3 Secrets to Setting Rates for Online Price Estimates
eAs the push for greater healthcare pricing transparency continues to grow stronger consumers are demanding for their healthcare to become more personalized to their specific needs. CMS has required them to post their standard charges clearly online so the consumer has the option to compare prices among other local providers. In the future, it may require hospitals to create a digital mobile platform where consumers can access their healthcare information on-the-go to appeal to the younger tech-savvy millennial generation.
But why does this push feel so sudden?
With patient deductibles continuing to rise pricing transparency is becoming more important to the consumer causing many patients to switch to high deductible and high coinsurance payments. This puts added pressure on hospitals to post an accurate cost estimate to patients who rely heavily on the accuracy of the estimate to budget for their cost of care. This is why ensuring the accuracy of the data used to calculate these standard charges is so critical to improving pricing transparency.
Think of it like adding code for developing some computer software.
In order for a computer program to work properly someone (or in most cases a data development team) is in charge of adding code to make the program work properly. If someone on the team makes a coding error, the mistake needs to be fixed quickly before the team continues to build the program.
The same principle applies to hospitals (specifically the Revenue Integrity department) when setting rates for their services before they get posted online. In order to ensure the accuracy of their rates, providers need to know that although they are able to post charges online they need to determine the pricing relative to their market first.
To help get started here are 3 important questions for providers to remember about setting rates:
- Is my data accurate and up-to-date?
- Are my hospital's prices competitive within the local market?
- How can I adjust my charges while still remaining revenue neutral?
Taking Charge of Your Chargemaster Rates
You know the age-old expression: You've got to learn how to crawl before you can walk. Well, the process of setting rates for pricing transparency works in a similar way.
Learning how and where to set rates for charges is important for long-term revenue growth but it would be unreliable without establishing accurate data as the foundation to back up the charges.
And while listing the Charge Description Master (CDM) rates for standard procedures is a step in the right direction consumers will likely find very little value from this detailed charge data.
Why? Because all that consumers want to know is what their out-of-pocket will be for any given medical procedure. No games no hidden charges just their out-of-pocket amount due. That's it.
Think of setting CDM rates like buying a new or used car off of the sticker price.
When you shop for a car you might see the price listed on the window but as the consumer, you know that the sticker price is not the final price because it's negotiable. For example, the sticker price might include items like GPS navigation heated seats and satellite radio but those may not be items that you want to be added to your car.
So what do you do? You ask the salesman to show you the final price of the car without the extra items added in so you can get an accurate estimate on the car you want. Even if you can pay for the car in full at the time of purchase the dealership allows customers to make monthly payments to ease the financial stress of the buyer.
Setting Chargemaster rates for hospitals works the same way.
Although consumers can necessarily negotiate the price of their healthcare they can look at the expected price and compare that cost to other providers. And for those patients who'd prefer to make monthly payments for a costly procedure, hospitals can accommodate this as well-- ensuring their payment and helping hospitals lower bad debt in the process. And with CDM reviews occurring on an annual basis, hospitals can afford not to monitor these rates consistently throughout the year as the rates often fluctuate.
Are Prices Competitive Within The Local Market?
After establishing accurate data as the driving force behind setting CDM rates the next step for hospitals is to ensure that the rates are competitive within the state and local market (although local market competition is far more significant as patients are less likely to travel throughout the state to receive medical treatment).
In order to be certain that your organization's rates stay competitive, it's important that the Revenue Integrity team knows how and when to conduct their annual reviews. Typically from a best-practices standpoint, these reviews should occur annually before your new fiscal year to ensure that the charges you're comparing your rates toward are accurate and up-to-date.
Remaining Revenue Neutral
Part of the challenge in reviewing and adjusting the Chargemaster rates annually is the struggle to remain revenue neutral. This process involves the Revenue Integrity team examining a total Chargemaster list of all their charges in order to determine where they can lower or raise their rates while remaining revenue neutral.
Remaining revenue neutral is key to keeping your CDM rates balanced because it assures the hospital can lower charges in areas that don't negatively impact revenue. This is considered the sweet-spot as far as CDM reviews are concerned.
And while many providers may choose to use software like Microsoft Excel to adjust their charges, it does not provide enough modeling capability to allow your organization to strategically adjust the charges. Organizations need to implement software that is designed to model all of the charges as well as utilize pricing scenarios to help analyze the data to maintain revenue neutrality.
With pricing transparency continuing to generate concerns among many providers, ensuring the accuracy of a hospitals CDM needs to be a top priority. As said earlier you need to learn how to crawl before you can walk and in the case of healthcare pricing transparency, hospitals need to be sure the CDM rates are accurate before posting their rates online to the consumer.
Going forward, it's important to always be mindful of CMS updates or even proposed updates to price transparency as regulations are subject to change. This allows your organization to be viewed as an innovator rather than a lagger. Because when CMS inevitably makes updates to pricing transparency requirements hospitals don't want to find themselves trying to catch up with the latest updates while their local competitors reap the benefits of one less hospital to compete with.
Brad Josephson is the Director of Marketing and Communications at PMMC a leading provider of revenue cycle management software and contract management services for healthcare organizations and providers. Brad has extensive knowledge of healthcare revenue cycle management tools that improve the financial performance of healthcare organizations.