In the article “Health care as a ‘market good’?” Hsia et al1 found substantial variation in total hospital charges among 19 368 appendectomy patients in California. The article engendered angst and claims of evidence of market failure. But before impugning the market mechanism, it is important to understand 2 market realities found in capitalist systems, whether customers buy health services or an apple at the store.
First, total charges are a product of the number of services used and the charge per service. The article showed that older and sicker patients had higher charges, probably because they required more services while they were hospitalized (for instance, the patient with the highest bill apparently also had cancer). But some variation was undoubtedly because different hospitals have different charges for the same service. Hospitals set charges to cover anticipated costs based on their payer mix: they understand that government payers pay less, private payers pay more, private payers use charges to negotiate discounted payments, and all patients are charged the same for the same service. Similarly, different stores might charge different prices for an apple.