It sounds like pure fantasy to come up with a number they should charge and it is the same for every provider in a zip code. Different hospitals, clinics and offices would pay different rents, staffing expenses, supplies, marketing, utilities, and the list goes on. Not even McDonalds charges the same price for the same meal in every location in a zip code. Malls, airports, entertainment venues are easy examples of divergent pricing.
Right, the UCR is usually pegged at the 75th percentile price for that ZIP code — though that can vary from payer to payer, some can even go up to 90th percentile — it's usually determined by actuaries. It's basically a guidance that conveys "we've never met you before, but you're asking us to reimburse for a treatment, and we as an insurance company think this is the highest reasonable amount to charge for that treatment". It's also important to note that payers don't advertise whether they're doing 75th percentile or 90th percentile or 50th percentile or whatever, because then it just becomes an incentive for providers to anchor at that amount, even if it may be higher than they would otherwise bill for that treatment — they'd just submit a claim for that amount and say "cool, thanks, pay me". In single-payer countries in which the state is a monopsony buyer, there is only 1 rate (sometimes a narrow range), often per location.
In either case, the goal is to try to keep prices down, and in many cases to prevent so called "upcoding" by providers. You'd be surprised how prevalent upcoding is among providers. I've been on the phone with a provider that included in a claim an $80 line item for "oral hygiene instructions", which is a fancy way of saying "instructing the patient to floss more". I've seen another claim that asked for $300 for sign language because the patient was deaf. I've seen yet another claim that asked for $200 for a swaddle for an infant patient. In all 3 of those cases, I personally informed the clinical administrator on the other end "this is not covered", and their response was something to the tune of "oh yeah that's okay, we just put that on there to see who covers it, you can go ahead and ignore that line item".
All of this is characteristic of the fee-for-service model, which is increasingly being seen as quite flawed, regardless of whether it's done by the public sector or the private sector.
And people wonder why health care in America costs so much. You have two businesses (at least one of which is totally removed from the services being provided) trying to scam each other every time someone goes to the doctor.
