According to this article, it's a way to make insurers seem like they're getting a discount and charging those who pay out of pocket way more, maybe to get everyone on insurance. I think it's due to one more thing: profits in the health industry are capped as a percentage from my understanding so there is a lot of incentive to keep prices high.

"When the dance between hospitals and health insurers began, if a hospital’s actual cost plus reasonable profit totaled $1,000 for a given procedure and the insurer demanded a 50 percent discount, the hospitals simply negotiated towards doubling the price from $1,000 to $2,000 in order to make it all work out. But over time, hospitals began to include other charges into the cost of a procedure, including their unpaid collectibles from patients who were uninsured and could not pay, losses in unrelated hospital divisions, inefficiency in how the hospital was being operated, etc. As time has progressed, this approach has grown so out of hand that any rational explanation for pricing no longer appears to exist." https://www.forbes.com/sites/rickungar/2013/05/08/the-great-american-hospital-pricing-scam-exposed-we-now-know-why-healthcare-costs-are-so-artificially-high/#2a54c6093bff