Strategic Pricing

All hospitals have Chargemasters or price books which specify the basic charges for their services. This Chargemaster is usually huge and may cover as many as 10,000 to 40,000 individual items. Proper maintenance of the Chargemaster is essential for the institution to obtain correct reimbursement for the services rendered. Unfortunately, maintenance of the Chargemaster is not an easy task and often needs outside expertise to accomplish.

One of the pitfalls that institutions fall into when updating the Chargemaster is to use an across-the-board increase in their Chargemaster pricing. Studies have proven that across-the-board increases are not optimal for maximizing net revenue, however, this is the status quo for many hospitals.

Strategic Pricing, on the other hand, allows a hospital to maximize net revenue while minimizing overall Chargemaster price increases by scientifically adjusting the Chargemaster prices.

DAXPY uses rigorous scientific optimization techniques for doing hospital strategic pricing. This process is used as a method of finding the best solution to a complex problem subject to constraints. With the assistance from the experienced DAXPY consultants, established hospital specific rules and contract terms are converted into a mathematical formula, solved by powerful optimization software to yield Chargemaster prices that allow the hospital to achieve its revenue goals. Scenarios can be run to evaluate the potential effects of different pricing strategies, and confidence that new prices are reasonable and justifiable can be insured by including other hospital published charges in the optimization.

The primary deliverable is a Chargemaster price list which can be directly uploaded into the hospitalís hospital information system without further manual intervention. Secondary deliverables include a report of the findings, revenue improvement and other summary reports by department and payor.

The anticipated financial benefit of strategic pricing is net revenue improvement which is 20-40% better than an across-the-board chargemaster price increase.

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DAXPY Low Risk Proposition
  • Strategic Pricing Paper
  • HFMA Wants you to know
  • Strategic Price Setting
  • Defensible Hospital Pricing