Recently I talked with a CFO about his initiative to deliver greater pricing transparency for his hospital, a solo community hospital that faces new competition from a system that just acquired a cross-town rival.
The CFO is on-schedule for the January 2021 federal mandated deadline with pricing for 300 shopable services. He’s competitive with the cross-town rival now, but is unsure how the larger system will affect his hospital moving forward.
We talked about taking advantage of the federal mandate to differentiate his hospital from the cross-town rival now owned by a larger system. He agreed the hospital charge master is out-of-sync given the annual percentage price adjustments over time. We discussed how to fix this and talked at length about reducing charges (and contractual allowances) that have become widely inflated.
Our charge master reconfiguration only takes about 30 days and is the first step to having rational and defensible pricing in the charge master. We use an algorithm to accomplish this after completing a thorough review and analysis of charge and payer data.
No charge master reconfiguration would be complete without market-testing to compare charges with other area hospitals.
Our charge master reconfiguration includes a detailed market analysis of competitor hospitals by service line. We distill the data to confirm brand strength by service line, including dominant service lines where price is not a factor, service lines that are emerging as new strong revenue producers, and those that are competitive with the competition but are not significant revenue producers.
We recommend analyzing 3 years of charge and payer data to discern long-term and emerging trends. This will help us project (predict) future revenue, especially when a new provider enters your market.
What else goes hand-in-glove with greater pricing transparency?
Reviewing pricing strategies should be part of a charge master reconfiguration. Cost accounting is again in vogue, enabling CFO’s to identify cost of each service line, often down to the patient account level.
Are you using a multiple of Medicare reimbursement to set charges now, a standard mark-up based on cost, or another way of setting charges? Our analysis will compare each in its ability to reduce charges and contractual allowances effectively.
The initial federal foray into pricing transparency is designed to incite greater consumerism (more competition), yet one unassailable reality is brand strength’s strong influence on patient (consumer) choice.
It’s important to provide a pricing tool estimator on your website that has converted CPT code-language to “consumer-speak”, streamlines navigation to accommodate all demographics, and strengthens patient engagement
It’s important to remember the charge master prices thousands of items, therefore right-sizing charges requires a detailed analysis of charge and payer data. We do this.
Brand still matters with the 300 shopable services, especially since patient referrals account for a large percentage of a hospital’s business. In addition, patients who have employer-based insurance often can choose a physician for a specialty service (self-referral) without securing a physician referral.
Drilling-down to the data of these two subsets ensures effective trend analysis that facilitates accurate predictability of future performance.
Providing greater pricing transparency to the community you serve is a key part of a successful patient engagement strategy and essential to having an effective patient funnel.
Everyone says it’s all in the data, but data itself is worthless unless you can tease key takeaways from your data to grow brand, improve patient engagement and loyalty, and achieve fiscal sustainability.
Our pricing transparency tools of a charge master reconfiguration, new pricing strategies, and detailed data analysis will help you do this.
See what Q can do for you!