How hospitals approach price transparency.

A survey of finance leaders found that hospitals with lower charges were more likely than other hospitals to emphasize making prices defensible rather than simply transparent. Finance leaders of hospitals with higher charges were more likely to express concern that price transparency would cause a reduction in hospital revenue by forcing them to lower charges. Those respondents said commercial payers likely will have to agree to renegotiate contracts for price transparency to be a financially viable proposition.

Equity versus adequacy of managed care contracts.

Healthcare finance leaders can use a methodology and metrics to compare managed care payments against those of their local and regional peers. Depending on payment levels, they should adopt one of the following negotiation stances with payers: If payment levels are both equitable and adequate, they should view a continuation of the present structure as desirable. If payment levels are adequate but not equitable (e.g., payments are lower than payments peers are receiving for similar services), they should seek increases in payment to level the payment structure among providers. If payment levels are neither adequate nor equitable, they should demand correction in the near future to avoid the need to cease operations. If payment levels are equitable but not adequate, however, they should question the viability of the delivery system.

A better way to measure volume--and benchmark costs.

Equivalent patient units is a more reliable measure of a hospital's patient volume than adjusted discharges or adjusted patient days because it better accounts for both inpatient and outpatient volumes. Three elements are required to calculate equivalent patient units: equivalent discharges, equivalent visits, and the payment ratio. All of these elements are available through publicly available data, making it possible for hospitals to immediately adopt this new metric and, thereby, better understand their potential for savings.

Is there a cost associated with higher quality?

An analysis of the relationship between quality and cost using a sample of 3081 Medicare-reimbursed acute care hospitals found that cost appears to increase somewhat with quality improvement. However, an analysis that focused on the top 10 Medicare severity-adjusted DRGs (MS-DRGs) in terms of volume, based on national statistics, found that improving quality can help to reduce costs. An examination of mortality associated with a single MS-DRG found that cost increases steadily as mortality rates increase, supporting a conclusion that poor outcomes lead to greater expenditures.

Cost reduction: identifying the opportunities.

Inpatient and outpatient patient-encounter components provide a far better indicator of relative cost position than measures such as cost per adjusted discharge or cost per adjusted patient day. Cost per encounter can be expressed as the product of three key cost drivers: intensity of services, productivity/efficiency, and resource prices/ salaries and wages. Cost reductions result from actions taken in two primary areas: utilization of services and cost efficiency.

10 myths of strategic pricing.

Transparency and defensibility of pricing are key issues, but some myths about strategic pricing exist. Sensitivity to the complexity of strategic pricing is imperative. Implementing a realistic pricing strategy will help hospitals achieve positive outcomes.

Scorecards and dashboards: using financial metrics to improve performance.

To develop a dashboard reporting system for hospitals, four critical factors should be taken into account: Factors most important to the organization's success. Critical drivers that influence performance attainment. Relevant measures. Relevant benchmarking data.