PwC: Reconsider chargemasters for price transparency

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Money sign.

Are hospitals approaching a tipping point in terms of price transparency for consumers? Will they have to take some short-term revenue losses in order to have more satisfied patients?

Those are the questions being pondered by some hospital systems, with executives assessing the risks involved with cutting chargemaster prices, according to a new study by PwC's Health Research Institute.

The cost-shifting to consumers and the stark contrast in prices among hospitals is prompting some consumers to seriously consider obtaining some services in other settings. More than 30 percent of those surveyed said they would obtain imaging services in a retail clinic or a similar setting, according to the PwC study.

There are stark price differentials: In Maine, for example, a wrist X-ray that costs $255 at a hospital may be as little as $52 at a standalone imaging center. As a result, “some hospitals are examining ways to incorporate clear pricing strategies to compete for consumers,” the report said.

If that's the case, it could signal a departure from the way many hospitals are going about their price transparency initiatives, offering little more than the most basic data about what patients can expect to pay for services. A recent report by Health Care Incentives Improvement Institute and Catalyst for Payment Reform gave passing grades to only seven states for price transparency. And hospitals have come under withering criticism for using their chargemasters as little more than a device to overcharge for specialty services.

Nevertheless, the confluence of events described in the PwC report has pushed Orlando, Florida-based Adventist Health to cut the charge-to-cost ratios in its chargemaster. That's despite the fact that reducing some components of its chargemaster between 30 percent and 40 percent would translate to a loss of between $50 million and $75 million in revenue.

“Our marketplace was starting to tell us that the tolerance for what was going on, both from a rate perspective and a charge perspective, was no longer going to be acceptable,” said James English, vice president of revenue cycle finance at Adventist Health System. “So our executive team saw the horizon and said we now have to look internally and see what we can do to start marching down on rate and charges, decrease complexity, before our payers came and did it to us.”

The strategy appears radical for Florida, which contains 40 percent of the nation's hospitals with the highest charge-to-cost ratios--a reveal that has had zero impact on the business practices of those facilities.

Geisinger Health System in Pennsylvania has also begun offering some rebates to patients who are dissastisfied with the cost and quality of their care. The organization has paid out more than $400,000 to patients as part of its “money-back guarantee," which it launched last year, FierceHealthcare recently reported. 

The PwC report concluded that hospitals should seriously consider bundling its services into a comprehensive package, compare their charges against competitors, and assess the overall impact to revenue. “Dramatic changes in pricing could affect how hospitals report costs to Medicare--and also could impact disproportionate share hospital payments,” it concluded.