Key Opportunities For Hospitals To Boost Margins In The Era Of Price Transparency

Hospital Price TransparencyAbout 60 million Americans live in rural areas and depend on local hospitals for care. In 2019, a record 18 rural hospitals closed, bringing the total closures since 2010 to 124, according to the Cecil G. Sheps Center for Health Services Research.

With almost 700 more rural hospitals at risk of shutting, the need for strategies to boost margins at these facilities has never been greater.

During a Feb. 26 webinar sponsored by Healthcare Financial Resources and hosted by Becker’s Hospital Review, three representatives from HFRI discussed ways hospital leaders can help their organizations achieve financial sustainability.

Factors contributing to rural hospital closures include increasing costs and declining revenues, complex patient populations and difficulties attracting and retaining providers. Solving these issues can not only help these hospitals stay open, but really thrive in their communities, according to Mr. Giuliani.

“The best way to ensure we can offer the highest quality of care to as many people as possible is to ensure our providers are healthy financially,” Mr. Giuliani said. “Those margins help drive growth, research and continuous improvement in care.”

Preparing For Price Transparency

To achieve thicker margins, today’s hospital leaders must help their organizations meet the demands of changing regulatory requirements and rising consumerism within the industry.

In 2015, CMS began introducing hospital price transparency guidelines, requiring hospitals to provide a standard list of charges upon patient request. Beginning in 2021, CMS’ final rule will require hospitals to publish standard charges online in a machine-readable file and to disclose negotiated payer rates.

“We foresee a continued legal battle but are proactively looking to prepare our hospitals for a consumer-centric approach to pricing transparency,” Ms. Brantner said. “We recommend an intuitive user-friendly solution that incorporates the complete list of charges, the base CDM price and a list of common procedures in a consumer-friendly language.”

HFRI also suggests initiating the functionality to allow patients to enter copay and deductible information for a more complete estimate. By inputting the patient’s insurance details and accessing the facility’s historical data, hospitals can gauge a truer estimate of services and patient obligation, according to Ms. Brantner.

“We’ve found that this strategy improves collections, reduces bad debt and is great customer service that improves the customer experience,” Ms. Brantner said.

Designing Pricing Strategies

Before hospitals publish their charges — which are intended to represent the statistical basis of costs for hospitals — a prudent pricing strategy should be implemented. Thus, HFRI recommends hospitals price a chargemaster in line with Medicare fee schedules, costs or comparative peer-pricing data.

All hospitals are reimbursed differently, depending on their outpatient prospective payment system, critical access status or other third party payer contracts, but most charges are typically divided into five basic revenue streams: room rates/observations, emergency room/clinic visits, diagnostic and therapeutic services, operating room services and drugs and supplies.

“Cost-based mark-ups are recommended for drugs/supplies so that full transparency can be achieved,” Ms. Brantner said. “We also recommend identifying [diagnostic and therapeutic] items with negative patient satisfaction and pricing those items competitively for outpatients against other data sources, such as a freestanding facility or actual clinic data.”

Before new hospital price transparency regulations take effect, it’s important for hospitals to establish rational pricing strategies that can stand up to the test of consumerism. Implementing effective pricing methods improve hospitals’ contract management capabilities — as they have prices that are relative to the peer market — and enable them to better articulate pricing strategies to payers.

Opportunities To Boost Hospital Efficiencies

Identifying payer issues upfront can help hospitals improve back-end efficiency and reduce cash loss. Additionally, improved efficiency and well-organized teams will ultimately lead to an improved patient experience.

“A well-tuned insurance accounts receivable team will help ensure patients’ claims are paid appropriately and that patients are billed correctly and timely,” Mr. Low said. “Identifying [payer] issues and building payer relationships is also critical to reducing current and future rejections.”

Challenges with new EHR systems have been well-documented, with one survey finding 65 percent of respondents who implemented new software experiencing financial losses in their practice. To ensure EHR systems don’t negatively impact efficiency, productivity and cost, complete and proper implementation should be top of mind for hospitals.

During new implementations, facilities often see days in accounts receivable and denials increase while cash flow decreases, which can be a year or more until stabilization, according to Mr. Low.

“Building, reporting and assessing the data with the EHR system is a challenging and always evolving task,” Mr. Low said. “Communication between the clearinghouse and EHR should be a main focus to ensure staff have the ability to stop account issues prior to billing.”


Preparing for hospital price transparency and developing effective pricing strategies for hospital charges is paramount for all healthcare facilities this year. Meeting this challenge will be especially important for rural hospitals and other organizations facing fiscal challenges. Healthcare leaders should look to arm their teams with the appropriate tools and processes for improving revenue cycle efficiency and reimbursement.

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