service (which will certainly be significantly less than the gross billed charges), and to undermine plaintiff’s contention that the gross billed charge is the de facto reasonable value of the services.  Actually obtaining this information, however, may be easier said than done.
Some media accounts8 indicate that there is significant resistance to the requirements of the Hospital Transparency Price Rule, and therefore, limited compliance with the rule by some of the larger providers. For other providers, however, a simple Google search will result in the “machine-readable digital file” required by the rule9, and a wealth of information about what other hospitals charge (regardless of payment source) for the same services as provided to the plaintiff in your case.  If a hospital is not in compliance with the rule, defense counsel may be able to obtain the same information by pursuing a subpoena duces tecum and a CR 30(b)(6) deposition with the hospital provider.  Moreover, if defense counsel is unable to obtain the requested information through discovery, a complaint can be made to CMS about the hospital’s noncompliance, as the regulation allows for the imposition of civil penalties.  In any event, researching information about the subject hospital’s “standard charges,” as well as other comparator hospitals’ charges prior to deposing plaintiff’s expert, will give defense counsel the necessary tools to undermine the contention that the amount billed is reasonable because it is consistent with what other hospitals charge.  
1Every year, Medicare-certified hospitals and other institutional providers are required to provide the federal government with an annual cost report, which can be purchased for $90 per report from  A complete cost report, including the worksheets, will include worksheets G-2 and G-3.  These two worksheets are incredibly helpful.  G-2 documents the hospital’s gross operating costs and gross revenues for the fiscal year, while G-3 documents the hospital’s overall revenues for the year, including total patient revenues, the total amount written off as allowances and discounts, the net patient revenue, the operating costs (from G-2) and the net income.  This means that for any hospital where the plaintiff was treated, for fiscal year that the plaintiff was treated, defense counsel can establish that the total percentage of the gross billed charges that the hospital wrote off, across the board.  It is difficult for the plaintiff to argue that the gross billed charges represent the reasonable value of the services provided when the particular hospital providing the care wrote off 70% or 75% of the gross bill charges across the board.
2As with Part I of this article emphasized, this analysis is limited to addressing the reasonable value of hospital charges only.  Providers’ billing and collection practices are significantly different from hospitals’ practices, and the methodology discussed in these articles is not applicable to providers’ charges.

3The entire report can be found at

4DRG stands for Diagnosis Related Groups.  The diagnosis-related group system classifies in-patient stays into categories for the purposes of determining payment, based on the premise that treatment of similar medical diagnoses generates similar costs.  Most health insurance companies, as well as Medicare, use the DRG system to determine how to reimburse hospitals.  This means that hospitals get paid according to the diagnosis of the admitted patients.  

5The full CFR publication for 45 CFR 180, including the executive summary, can be found at:

6See 45 CFR §180.20 (Definitions).

7As outlined in Part I of this article, most hospitals automatically apply deep discounts of up to 60% of the gross billed charges for cash-paying or uninsured (self-pay) patients.
8“Low Compliance from Big Hospitals on CMS’s Hospital Price Transparency Rule,” Health Affairs Blog, March 16, 2021 (

9A Google search for “multicare hospital pricing transparency” will take you to  This page allows access to the list of standards charges employed by each hospital in the Multicare system.  Using Tacoma General Hospital as an example, the file includes a list of the Chargemaster charges, a list of “All Service Items” and a list of “Shoppable Items.”  The “All Service Items” list requires that you search for the relevant services, but once the search results are returned, the database provides information about the gross charges, the cash discount, the de-identified minimum charge and the de-identified maximum allowed.  The difference in the various charges is striking.  For example, a biopsy of the heart has a gross charge of $23, 446.65, a cash discount of $9,378.66, a minimum negotiated price (de-identified minimum allowed) of $648.88 and a maximum negotiated price (de-identified maximum allowed) of $3,025.25.