Where Should Hospitals Focus Transparency Efforts

In our work with hospitals around the country, we have found that many hospitals are struggling to identify what services are most subject to price transparency concerns. Some are taking a broad-brush approach and reduce all charge codes to the level of free-standing entities. This approach is usually not the most effective methodology because it does not focus on the critical procedures where transparency is a major concern.

We decided to identify what procedures hospitals should be most concerned about when they face significant price competition from free-standing outpatient centers. If a hospital can compete with free-standing entities on price for those critical procedures, they should enhance their competitive position without sacrificing revenue in areas where price transparency is not a patient selection factor. Our study resulted in our latest price comparison report, the Transparency Fifty™.

To develop the Transparency Fifty™ we used two data sets. The first data set was the 2016 Medicare HOPPS data file which we used to identify high volume hospital outpatient procedures grouped in four categories that are similar to four major free-standing entities – labs, imaging, therapies, and surgeries. We reviewed the data using both total charges and total volumes by CPT/HCPCS procedure code but decided to use total charges as the best indicator of areas of concern for hospitals, although the top charge and top volume procedures frequently overlapped.

The second data set used came from the 2015 Medicare Physician/Supplier Procedure Summary file. We used this data set to identify high volume procedures performed in free-standing laboratories, imaging centers, therapy centers and ambulatory surgical centers. We then ranked each free-standing group’s procedures by CPT/HCPCS code from highest volume nationally to lowest. The final step was a comparison of the high volume hospital outpatient procedures with high volume free standing procedures to identify procedures that were on both lists.

So what services were included in the top fifty procedures from our study?

Laboratory tests (17 Procedures)

Seventeen procedures were selected that all ranked in the top 30 for free-standing labs and the top 25 for lab procedures performed in hospitals. Topping the list were comprehensive metabolic panel (CPT 80053) and complete blood count with white blood cell differential (CPT 85025). Not surprisingly, routine venipuncture, urinalysis and blood glucose test also appear as top procedures.

Imaging procedures (18 Procedures)

Imaging is the area where we experience the most hospital client requests to assess the revenue impact of setting hospital prices to free-standing centers. Eighteen procedures were selected including 6 MRIs, 2 CTs, 1 PET scan, 2 chest x-rays, diagnostic mammogram, 5 echography/ultrasound procedures and a bone density x-ray.

Surgical procedures (6 Procedures)

Six surgical procedures were selected including four endoscopy procedures, cataract surgery and an epidural injection of the spine.

Therapy services (6 Procedures)

Six procedures were selected including PT evaluation, therapeutic activities and therapeutic exercises.

Other procedures (3 Procedures)

Two sleep study procedures and an electrocardiography holter monitoring procedure ranked high for services performed by entities categorized as free-standing imaging centers.

We believe the Transparency Fifty™ report is a good starting point for those hospitals that are concerned about price transparency for services that are frequently performed in free-standing centers and that are easily shoppable by ambulatory patients. This new report allows hospitals to benchmark against peer hospital prices and the state averages for free-standing centers in their state.

Changes to address price transparency and competition may not happen quickly, but hospitals need to stay ahead of the curve as payers and patient patterns adjust in this cost-conscious industry. We hope that the Transparency Fifty™ report is a tool that will be used to help hospitals successfully navigate in the age of price transparency.

To learn more give us a call or learn more about our reports here.

By Scott Houk, CPA

Director – Consulting Services

Comparative Benchmarking is crucial to any business. Comparative reference points give you a place to start measuring your success, as well as goals to reach for in the future. You can compare your hospital’s success against your own past, of course, but that won’t tell you if you’re getting left behind by your competition. Benchmarking helps answer important questions like how am I doing in my industry, and am I keeping up with my competitors?

To set your benchmarking you must first choose a peer or peers, which can be difficult. Of course, no one can really compare to your facility, but we can get as close as possible.

Locally

The best place to start is your neighbors. Even if the hospitals around you are a different size or have a different specialty, you still compete with them for services. You’ll likely compete with them more as federal and state legislatures expand pricing transparency. If a patient investigates prices, they’re most likely to start locally.

If your peer is struggling in the same areas, you may not need to make cuts to remain competitive. On the other hand, you may discover a competitive edge. You may also want to widen your search to state or regional competitors.

National Average

If your numbers line up closely to your local competitors, you may miss growth potential. Sometimes it’s best to step back and analyze how the country is growing and changing.

By Bed Size

You can also look at different parameters nationally. Although these hospitals are governed by different legislation and population health, their comparable size means they will have similar resource management issues. There is a lot you can learn by comparing their data with your own.

Net Patient Revenue

This metric is used to assess relative payment levels for both inpatient and outpatient hospitals. You can evaluate average payment per patient encounter, allowing you to analyze data in greater detail. This metric can give you a more accurate measurement to compare your hospital with others. We talk more about Net Patient Revenue here.

A Combination

All of these measurements can help you choose a peer, but taking several into consideration can help you choose an accurate peer. Of course, our consultants can also guide you to the most accurate comparison.