Putting a price on healthcare - with technology

18 June 2019 Consulting.us

Healthcare consultancy SunStone Consulting has enhanced its Pretium solution, which helps providers make better and more transparent pricing decisions.

In the American healthcare system, the charge description master (CDM) is the central mechanism of a health provider's revenue cycle, providing a listing of items billable to patients and insurance providers. The Time Magazine article “Bitter Pill” ignited a wave of negative press around CDMs in 2013, asserting they routinely listed extremely high prices “devoid of any calculation related to cost.”

The article tapped into the long-simmering discontent that healthcare costs more in the US than in countries with single payer systems like the UK. US providers charge more because they can, and insurance premiums balloon, and the country is left with an increasingly expensive and unsustainable system, with a complex patchwork of coverage (private insurance, ACA, Medicare, Medicaid) that doesn’t reach every citizen.

One improvement proposition that skirts the American exceptionalism towards nationalized healthcare (among Western democracies, at least) is that of “value-based care,” popularized by academic Michael Porter. The model shunts aside the current fee-for-service model – which incentivizes multiple and costly procedures – in favor of payment tied to patient outcomes. Value-based care aims to bring down ballooning costs with a focus on treatment quality over quantity, and the government is receptive to the idea: it set a goal of tying half of Medicare benefits to value-based payment models by 2018.

Putting a price on healthcare - with technology

Value-based care and a single payer system are one route to ensure full coverage, better patient outcomes, and a more sustainable healthcare system, but providers would fight tooth-and-nail to prevent that sort of sea change. And you can’t blame them: they’re just looking after their own interests, as organizations and people are wont to do.

For now, the government has set a requirement effective January 1, 2019 to disclose charge description masters in a machine-readable format. The Center for Medicare and Medicaid Services, meanwhile, has launched a website to allow beneficiaries to calculate costs at various hospitals for the same procedure.

Providers, as such, are on the defensive against rising criticism surrounding the prices charged for procedures. Provider-based billing is also a source of confusion, especially where transparency is lacking. Aside from not understanding how the hospital came to its pricing conclusion, the esoteric language of CDMs also renders it incomprehensible to laypeople.

Healthcare consultancy SunStone Consulting thinks providers can defend their prices by “developing, documenting and implementing a carefully considered and well-thought-out pricing methodology, with transparency, across all settings.”

The Harrisburg, PA–based firm has now enhanced its Pretium web-based pricing solution, which leverages years of patient pricing experience. The software allows providers to develop a structured pricing methodology for CDM line items, with customizability for unique circumstance and pricing philosophies.

Pretium calculates and recommends a specific CDM price for each item, while showing the full calculation process. This allows providers to explain how each price was determined, maintaining compliance with regulations and guidelines.

The software also lets users tweak the proposed price to immediately view the estimated impact on gross and net patient revenue.

Aside from its Pretium offering, SunStone delivers a full scope of services in strategy, reimbursement, regulatory and compliance, and revenue cycles. The firm’s clients include the NHS, The University of Kansas Hospital, and the New York City Health and Hospitals Corporation.


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