Mastering Defensible Pricing in the Era of Price Transparency
Written by Kevin Chmura
Chief Executive Officer, Panacea Healthcare Solutions
In the ever-evolving financial landscape of healthcare, trends often intertwine, creating a domino effect that compels providers to reevaluate their practices. The industry is witnessing a critical juncture where one such intersection has emerged—marked by the confluence of increasing consumerism, heightened cost awareness, and the implementation of regulatory changes. As the healthcare industry adapts to the CMS Price Transparency Rules and the No Surprises Act, a new paradigm of defensible pricing takes center stage. This article delves into the significance of defensible pricing in an era characterized by unprecedented transparency, shedding light on the strategies that can ensure both financial viability and patient trust.
The Age of Unprecedented Transparency
Recent years have witnessed an unparalleled surge in consumer demand for price transparency within the healthcare sector. With the introduction of CMS Price Transparency Rules and the No Surprises Act, an abundance of charge data has become accessible not only to patients but also to advocacy groups, regulators, litigators, and the media. This influx of information has spurred many data aggregators eager to scrutinize published machine-readable files to uncover inconsistencies, inaccuracies, and potential opportunities.
Navigating Distractions and Focusing on Defensibility
Amid the complexities of complying with evolving Price Transparency rules and the sensitivity of revealing negotiated rates with insurance payers, providers have sometimes lost sight of a fundamental facet—ensuring the defensibility of their underlying charges. Over time, charges can become disconnected from actual costs due to routine across-the-board increases and compromises made during contract negotiations. Gone are the days of individually justifying charges to patients; comparisons with local competitors and national benchmarks are now not only feasible but also increasingly prevalent due to those same aggregators previously mentioned.
Providers who have traditionally relied on annual pricing increases to offset the impact of rising unit costs must now consider how those prices will be viewed by a wide group of constituents with varying mandates and new tools but without the benefit of historical data points. Each price in the charge description master needs to stand on its own.
The Basics of Strategic Pricing
Strategic pricing involves establishing rational and defensible prices across all facets of healthcare services, encompassing procedures, supplies, drugs, and other elements in the charge description master. This approach draws upon a blend of unit cost analysis, market group comparisons, fee schedules, and various other parameters. Providers engaging in strategic pricing must contemplate multiple pricing scenarios, considering the potential ripple effects on reimbursement. The most successful endeavors set clear net revenue objectives, often spanning multiple years. This foresight is particularly pertinent in the era of price transparency, where comparisons extend beyond peer assessments to encompass historical pricing practices.
The Strategic Approach to Defensible Pricing
A more strategic approach to pricing entails a comprehensive assessment of unit costs and market positioning in relation to peers. By adopting strategic and defensible pricing practices, providers stand to gain several advantages:
Beyond the basic obligation to adhere to regulatory mandates, price transparency will emerge as a disruptive force that has the potential to reshape the entire healthcare ecosystem. It will evolve into an instrument through which healthcare providers can proactively engage with patients, fostering an environment of trust, accountability, and empowerment. By openly sharing comprehensive pricing information, healthcare entities have the opportunity to elevate their brand identity, positioning themselves as leaders in clarity and ethical practice in an industry often characterized by opacity.
About Panacea Healthcare Solutions
Panacea Healthcare Solutions has spearheaded Strategic Pricing since 2007 and has been a pioneer in providing compliant and cost-effective Price Transparency Software and Services. Hundreds of hospitals nationwide have adopted our esteemed Hospital Zero-Base Pricing® methodology and have earned the coveted Short List distinction from HFMA’s Peer Review program. Our comprehensive Price Transparency Suite equips clients with fully compliant and cost-effective Machine-Readable Files, Patient Estimation Systems, Shoppable Services Lists, and Good Faith Estimates.
To explore our innovative products and services further, visit our website at www.panaceainc.com or reach out to me directly at [email protected].