OBJECTIVES: The large variation in payments hospitals receive for similar services has captured the attention of payers and policy-makers looking for ways to curb excess health care spending. There is little empirical evidence regarding the specific role that patient, population, and market factors might have in driving price variation across small geographic areas and how these factors vary by payer. The purposes of this study are: (1) to provide insight into the relationship between patient, population, and market factors and payer-specific prices for several common conditions, and (2) to examine the factors that influence differences in the inpatient price per discharge between public (Medicare) and private payers among different hospital services. METHODS: We extracted hospital data from six states where a Healthcare Cost and Utilization Project (HCUP) price-to-charge ratio (PCR) was available from the 2006 State Inpatient Databases (SID).  Even in states with PCR data, the PCR was not available for Kaiser Permanente hospitals so those discharges were excluded. The price per discharge was measured at the county-level for all discharges, an acute condition (acute myocardial infarction), and an elective condition (knee arthroplasty). Payer-specific inpatient prices were estimated by applying the HCUP PCR to total hospital charges. Ordinary least squares regression models were used to identify factors significantly associated with inpatient price per discharge by payer. RESULTS: Hospitals charged significantly higher prices to private payers compared to public payers. There was more variation in price per discharge for private payers compared to public payers for most hospital services. Specific market factors, including hospital competition, were associated with the price variation between payers. CONCLUSIONS: The larger variation in the price per discharge identified among private payers necessitates further exploration.  It may stem from differences in negotiated prices and market power across small geographic areas, or the price restraints of public payers.