Succeed with Internal Pricing Analysis: Part 3. Avoid Pricing Analysis Pitfalls
Succeed with Internal Pricing Analysis:
Part 3. Avoid Pricing Analysis Pitfalls
In Part 1 of our “Succeed with Internal Pricing Analysis” series, we outlined strategic planning tips to help your in-house pricing project run smoothly. Part 2 provided examples of analytical options. This is our final article of this series and addresses risks to avoid.
When performing in-house pricing studies, pricing mistakes can undermine your team’s credibility and waste precious time. We have outlined common challenges in the sections that follow.
Pricing integrity requires continued attention to accuracy and consistency with defensible pricing policies. Unfortunately, mistakes are common when requesting charge data extracts in today’s frequently changing Hospital Information Systems environments. Avoid making erroneous assumptions in your pricing analyses by monitoring for:
- Inaccurate Charge Master file exports, for example:
- Files with cost centers or charges that are not ‘active’ charge items
- Charge Master exports based on a historical version rather than current
- Reference to an incorrect price field (future, historical, etc.)
- Data for another business entity (common when on a shared system such as a ‘community’ or corporate platform)
- Missing or incorrect key data elements (wrong charge item number, incorrect code fields, embedded modifiers, data entry errors)
- Export errors due to data formatting (loss of leading zeros, field delimiter errors, incomplete exports, etc.)
- Basing pricing analysis on erroneously-assigned or invalid CPT-4® or HCPCS Level II codes
- Failing to differentiate Hospital, Physician, Clinic, or other provider settings in the pricing analysis
- Not including modifiers to differentiate similarly-coded charge items (-26 professional component, -TC technical component, -50 bilateral, etc.)
Non-Compliance with Coding Parameters
Pricing updates may be erroneous if the organization fails to consider code changes and coding rules such as:
- Changes in CPT-4® or HCPCS code definitions such as time increments, structure of the code, initial vs. subsequent status, add-on or parent code status, source or testing methodology (lab), etc.
- HCPCS code changes to drug HCPCS units of services (ex. Medicare changes the drug descriptor from 10 mg to 1 mg)
- Charge protocol that fails to follow CPT coding guidelines
Past Pricing Mistakes
When evaluating prices, many organizations find that there is a significant loss of relativity of price to cost or work values due to historical price updates such as:
- Across-the-board price updates
- Repeated “optimization” of prices for certain services based on payment methodologies or utilization frequency
- Publishing prices with errors
- Poor public relations relative to patients or press relative to health system pricing
- Comparing to market providers that do not have realistic prices
For today’s health care systems, credibility is essential, and pricing is a growing area of sensitivity. The esoteric nature of healthcare pricing makes providers vulnerable to patient frustration and public relation challenges. Pressure compounds with the growing national and state mandates for Charge Master publication.
Hospitals of all sizes are facing increasing public scrutiny of their pricing. In today’s environment, mistakes with pricing can no longer be disregarded.
Misinterpreting Pricing Data
Market data is only one quiver in a team’s tools for pricing analysis. However, we find that many are basing price changes on commercial market data sources and reports that are not fully-understood. Competitive market pricing data can be misinterpreted by failing to consider:
- Market factors (over the counter supplies and medications, retail competition, lower-cost high volume competitors (reference labs or imaging centers), etc.)
- Send-out or outside services priced differently from in-house procedures or tests
- Charges for packaged supplies, items, or services
- Related charges (or partner charges) that are typically on a claim together (devices + procedures, draw + lab test, blood + blood administration, IV therapy + drugs & solutions, radioisotopes or contrast + imaging, surgery + anesthesia + recovery, ER procedures + ER visits (hospital & pro fee), Clinic procedures + Clinic visits (hospital & pro fee), etc.)
- Potentially skewed benchmark values
- Including outlier organizations with poorly maintained pricing or overly aggressive rates
- Using comparative market pricing source data that is not representative of reasonable pricing (limited data, provider rates that are not comparable to your organization or provider settings, markets that price excessively, overly-generalized ‘percentiles’ that mask inaccurate data, etc.)
It’s important to remember that every organization has a personalized and unique pricing strategy, service mix, payer mix, contracts, and overall level of sophistication with pricing. Choose and interpret your market comparison data carefully to avoid pricing changes that are unrealistic.
Confusion about Comparative Pricing Data Sources
When looking at market data, it’s critical to understand the source of the data, the aggregation method of the data provider, and the potential changes that may have occurred over time. We’ve noted that some organizations make pricing mistakes when they don’t fully understand the comparative data. Avoid misunderstanding market data by confirming:
- The software vendor or publisher’s source of the market data
- Where the market data is derived (claims, surveys, internal proprietary information, vendor’s client information, etc.)
- Statistical methodologies used and data compilation logic for the displayed rates
- Timeframe reflected by the data
- Organizational strategies for market percentiles
Remember that incorrect assumptions about comparative data can undermine even the best efforts when performing price updates. Be sure your team is knowledgeable of the areas noted above to avoid making pricing update errors.
As your organization undertakes in-house pricing analysis work using ChargeAssist®, consider the planning and project management tips noted in Part 1 of this series, and develop a realistic analytical scope with protocol options from Part 2.
Avoid the mistakes that many hospitals make by understanding data sources, carefully scrutinizing market information, and rectifying (rather than compounding) past pricing mistakes. Also remember: for properly interpreting pricing analysis models, your organization’s charge and utilization data must be accurate, with coding rules interpreted correctly.
We hope this series has been helpful for our hospital and health system customers. If more strategic help is needed or more in-depth analytics are required, Holliday & Associates provides not only 1:1 consulting working sessions but can refer your team to some of the nation’s leading strategic pricing consultants at our business partner, Panacea Healthcare.
Holliday & Associates offers ChargeAssist®; an HFMA Peer Reviewed™ Charge Master auditing and resource tool for easily auditing, collaborating, and maintaining Charge Master files. We also provide Charge Management CDM Coordinator Education and CDM Reviews by a team of credentialed clinical, coding and technical auditors.
Contact information: (800) 831-3323 | Web Site: www.ChargeAssist.com | firstname.lastname@example.org