It's hard to imagine a healthcare delivery model in which pricing reflects the costs of care. One health system announced at HFMA's ANI 2007 the results of its attempts to better align these problematically dissociated factors.
Rosemary Nuzzo, director of finance for New Jersey-based Atlanticare Regional Medical Center, and Frederick Stodolak of Accuro Healthcare Solutions discussed pricing transparency efforts and the challenge of establishing defensible pricing while maintaining revenue.
"It's only been 10 months since Bush signed an executive order (for transparency), and it's been amazing to me what's happened," Stodolak said at the start of the presentation, titled, "Setting Pricing to Satisfy the Government, Public, and CFO." "About three years ago, I'd say 80 percent of the CFOs I talked to said, 'with the increased use of prospective rates in our payer contracts, prices don't mean much to us anymore.'"
Prices mean a lot to Nuzzo, who said Atlanticare has implemented programs for both transparency and defensible pricing. "Our objective was to be able to provide patient estimates, defend prices to the government, public, and CFO, and realign prices without impacting net revenue," said Nuzzo.
The pricing review program proved difficult to launch, Nuzzo said. "We ended up with 85 models before we developed the one we used." Atlanticare first established a formal system for patient cost estimates at the point of care, then developed cost-based and market-based pricing comparisons and conducted net revenue modeling based on each.
Atlanticare found that its prices were higher than its market peers, and that reducing prices greatly impacted revenue. In the end, Atlanticare adjusted its prices for clinic visits up to $400 and its ambulance runs up to $4000 so that net revenue was not impacted by price reductions elsewhere.
Additional challenges in the review included bending to payer-specific price increases and quelling public relations concerns regarding increases, said Nuzzo. With the new pricing, 80 percent of Atlanticare's departments are now using prices based on true cost and net revenue is unaffected.
Stodolak said defensible pricing and transparency aren't just beneficial for consumers, but also for providers. "Wouldn't it be great if prices could be related to cost as a basis for profitability analysis?" he asked.
The only thing that's left for Atlanticare's program is the uploading of the new prices and implementation, Nuzzo said. "Every time we did a pricing review we thought we were going to fix this, and now we actually are."