The drumbeat for rational hospital pricing is not going away; its getting louder.
Witness, for example, the recent study From Soak the Rich to Soak the Poor: Recent Trends in Hospital Pricing by Gerard Anderson, a health economist at the Johns Hopkins Bloomberg School of Public Health, published in the May-June issue of Health Affairs. Using 2004 data, the study found that the prices hospitals charged self-pay patients were two to three times more than what hospitals charged commercial payers and Medicare. The report further noted that this gap had grown significantly since the mid-80s. The mainstream press quickly picked up on the study, reinforcing the notion that the uninsured billing issue is far from being resolved in the publics mind.
On June 29, Michael Moores new documentary, Sicko, will be released nationwide. By all accounts, the film is a moving depiction of people whose lives have been turned inside out because of this countrys incomprehensible approach to healthcare financing.
And looming not far in the background is the federal governments continued exhortations for transparency, accompanied by the not-so-gentle reminder that if hospitals dont solve this problem, the government will attempt to do so through legislation.
The pricing problem will continue until hospital prices are linked to some rational basis, such as cost or market prices. The root causes of why illogical pricing exists and why change is so difficult are deep and require political will and broad-based collaboration to address. Hospital leaders must play a role in encouraging the former and participating in the latter.
However, while working toward long-range, multistakeholder solutions, hospital leaders can take steps now to rebase their pricessteps outlined in the Healthcare Financial Management Associations just-released patient-friendly-billing project report, Reconstructing Hospital Pricing Systems. As the report says, hospitals need to: Develop a well-defined, rational and competitive pricing philosophy, strategy and structure to guide policy decisionmaking, redesign and update efforts. Using cost and price data, a hospital can determine a pricing structure that will guide redesign and update efforts. The philosophy should reflect issues such as the organizations overall strategic and financial objectives. Examine approaches that mitigate the impact of pricing changes on Medicare and Medicaid payments and regulations. The CMS provides hospitals with a means to request a different cost-to-charge ratio if a hospital believes that the current ratio is inaccurate. Adopt a pricing strategy or discount policy that ensures uninsured patients of limited means are not charged more for the cost of care than is paid by commercial insurers or government programs. Hospitals should provide clear, consistent discount policies for this population. These discount policies must relate to a rational benchmark such as cost and market prices. Develop formal, written policies for providing cost estimatesincluding expected out-of-pocket expenseto patients, and be clear about what the estimates do and do not cover. Negotiate with insurers to remove contractual barriers to rational pricing methods. Although it may be difficult, all hospitals can inform payers of overall simplification goals and work toward achieving contracts that are simpler and easier to administer. Simplify and standardize the chargemaster throughout your organization. A simplified, clean chargemaster will enhance a hospitals ability to post prices and provide patients with accurate and timely information on their financial obligations.
Continually improve your facilitys cost-accounting competencies. Cost per encounter or procedure, such as DRG or ambulatory payment classification codes, is critical information for a successful pricing strategy. Therefore, hospitals without the ability to capture and track such information might consider developing and maintaining accurate data on labor, supplies and other expenses.