Price Comparisons

February 16, 2012

Hospitals are increasingly interested in understanding their relative price position. With the increase in consumer based purchasing decisions, the sensitivity of pricing has increased.

The traditional model of pricing analytics is to compare prices line-by-line, service-by-service. Hospitals then look at individual prices of services that they feel compete with independent labs, imaging, centers and other providers. However, this is not how patients buy many services. Most healthcare services are not purchased, or priced, one at a time. As payers and ACOs look at bundled payments the challenge to hospitals is to correspondingly understand bundled charges.

Hospitals deliver services in bundles. Essentially, there is generally a primary service and there are ancillary or support services. For example, if I come into the emergency room with a fractured arm, there will likely be other charges for casting, imaging, drugs, and potentially supplies. To compare typically non-emergent services such as a diagnostic colonoscopy, a hospital or patient would need to look at the services provided with the procedure.

Having access to the procedure code price alone, however, does not answer the question. There are also drug, supply, and possibly pathology charges. What if we were to create a Hospital Price Index ™ that could take these services and assign them to the primary service? This would create a comparative that mattered.

After identifying the average accompanying services for primary services and including those charges in the comparison, we now have a much better feel for how the prices stack up to the market.

This approach will allow hospitals to develop strategies around how they charge for a complete service, not just the individual components.

AppRev is now using this approach to develop rules for our Pricing Analytics solution

By: Seth Avery, Chief Executive Officer

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