Becker's Hospital Review

26 Sponsored by: Why it's time for hospital finance teams to rethink their pricing strategy: 5 questions with Strata's Liz Kirk H ospitals and health systems are facing an uphill battle when it comes to financial recovery. During the initial four-month surge of COVID-19, U.S. hospitals lost $202.6 billion, according to estimates from the American Hospital Association. While the AHA estimates account for revenues lost due to postponed elective procedures, they do not factor in a number of other potential financial losses, including labor and capital costs. This means the $200 billion-plus figure is likely shy of the true economic impact felt by hospitals. In this financial environment, healthcare organizations can't afford to leave money on the table. Many hospitals and health systems lose millions due to inaccurate and inefficient approaches to pricing for services, according to Liz Kirk, senior vice president of strategic services with Strata Decision Technology. Here, Ms. Kirk answers five questions about the role of pricing in hospital financial recovery and why delivering patients true price transparency is mission critical for hospitals in the era of COVID-19. Note: Responses have been edited for length and clarity. Question: In your experience, how do most organizations approach pricing for their services today? Liz Kirk: Most organizations take one of two approaches. One is a pretty simplistic, annual approach where the organization increases pricing 2 to 5 percent across the board without really looking at how they're priced compared to competitors in the market. On the other end of the spectrum, some organizations take a more strategic approach that often involves working with consultants. Every year, these organizations send their data off to consultants for heavy analysis to better meet payer requirements and save significant sums. There is also a third method for those organizations with solid finance chops. This third type of analysis typically lives in a giant Excel doc, which is labor intensive to maintain and prone to error. Q: How should hospitals and health systems be thinking differently about pricing, given recent technology advancements, a changing healthcare environment and the COVID-19 crisis? LK: Organizations should think about pricing as a lever to grow volume, reimbursement and margin. To do that, you have to take a much more defensive, data-driven and strategic approach to pricing. Chargemasters for health systems, especially those that have undergone mergers, have gotten more complex. There can be three to four chargemasters with up to 50,000 line items. To price strategically, health systems need to understand what is in all those price chargemasters, especially with the new transparency rules coming in 2021. Hospitals need to make sure their prices are aligned with the rates they've negotiated with payers. If the rates aren't aligned, they're losing money. They need make sure their prices cover their costs. If not, they're losing money. They need to understand whether their prices are competitive in their marketplace, because as transparency on pricing becomes more available to patients, patients will have the ability to make informed choices about where they go for care based on cost, particularly in a difficult economy. Algorithms powered by technology can help health systems quickly access this expanse of knowledge without paying thousands to consultants. In the COVID-19 era, providers can't afford to lose money due to pricing oversights. They need to focus on financial recovery and eliminate waste and inefficiency. Q: How will deadlines related to the new CMS price transparency rule affect hospitals during COVID-19? LK: There's been some back and forth on this, but the most recent ruling says hospitals will have to have transparent pricing for shoppable services and make some of their negotiated payer rates transparent by Jan. 1, 2021. Right now, it looks like that deadline and those requirements will stick. However, CMS does have a track record of pushing deadlines, but our belief is that they will move forward with this rule. Q: How can hospitals leverage price transparency for financial recovery as elective cases resume? LK: Hospitals are going to be in a difficult spot because across the country, there is so much unemployment and so many people have lost their benefits. This is going make it difficult to bring back the full number of elective surgeries scheduled prior to COVID-19. Pricing competitively and transparently within your market for shoppable services can be a lever to drive volume. Q: What advice do you have for organizations looking to adopt more strategic, transparent pricing in the coming months? LK: First and foremost, complete a review of existing chargemasters and find out if you're priced higher or lower than you should be in the market. I'd advise them to invest in the technology that will allow them to understand their pricing, which will in turn allow them to deliver patients transparency, and that will build trust in the community and allow them drive up volume. n Strata Decision Technology provides an innovative cloud-based planning, analytics and performance platform that is used by healthcare providers for financial planning, decision support and continuous improvement. Founded in 1996, the Company's customer base includes 1,000 hospitals and many of the largest and most influential healthcare delivery systems in the U.S. e Company's StrataJazz® application is a single integrated soware platform that includes modules for strategic planning, capital planning, operational budgeting, management and productiv- ity reporting, decision support and continuous improvement. e Company's headquarters are in Chicago. For more information, please visit www.stratadecision.com.

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