In the near future, hospitals will compete for business just like other service industries, i.e., restaurants and retailers, to name a few. For example, consider how someone finds the best speaker to buy on the market. They go online and compare prices, specs and quality. Knowing this information, they can then decide whether they will choose a certain speaker or not. For years, healthcare was immune to this level of consumerism, but since the push for stricter price transparency laws in healthcare, the consumer now has all the information they need to choose your hospital or not. The truth this change brings is that consumerism isn’t going anywhere. In fact, it is only going to get ramped up. As it will affect their bottom line, hospitals should take this seriously and plan to align with consumer demands and expectations.
Hopefully your hospital's pricing strategy doesn't sound like this: “Prices were set in cement a long time ago and just keep going up almost automatically.” This was one Chief Financial Officer’s explanation of Chargemaster prices from the controversial 2013 Time Magazine article “Bitter Pill: Why Medical Bills Are Killing Us.” The article highlighted the extreme cases of high prices at hospitals and even called several hospitals (by name) into question. Although some of the findings in the report were later disputed, the article placed hospital pricing under a microscope and reinforced the need for defensible pricing. Automatic price increases might be the traditional route, but the strategy opens itself up to scrutiny, inefficiencies, and a potential loss in net revenue. Because of these factors and the recent emphasis on increased price transparency and defensible pricing, hospitals are moving away from the "across the board" annual gross price increase and towards a modeling approach to predict how charge adjustments impact net revenue. Not only does this give finance a clearer picture of future net revenue, it creates a defensible pricing strategy if prices ever come into question.