Provider Contractual Write Off is what my insurance calls it, YMMV. A charge of $3859 has a write off of $3414 so the insurance company pays $445. Had I not had insurance I would be looking at a $3859 bill. Why does the insurance company get such a big discount?
Volume.
If the provider doesn’t accept the insurance company, they no longer get patients from that company. So the insurance company holds all the cards. The provider needs to set rates to cover things given that.
That’s why some doctors don’t take insurance. They can charge everyone $800 for the procedure instead of having two tiers.
At the same time if the insurance company didn’t have a good selection of providers in the network the insurance company wouldn’t sell any policies. So normally there’s a lot of back and forth when contract negotiations come up, with one side occasionally calling a bluff, as in Highmark Blue Cross and the University of PA Medical Center.
In practice the provider knows most cash patients can’t pay $3859, so there’s often a negotiation here to. The provider gets something instead of nothing, they can keep their high list price as fiction for negotiation tactics with insurance or if some rich 1%er comes in.