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Developing a Pricing Strategy to Stay Revenue Neutral and Market Competitive

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  • Location: Manchester, NH
  • Number of Beds: 330
  • HIS System: Allscripts
  • "Everything was timely. No matter how many different ways we wanted to see it, PMMC obliged and gave us good advice. Having someone validate that we are doing the right thing and that we are pricing right is reassuring,"

The Challenge

With price transparency becoming a more important topic as patient deductibles rise, the healthcare industry is seeing a bigger push to make charges more accessible to their patients. The issue of rising healthcare costs has always been a concern for those without insurance; but now, as patients take on plans with higher deductibles and coinsurance payments, consumers are beginning to demand more transparency due to higher levels of responsibility. 

This, in turn, puts higher pressure on hospitals to post costs for procedures. However, posting prices for procedures doesn’t address the issue that each procedure is dependent upon the patient and their condition. While one patient may proceed through surgery without complication, another may have the same procedure done and encounter numerous problems, all of which change the price of the procedure.

Catholic Medical Center (CMC), in Manchester, New Hampshire, is located in one of just 8 states that do not currently report prices publicly. Although New Hampshire Hospital Association does have a general guideline to provide procedure costs for patients seeking estimates for common procedures, the listed prices are averages and dated.

This leads to poor patient experiences when charges come back higher and reflects poorly on individual hospitals. This prompted the need for a new method to establish validated pricing while also staying market competitive.

 

The Solution

CMC had two key objectives for their pricing review: Remain net revenue neutral and keep prices within 95% of their market. Their overall goal is to continue to be the low cost, high quality healthcare system of choice for residents in NH.

The Director of Pharmacy at CMC contacted the CFO and the Director of Revenue Cycle Integrity, Donella Lubelczyk to find a solution to formulate more justifiable pricing. Along with the hospital charges and clinical documentation, Lubelczyk wanted to make sure all charges were valid, correct and appropriate prior to building it into their new revenue cycle system that they were transitioning to.

Lubelczyk had prior experience with PMMC’s contract management and decided to expand their use into chargemaster management as well. PMMC was able to model their CPTs based on the previous year’s data and map out their volumes to help create new pricing models and give CMC several scenarios to consider for updating pricing.

Due to CMC’s goals of remaining net revenue neutral and keeping within 95% of the market, they needed to be able to analyze their service lines by volumes and have the ability to adjust individual CPTs up and down based on current cost and a justifiable markup formula. The pricing maps provided by PMMC show where CMC falls in comparison to their market as well and helps them adjust should they deviate from the market in certain areas.

 

The Results

CMC hopes to continue using PMMC to support any changes in their pricing. They’re working proactively to post prices publicly, regardless of laws in New Hampshire, in order to get a step ahead of their competition and to better serve consumers. Currently, they have a link on their website to price transparency information. PMMC has allowed CMC to remain net revenue neutral and retain their 95% of market position.

“At the end of project I like to be able to write policies as to how we're going to charge moving forward, and what our charge formula is going to be. It's nice to have that backed up by PMMC,” explains Donella Lubelczyk.

By working with PMMC, CMC now has a formalized process to update and approve pricing changes at their organization.

After CMC receives the pricing recommendations, Lubelczyk sends pricing updates to all departments affected by the changes. They then have 4-6 weeks to review and sign-off on the updated Chargemaster, allowing them to upload it in advance of their new fiscal year beginning October 1.