The story your hospital prices tell
Price transparency is as much an optics issue as it is a managed care issue. Here are three ways you can control the narrative.
These days, there are few topics in healthcare grabbing more headlines than pricing. From surprise billing to reference-based reimbursement, pricing is an issue with both operational and reputational implications.
With transparency rules from the Trump administration set to take effect on January 1, 2021, pricing may be especially top of mind for healthcare leaders. Sure, there are rumblings that the rule – which requires hospitals to publicly display negotiated rates for 300 services – will face delays, and many providers are hoping they won’t have to play ball.
But whether it’s this rule or another, the flood of conversation around price transparency isn’t expected to dry up any time soon, and many healthcare execs are considering what it will take to achieve compliance.
Hospitals may want to be proactive and start digging into their numbers before it’s an absolute requirement. You will likely uncover some interesting insights like I did when I looked into the details.
When I started looking across a network of 65 hospitals to really understand managed care contract rates at a granular, individual level, I was surprised at the amount of variation in rates for individual services from health plan to health plan.
I worried about the picture this might paint for consumers, brokers, and employers, and the impact it might have on their plan selections in our markets.
As the push for price transparency swells, hospitals have to think about the messages that their numbers send. Even if Trump’s rule is blocked, that delay won’t be the end of the push for price transparency. There’s speculation that rate regulations could show up in budget appropriation legislation this May, or again later.
Ultimately, this deep dive into our contracts tells me that if price lists go public, there’s more than one story your contracted rates are going to tell. It’s not just the one they tell consumers about whether your rates are reasonable, or substantially higher than other facilities in your area. There’s also the story your rates tell competitors about who’s negotiating the highest rates in the market, and what that says to brokers and employers choosing affordable plans for their groups.
So, if the ledgers become public – what do you want them to say?
1. Begin by knowing what the rates say today.
Inventory your largest managed care contracts for services you think might be displayed if the rule moves forward. You don’t have to identify these services on your own—leverage the data provided by third-party consumer research organizations to identify what patients are shopping for and let that be your focus. Many of these research companies can also handle the operational aspect of getting these services displayed and accessible in compliance with federal rules, should that become necessary.
Look carefully at commoditized services like MRIs, lab work, and radiology. Your rates don’t have to be the lowest in the market, but if outpatient, freestanding facilities are cheaper than yours by ten-fold (or more), that’s going to make a compelling headline for your local paper – at the expense of your hospital’s reputation.
2. Approach the health plans in your market.
To the extent that you haven’t done so already over the years, you need to determine what constitutes an acceptable price, and approach health plans about moving those rate levels up or down across your contract to reposition yourself in the market.
Worried that you might wind up in the red? Offset any rate reductions with increases to your underfunded services, such as emergency care, to ensure these shifts come out financially neutral for your system.
The big question: Will health plans work with you on this?
The answer is that some will, and some won’t – but there are some carriers who see an opportunity to gain a stronger foothold with consumers through greater price transparency and partnering with hospitals to keep rates in line with the market. Others may not be so visionary. It will depend on the type of plan and your relationship with the carrier.
This work isn’t something you can decide to initiate at the final hour. If you own a bookstore or a dress shop and decide to drop or hike your prices, you can spend an afternoon repricing your wares. But in our industry, you’re not completely in charge – and it’ll take far more than a day to make any necessary adjustments.
The rebalancing of prices for your services and the necessary conversations with health plans to get there will take at least six months – and conversations that start in December aren’t likely to get much traction.
3. Create strategic messages on price and value.
If and when the numbers are made public, strategic messaging will be key to how your system is perceived. To be clear, we’re talking about consumer preferences and perceptions, not the actual care you’re providing – so you’ll need to conduct market research, consider what competitors are doing, and identify the questions that patients are most likely ask when they’re faced with a proliferation of price information. Then come up with easy-to-understand answers.
Internally, you’ll want to ask and answer these questions:
- Do you have a strong brand, or not?
- Can you justify a higher price than the market average for a given service, or not?
- What is the unique value your organization brings to your patients and their community?
Your efforts and resulting messages will have to go beyond the traditional hospital talking points of quality and commitment to include concepts like affordability, choice, and value.
Ultimately, taking a close look at your rates and where they fall in the market, in parallel with thinking today about your positioning – on price, on brand, on reputation – will give you more leverage to steer the price conversation into 2021 and beyond.
Clint Hailey is the chief managed care officer at Tenet Healthcare. Previously, he held managed care positions at HCA Texas and Texas Health Resources.