April 1, 2009 Pricing Transparency The Role of Supply Chain Leadership.
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Transcript of April 1, 2009 Pricing Transparency The Role of Supply Chain Leadership.
![Page 1: April 1, 2009 Pricing Transparency The Role of Supply Chain Leadership.](https://reader030.fdocuments.net/reader030/viewer/2022032708/56649e6f5503460f94b6c7be/html5/thumbnails/1.jpg)
April 1, 2009
Pricing Transparency
The Roleof
Supply Chain Leadership
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“Don’t bother me, can’t you see we’ve got a battle to fight?”
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Supply Chain Leadership
is Essential to Successfully
Achieving Pricing Transparency
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1. Defining the Current Environment
2. Sharing Our Experiences
3. Your Leadership
Our Topics
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Defining the Current Environment - How did we get here?- Legislation
Sharing Our Experiences- Chargemaster – Strategic Importance- CMS Cost Reporting - Debunking Common Myths- Cost Transparency
Your Leadership- Be at the Strategy Table- Understanding Your Role- Improving the Bottom Line – OR Revenue Maximization
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Defining the Current Environment - How did we get here?
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The Problem
• Surveys show consumers can come
within 1% or $300 for the Price of a new
Honda Accord
• But a 4 Day Hospital Stay Price?
Incorrect by 56% or $8,100
Harris Interactive Poll for Great-West Healthcare July 2005
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Survey: Estimate Surgical Procedure Cost
Hip Replacement
WSJ Health Care Poll, “Public Perceptions of Costs for Health Care Products and Services Differ Widely” , July 2004
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Survey Results
WSJ Health Care Poll, “Public Perceptions of Costs for Health Care Products and Services Differ Widely” , July 2004
Accurate Response Rate: 14%
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WSJ Survey: Most Important Issue
44% Believe it’s CostsTranslated: The Price They Pay
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What is Price Transparency?
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Price Transparency Goals
• Increase Competition among Providers
• Help Patients Make Informed Decisions
• Reduce Charge Disparities for Same Care
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The Goal: Publish Procedure Price List
ProcedurePatient Price
Implant Charge
Open Heart Bypass $19,524 Possible
Thoracotomy - Minor $10,819 No
Pacemaker Insertion $4,207 Yes
Open Heart Valve Replacement $19,200 Yes
Carotid Endarterectomy $9,088 Possible
Removal of Pacemaker $2,114 Possible
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For Hospitals:
Price Transparency
Requires
Cost Transparency
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Defining the Current Environment - How did we get here?- Legislation
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• Bush Administration Openly Supported
Transparency Initiatives
Executive Order August 2006
Health IT Research – Strategies Funded
Health Savings Accounts – Incentive
• HHS Secretary Leavitt Pushed for State
Involvement
Federal Legislation
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Transparency legislation in place
No current legislation in place
Pending legislation
Source: National Conference of State Legislatures, www.ncsl.org, December 2008
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• National Conference of State Legislatures
• Pending and Enacted Transparency
Legislation by State
http://www.ncsl.org/programs/health/Transparency.htm
Where to Find State Legislation
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• Obama Administration – “American Recovery and Reinvestment Act of 2009”
Health IT Grants – EMR Rollout
• Proposed Federal Budget Plan 2009
Reduce Medicare payments to Control Costs• Americans Speak on Health Reform: Report on
Health Care Community Discussions
Need to Understand Prices
New Federal Legislation
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Defining the Current Environment - How did we get here?- Legislation
Sharing Our Experiences- Chargemaster – Strategic Importance
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Chargemaster Problems Arise When
Patient Price
Actual Costs
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How does this happen?
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Limited System Integration
Software ApplicationAccurate Item
Cost Patient
Price
Patient Finance NO YES
Operating Room NO NO
Purchasing YES NO
Decision Support NO YES
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Yearly Price Ramp Up Example:
Item Description: ½” Drain Tube
1995 Item Cost: $3.34
Markup: 150%
1995 Patient Price: $5.00
Separation of Costs from Prices
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Separation of Costs from Prices1995 Patient Price: $5.00
2005 Patient Price: $10.78 (8% Yearly Ramp Up)
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Problem: Patient Charge Data Used to Understand Costs
Patient Finance System
Decision Support
Data
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Procedure Costs Analysis – Actual Costs vs. Decision Support
Result: Limited Visibility to Actual Costs
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Procedure Costs Analysis – Actual Costs vs. Decision Support
Result: Limited Visibility to Actual Costs
} Inaccurate Costing
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Defining the Current Environment - How did we get here?- Legislation
Sharing Our Experiences- Chargemaster – Strategic Importance- CMS Cost Reporting
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Centers for Medicare & Medicaid Services (CMS)
• Annual Data Provided by Hospitals
• Used to Determine Cost to Charge Ratios
• Directly Affects Federal & State
Reimbursement Rates
CMS Cost Reporting
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CMS Cost Reporting
CMS Set New Goal of Setting More Accurate
Hospital Payments
• Return to Fixed Fee Reimbursement
System
• No Longer Looks at Gross Charges
• Now it Looks at Costs
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Defensible Cost Reporting Requires
Actual Costs
Patient Price
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Defining the Current Environment - How did we get here?- Legislation
Sharing Our Experiences- Chargemaster – Strategic Importance- CMS Cost Reporting - Debunking Common Myths
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Are All Supplies Chargeable?
Operating Room / Cath Lab
YES
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Many Hospitals Do Not Charge for Every Supply Used in the OR
Our Experience
Why?
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Our Experience
Most Common Reason Given: “Routine, or Commonly Used Supplies” Are Not Chargeable
According to CMS
Myth
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Medicare Provider Reimbursement Manual Section (2203.2)
“They should be direct identifiable items and services provided to individual patients; furnished under the direction of a physician because of specific medical needs; and not reusable or represent a cost for each preparation.”
Myth: This refers to SNFs not Hospitals
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Are Instrument Trays Individually Chargeable?
Operating Room / Cath Lab
YES
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Many Hospitals Do Not Charge Individually for Instrument Trays
Used in Every Case
Our Experience
Why?
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Our Experience
Most Common Reason Given: Reusable Instrument Trays are
Considered Routine and Not Billable Separately
Myth
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What this Means:
Charge for All Supply & Implants Used
Charge for All Equipment & Instrument Trays Used
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What this Does:
Makes Patient Charges Defensible
Aligns All Actual Costs Per Case
with Charges
Enhances CMS Cost Report
Enables Cost Transparency
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Defining the Current Environment - How did we get here?- Legislation
Sharing Our Experiences- Chargemaster – Strategic Importance- CMS Cost Reporting - Debunking Common Myths- Achieving Cost Transparency in Surgery
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• OR Time Charges• Surgeon Time• OR Room Time• Anesthesiologist Time
• Equipment Charges
• Instrument Tray Charges
• Supply Detail Charge
• Implant Detail Charge
Operating Room Charges
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Costs Driving Price Transparency
SurgeonSurgeon
Time Charge
Dr. A $12,000
Dr. B $8,000
Achieving Cost Transparency
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SurgeonSurgeon
Time Charge
OR Time Charge
Dr. A $12,000 $9,200
Dr. B $8,000 $6,100
Achieving Cost Transparency
Costs Driving Price Transparency
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SurgeonSurgeon
Time Charge
OR Time Charge
Supply Charge
Dr. A $12,000 $9,200 $3,300
Dr. B $8,000 $6,100 $1,200
Achieving Cost Transparency
Costs Driving Price Transparency
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SurgeonSurgeon
Time Charge
OR Time Charge
Supply Charge
Implant Charge
Dr. A $12,000 $9,200 $3,300 $7,800
Dr. B $8,000 $6,100 $1,200 $8,200
Achieving Cost Transparency
Costs Driving Price Transparency
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SurgeonSurgeon
Time Charge
OR Time Charge
Supply Charge
Implant Charge
Total
Dr. A $12,000 $9,200 $3,300 $7,800 $32,300
Dr. B $8,000 $6,100 $1,200 $8,200 $23,500
Achieving Cost Transparency
Costs Driving Price Transparency
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Costs Driving Charges
Achieving Cost Transparency
Acquisition Cost(Supply / Implant)
Markup(Range 150% - 279%)X
= Patient Price
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Chargemaster Design – One to One
15,000 OR Items in Item Master
=15,000 Items in Chargemaster
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Costs Driving Charges
SurgeonSurgeon
Time Charge
OR Time Charge
Supply Charge
Implant Charge
Total
Dr. A $12,000 $9,200 $3,300 $7,800 $32,300
Dr. B $8,000 $6,100 $1,200 $8,200 $23,500
Achieving Cost Transparency
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Costs Driving Charges
Achieving Cost Transparency
Indirect + Direct Instrument Tray
Costs
Markup(Range 150% - 279%)X
= Patient Price
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Improve System Integration
Software ApplicationAccurate Item
Cost Patient
Price
Patient Finance NO YES
Operating Room YES YES
Purchasing YES NO
Decision Support YES YES
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Improve System Integration
Software ApplicationAccurate Item
Cost Patient
Price
Patient Finance YES YES
Operating Room YES YES
Purchasing YES NO
Decision Support YES YES
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Defining the Current Environment - How did we get here?- Legislation
Sharing Our Experiences- Chargemaster – Strategic Importance- CMS Cost Reporting - Debunking Common Myths- Cost Transparency
Your Leadership- Be at the Strategy Table- Understanding the Need for Your Role- Improving the Bottom Line – OR Revenue Maximization
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Strategy Design
PATIENT FINANCE
OR LEADERSHIP
CFO
SUPPLY CHAIN
LEADERSHIP
INFORMATION TECHNOLOGY
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The Item File is the Master – Its Your Data
• Standardize Descriptions
• Ensure Costs are Lowest Unit of Measure
• Ensure Catalog Numbers Match Products
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Drive the Integration Process
Interfaces to the ORIS must:
• Handle Price Changes
• Transmit Lowest Unit of Measure
• Transmit the Chargemaster Number
• Manage Obsolete Items
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