Amounts Generally Billed (AGB): The Hospital Pricing Cap Most Patients Don't Know About

What AGB Actually Is

Amounts Generally Billed (AGB) is the maximum that a non-profit hospital is allowed to charge a financial-assistance-eligible patient for emergency or other medically necessary care. The cap was added to the Internal Revenue Code in 2010 by the Affordable Care Act § 9007, codified at IRS Section 501(r)(5). It applies to all non-profit hospitals as a condition of maintaining their tax-exempt status.

The practical effect: if you qualify for charity care under the hospital's Financial Assistance Policy (FAP) — typically households at or below 400% of the Federal Poverty Level — you cannot be billed more than AGB. AGB is usually 30-50% of the chargemaster price, sometimes much less.

According to the CFPB, up to 49% of medical bills contain at least one error. The most expensive error is when an FA-eligible patient is billed the full chargemaster price instead of AGB. That gap can be thousands of dollars on a single hospital stay. AARP analysis puts the average overcharge on hospital bills exceeding $10,000 at approximately $1,300, and AGB violations are a significant contributor.

Why It Matters: The Gap Between Chargemaster and AGB

Hospital "chargemaster" prices are fictional starting numbers — the highest price anyone in the system pays. Insurance plans negotiate down to 30-50% of chargemaster (the "allowed amount" on your EOB). Medicare pays even less. Medicaid pays even less than Medicare.

AGB is supposed to track those negotiated rates. A typical AGB calculation produces a number close to what the average insurer pays for the same service. So a $30,000 chargemaster bill might have an AGB of $9,000 — meaning if you qualify for the hospital's FA program, you cannot be billed more than $9,000, and even that may be further discounted under the hospital's sliding-scale FAP terms.

How AGB Is Calculated (The Three IRS Methods)

The IRS allows non-profit hospitals to choose one of three methods for calculating AGB. Each hospital must publish its chosen method and updated AGB percentages in its FAP.

Method 1: Look-back, Medicare-only

Hospital averages all Medicare fee-for-service rates paid for the same service over the past 12 months. This typically produces the lowest AGB (Medicare pays less than commercial insurers).

Method 2: Look-back, Medicare + all private insurers

Hospital averages Medicare plus all private insurer payments over the past 12 months. This typically produces a higher AGB than Medicare-only.

Method 3: Prospective Medicare

Hospital uses the Medicare prospective payment system rate as the AGB. Updated whenever Medicare updates its rates.

Most large hospital systems publish their AGB percentage. A typical disclosure looks like: "Northwell Health calculates AGB using the Medicare-only look-back method. Our current AGB is 32% of total billed charges." That means a $10,000 chargemaster bill becomes a $3,200 AGB cap for FA-eligible patients.

Who Qualifies for the AGB Cap

The AGB cap applies to anyone the non-profit hospital determines is eligible for financial assistance under its FAP. Each hospital sets its own thresholds, but typical eligibility extends to:

• Up to 200% of Federal Poverty Level (FPL): usually 100% charity care (free)
• 200-400% FPL: sliding-scale discounts
• 400-500% FPL: partial assistance at some larger systems

Use our free Charity Care Matcher to check your % FPL and likely eligibility in 30 seconds. If you qualify under the FAP, the AGB cap automatically applies to your bill.

How to Demand AGB Pricing

Step 1: Verify the hospital is non-profit

AGB applies only to non-profit hospitals (~60% of U.S. hospitals). Search "[hospital name] 501(c)(3)" or check the IRS Tax Exempt Organization Search. Major non-profit systems include Cleveland Clinic, Mass General Brigham, Mayo Clinic, Kaiser Permanente, Banner Health, Intermountain Healthcare, and most religious-affiliated hospitals.

Step 2: Find the hospital's Financial Assistance Policy

Every non-profit hospital must publish its FAP, including the AGB calculation method and current AGB percentage. Search "[hospital name] financial assistance policy" or look for the link on the hospital's billing page. Our Charity Care Matcher finds the policy URL automatically.

Step 3: Apply for financial assistance

Submit an FA application within 240 days of the first post-discharge billing statement (federal deadline). Required documentation typically: proof of identity, proof of address, last 1-3 paystubs or recent tax return, and the hospital's FA application form.

Step 4: Confirm AGB pricing in writing

Once approved for FA, request a corrected statement at AGB pricing. Get it in writing. Reference the hospital's FAP and the AGB percentage. Federal law requires the hospital to comply.

Sample Script + Dispute Language

Phone script when calling the hospital's financial counselor

"I am applying for financial assistance under your Financial Assistance Policy. My household income falls within your eligibility threshold. Once approved, I expect my bill to be capped at the Amounts Generally Billed (AGB) under IRS Section 501(r)(5). What is your current AGB percentage, and how do I confirm the corrected statement reflects AGB pricing once my FA application is approved?"

Written dispute if billed above AGB after FA approval

"On [date] I was approved for financial assistance under your Financial Assistance Policy (FA approval reference: [number]). The current statement [number] charges $[amount], which exceeds your published Amounts Generally Billed (AGB) calculation of [percent]% of total chargemaster charges as required by IRS Section 501(r)(5). Please issue a corrected statement at the AGB rate and refund any overpayment. If this is not corrected within 30 days, I will escalate to the IRS Tax Exempt and Government Entities division and to the [state] attorney general's office, both of whom have jurisdiction over 501(r) violations."

When the Hospital Ignores AGB (501(r) Violations)

If a non-profit hospital bills you above AGB after FA approval, that is a violation of federal tax law. Escalation paths:

• IRS Form 13909 — Tax-Exempt Organization Complaint Referral. The IRS can revoke a hospital's 501(c)(3) status for repeated 501(r) violations.
• State attorney general — most state AGs have jurisdiction over consumer protection and non-profit hospital compliance. File a written complaint.
• State insurance department — useful in states with strong hospital-billing protections (CA, NY, IL, others). Find your state's route in our state-by-state guides.
• Local consumer-protection media — local news health-care reporters routinely cover 501(r) violations and have moved many cases to settlement.

Most violations resolve at step 1 or step 2 once the hospital realizes it's exposed to federal scrutiny. JAMA Health Forum (2024) found 73.7% of patients who dispute receive a correction. AGB violations have an even higher rate because the federal rule is unambiguous and well-documented.