Price Transparency: An Opportunity to Build Volume and Trust
About 18 months ago, Strata Decision Technology (Strata) released our Strategic Pricing module. This module uses purpose-built algorithms to find issues within an organization’s CDM, algorithm builders to identify pricing anomalies, and scenario modeling tools to model the financial impact of price changes – whether positive or negative – on your net revenue.
Admittedly, when we built this, we knew pricing transparency had been a topic for years. But after the first (then second) federal pricing transparency law, we got rather lucky on the timing of our software release.
With 20 years of experience in healthcare pricing, I had assumptions about how our module would help healthcare providers. I thought we’d primarily help organizations align their charge masters among entities in newly merged health systems, and hopefully that we would help health systems get off the “pricing consultant merry-go-round.” I thought a few organizations would want to decrease charges for patients and we’d help them make sure they wouldn’t hurt margin too badly.
In short, I wasn’t expecting us to start finding millions of dollars in net revenue opportunity. But, we are.
I honestly thought that with all the consultants passing through health systems in the revenue cycle and even in the strategic pricing space, the low hanging fruit would be gone. Good (and maybe bad) news: we are finding low hanging fruit—meaning lost revenue—at almost every organization we are working with.
Sometimes, those lost dollars are the result of old strategies intended to grow volume and compete in the market that the provider hasn’t revisited in years. Other times, the misaligned charges are the result of loose pricing processes and governance. Most often, prices are where they stand today because the health systems haven’t had the need to investigate or didn’t have the bandwidth to dig deep.
We have also found prices that vary considerably within entities—and throughout the health systems. Since our module incorporates cost accounting data, we can quickly spot charges way over—or way under (yikes!)—the cost to provide the service.
This amount of information can feel paralyzing, because it is typically so hard to anticipate the downstream impact a pricing change will have. At Strata, we are making this analysis easy by pairing actual terms with advanced modeling engines.
These providers know the impact of any proposed changes before they do it. They are increasingly confident that their prices are defensible and market sensitive. They know publishing prices for patients can build trust—but it can also build volume.
With pricing transparency mandates months away, now is the time to begin digging into your pricing to better understand both the risk and the opportunity. To learn more about our Strategic Pricing module, schedule a demo.