Setting CDM prices has become a challenging process. Much has been written regarding the challenges relating to external pressures, including media attention, competition, and the impact on payments. But, interestingly, there are heightened challenges relating to pressures that are internal to hospitals and health systems. More individuals (frequently, ranging from the CDM analyst to the CEO) have an interest in the CDM prices and with their own perspective on the appropriateness of the CDM prices. One result of this is that more hospitals and health systems are interested in having full time access to a CDM pricing tool that they can use to help them respond to the internal "customers" of the CDM prices.
SunStone has incorporated our years of CDM patient pricing experience into the development of Pretium®; our web-based CDM pricing solution. Pretium® has been thoughtfully designed to achieve a crucial balance between employing a price calculation methodology that is sufficiently sophisticated to accommodate the intricacies of the price setting task without making the software overwhelmingly complex.
Pretium® directs the performance of pricing reviews resulting in the development of a refined and structured charging methodology and CDM line item prices that will protect the net revenue stream while being sensitive to costs, the local market and third party payer contracts; facilitate the ability to explain the detailed patient prices and be in compliance with all regulations and guidelines.
CDMs are complex with a large amount of internal relational logic. Many patient services have their own specific pricing issues. Pretium® allows a user to incorporate these unique pricing considerations into the pricing calculation methodology. And, Pretium® has a state-of-the-art Pricing Review Screen. This review screen provides the user with powerful analytics and allows the user to ensure that the calculated proposed prices make sense in the context of the organization's overall pricing philosophy. The review screen allows a user to quickly and easily make potential changes to the proposed prices and to see immediately the estimated impact on gross and net patient revenue.
Pretium's® strengths stem from both of the following:
- A state-of-the-art, powerful, web-based software solution, and
- A sophisticated, comprehensive and structured pricing methodology
Consequently, Pretium® users are able to:
- Identify CDM patient prices that are more rational, relate to relevant benchmarks including cost, the market, and payments; and will be more easily explained and defended;
- Identify CDM patient prices that have an enhanced impact on net patient revenue. Pretium's® efficient and comprehensive pricing methodology enables users to independently perform any number of what-if scenarios until the desired modeling results are identified; and
- Perform an unlimited number of pricing analyses much more comprehensively, effectively and efficiently.
Pretium's® basic features include:
- Designed for use to perform year-end pricing analyses as well as a full range of what-if modeling exercises throughout the year.
- Suitable for hospitals and physicians.
- The price calculation is fully documented for every CDM line item.
- Allows the use of unlimited definitions of market comparisons and relevant benchmarks.
- Calculates the impact on gross and net revenue, including by insurance plan code.
- Price calculation uses sophisticated and structured pricing methodology.
- Designed to address important distinctions of clinical services
- Can be easily customized by user
- Payer payment methodologies can be defined by insurance plan code, patient type, revenue code, CPT/HCPCS code, etc.
- Pricing assumptions and scenarios can be customized by the user, for unlimited number of scenarios
- Web-based and is always available for use
- Requires no special software for use
- Secure - your data is maintained on secure servers and segregated from the files of other users
- Layout is intuitive and logical and follows the process of performing a CDM pricing review
Pretium® creatively combines a sophisticated price setting methodology that is required to address the complexity of CDMs and the healthcare marketplace with state-of-the-art software functionality.
SunStone has given the subject of CDM pricing considerable thought over an extended period of time because we have been so fully immersed in the subject.
More frequently hospitals and health systems are finding themselves in a position of needing to protect themselves from inappropriate accusations relating to their CDM prices. SunStone does not believe that any healthcare provider can defend itself from accusations that their prices are inappropriate by identifying the "right" or even the "reasonable" price for each service. We do not believe it is possible to identify a price that on its face will be perceived as reasonable or fair; at least, not a price that is perceived as reasonable or fair and generates an acceptable net revenue result. We believe that the most effective way to defend your CDM pricing is by developing, documenting and implementing a carefully considered and well thought-out pricing methodology.
We believe that the following aspects of a pricing methodology are baseline requirements in order to develop defensible CDM pricing:
- The methodology should be structured and well defined. In other words, there should be some sort of formula, mark-up or calculation that identifies the price. It seems to us that any methodology that ultimately relies on an individual's judgment to arrive at the price cannot adequately respond to the potential challenge of "how was this price identified"?
- The formula or the mark-up should be one with which the organization is comfortable. If the purpose of the price calculation is to provide a defense against potential accusations, then it is important to feel confident that the details of the calculation are reasonable. The price calculation should include a series of benchmarks including the market.
- The methodology and the identification of all CDM prices should be fully documented. It is important to be able to show, in detail, how every CDM price was identified.
- The methodology should be developed in a manner to meet the financial requirements of the organization. The reason CDM prices are established in the first place is to result in the collection of a certain amount of dollars.
CDM Pricing Solutions
SunStone recommends performing pricing reviews that will result in the development of a refined charging methodology and CDM line items charges that will protect the net revenue stream while being sensitive to the local market, facilitate the ability to explain the detailed patient prices and be in compliance with all regulations and guidelines. SunStone recommends:
- Develop and document the patient charging philosophy and objectives, which are integral to justifying detailed patient charges and for defending from inappropriate accusations. We suggest that the philosophy and objectives be approved at the highest levels of the organization, including governance.
- Develop a patient charge structure that meets the organization's financial requirements, considers the local market, considers the organization's specific circumstances, and is consistent with the organization's stated philosophy and objectives.
Specific elements of an organization's philosophy and objectives often include the following:
- Ensure that patient charge structure and charging protocols consistently result in patient charges that appropriately reflect the level and intensity of services provided.
- Ensure there is an appropriate charge for patient services rendered and resources.
- Ensure that all charges are being recorded in the patient accounting system.
- Ensure that the charge structure and charging protocols will generate net patient revenue that will meet the organization's financial requirements consistent with directives from the organization's governance.
- Ensure that all aspects of the charge structure and charging protocols are in compliance with all applicable third party payer billing regulations and guidelines.
- Ensure that the charge structure considers the overall costs (including contractual allowances, bad debts, etc.), rather than only, the cost of a specific patient care department or a specific patient service.
- Ensure that the charge structure and charging protocols consider the realities of the current healthcare financing environment and the range of payment methodologies including the mix and volume of patient services by third party payer to ensure appropriate payment from third party payers is received.
- Ensure that the charge structure and charging protocols are consistent with common industry practice and, to the extent practical and appropriate, consider local market conditions.
SunStone has performed hundreds of pricing analyses and has assisted in the development and implementation of policies and procedures that comprehensively address the establishment of patient prices. These pricing analyses have been for hospitals ranging in size from 35 beds to 1,250 beds and include academic medical centers, major teaching hospitals, for-profit and not-for-profit health systems, community hospitals and small rural hospital.
Our many years of personal, hands-on experience are the foundation to provide insight with innovative approaches to rate setting. SunStone consultants have been helping hospitals and health systems with patient charging issues for almost 35 years.
For more information please contact Leonard Brauner at 212-662-9393 or Frank Tokic at 913-269-8141; or via email at email@example.com and firstname.lastname@example.org, respectively.