"Children’s explanation of its billing practices suggests that, had the ear piercing not taken place, the overall charge for the surgery would not have been $1,877 lower. But Children’s billing practices may have shifted surgical costs that would otherwise have been covered by insurance onto O’Neill."

Begs the question, why did they shift the costs from the first proceedure into the second proceedure? 

I would bet the insurance company said they will only pay so much for the first proceedure, so the hospital put what insurance wasn't going to pay as a bill for the uncovered piercing procedure.  

Or it could also be this.  If the hospital is saying that the total cost is the same weither they did the piercings or not, then this is just lazy biling on the hospitals side where they lazily split the costs, lowering the billing for the first procedure and put that cost to the ear piercings when the insurance company would had paid for the full amount if they billed the full amount to them for the first procedure.  If this is the case, then they are making the patient pay for something that would had been covered by the insurance company.