How do Hospitals Compete with Free Standing Clinics?

The continued pressure on shoppable services has heightened the competition between hospitals and freestanding facilities. But what effect does this have on their day to day business? We analyzed the rate at which hospitals and their freestanding competitors have increased charges in four key groups from 2015 to 2019: imaging, procedures, labs, and therapies and found some interesting trends!

The chart below compares U.S. averages from Medicare data for 2015 and 2019. To account for the difference in charges due to case mix, we have adjusted procedure prices by their Medicare Ambulatory  Patient Classification (APC) relative weight. We mapped the HCPCS to the appropriate group, calculated total charges and total APC Relative Weight (RW), and finally divided total charges by total RW to arrive at the average charge per RW of one.

Average Charge per APC Weight of One

In imaging, we see hospitals have slightly closed the gap, increasing their average charge by 25% compared to 29% at their freestanding counterparts. This is a small difference and suggests that hospitals may not believe price elasticity in this area is very high and they are willing to maintain a price premium. 

Looking at procedures, hospitals have increased their average charge by 15% compared to 2015, as opposed to ambulatory surgical centers where the rate of increased remains nearly flat at 1%. It should be noted that while the average charges in this area look competitive between hospitals and ASCs, hospitals often do not include surgical supplies or anesthesia in their pricing for procedures. This differs from ASCs where the price is more inclusive. The relatively low rate of increase for ASCs (1%) suggests that ASCs may see little association between price and net revenue, or they may perceive a highly competitive price market with hospitals. 

Labs are moving at similar rate of increase with hospitals increasing their average charge by 31% compared to 28% at the freestanding facilities.

When looking at therapies, hospitals are closing the gap with freestanding facilities, increasing their charges by 11% compared to 16% at the freestanding sites.

The critical question for healthcare providers in these four outpatient service areas is to what extent does price drive market share?  In the four areas that we reviewed, the relative difference between hospital and free-standing prices remained relatively constant.  Only in the procedure area was there a significant variance between hospital and free-standing price changes which may suggest market stabilization in these areas.  Price transparency could provide some significant future price movement as hospitals modify prices to enhance their relative marketplace image.

Is your facility interested in understanding your pricing position relative to freestanding competitors? We can help!

Is CMS Auditing For Price Transparency?

Last year the hospital industry faced major changes to the availability and accessibility of their prices. Now that 2021 is here, and the new CMS rules are officially in effect, CMS plans to audit how successfully the industry achieved compliance.

According to the CMS website they have already selected hospitals for their initial audits. We’re not sure how hospitals were selected for audits, or what criteria went into CMS’ decisions, but we do know that some of the audits will probe specific complaints and patients can submit complaints on the CMS website. Additionally, we don’t yet know if hospitals found outside of compliance have been informed or fined.

Because there’s no single place to find the information, making sure every hospital is compliant and up-to-date may be a laborious, if not impossible task. That won’t stop CMS from investigating individual hospitals and systems, especially if they suspect, or have a report, that they are not compliant.

Noncompliance isn’t without risk. Should a hospital fail to post their prices, or decide not to do so, they could face a fine of $300 per day. CMS’ website states that there will be several steps before this, however, including a written warning notice and requesting an action plan.

Of course, hospitals can appeal before a judge, and have 30 days to do so. It is up to each facilities’ administration to determine how much risk they are willing to take.

What does this mean for you and your organization? Well, it depends on how much work you’ve already done. How close are you to compliance? What work still needs to be done?

We can help! We have experience with the types of files CMS requires as well as building price estimator tools. Give us a call at 888.779.5663 or see our price transparency resources here.

What Would Die Hard Cost John McClane (and His Hospital) (This Year)

Every year, as the winter holiday season rolls around, the greatest debate of our time resurfaces – is Die Hard a Christmas movie?

We at Cleverley + Associates believe that the answer to this question may be beside the point. What’s important are the traditions we create for ourselves, especially around the holidays. What really matters is what brings us together and make us feel happy and fulfilled.

But also, yes. It’s a Christmas movie.

Plus, it’s a totally awesome action movie, which means injuries…a lot of injuries. That got us thinking – we assume that John McClane went to a hospital eventually, and considering what he’d gone through, what would his treatment cost him and the hospital?

Last year, we speculated wildly on Mr. McClane’s bill. Let’s see what would change this year! As we pointed out last year, we’re not doctors, we’re data nerds, so our diagnosis and treatments are only tangentially related to real life medical advice.

Our hero sustains his first injury (or probably injuries) as he falls down the stairs while fist fighting. There are a lot of injuries that can occur from both a fall and a fight, but since Mr. McClane goes on to punch several other people, we can rule out fractures, spinal injuries, and basically anything that would put in him in traction.

But we can’t rule out a concussion, or a subdural hematoma.

He’d probably get an MRI and CT scan (Let’s go ahead and do both, since he’s a hero.)

We’d also want to do an ImPACT test.

This year the hospital saved a whopping $11, while Mr. McClane will owe $917 more than last year.

Next up, the most famous injury, deep cuts to our hero’s feet, because he walked across broken glass.


So, we’re talking lacerations to the feet.

We’re going to need a lot of antiseptic, bandages, and probably stiches. Also foreign body removal from the wounds.

Again, ow.

It looks like Mr. McClane saved $466 on his terrible and iconic podiatric injury! It cost our fantasy hospital $104 more.

Next up, poor McClane is shot in the shoulder! The following scenes, where he still manages to win in hand-to-hand combat with the villain, show that the bullet likely grazed him. Of course, we can’t rule out that the bullet is still there, or a shard of it. So, we’re going to have to explore the wound to make sure it’s clean, and probably take an x-ray to make sure we got all the bullet bits out.

This year that procedure looks cheaper for both John and the hospital! Mr. McClane will save a total of $1,553 while the procedure will be $402 cheaper for the hospital!

Lastly, in the grand finale, John McClane wraps a fire hose around himself and bungee jumps off the building. This is, generally speaking, a terrible idea. He then breaks through a window using his already battered body. Again, not a great idea.

This could, of course, cause a variety of injuries, but let’s go ahead and just assume the worst – a fracture of the vertebrae and ribs. There would probably also be internal damage as well, but considering he’s still walking around being witty, let’s assume he’s miraculously okay-ish.

These procedures will cost McClane $112 more than last year, and cost the hospital $28 more.

The end of the movie seems to suggest that McClane rides off into the sunrise with his wife, triumphant and filled with the Christmas spirit. I assume they didn’t go straight home with the hope that he would survive until morning. More likely they stopped at the ER to at least make sure he wasn’t bleeding internally.

So here’s everything all together! Overall, both John and the hospital saved money this year. John spent $970 less and the hospital saved a total of $281!

Happy Holidays everyone! Yippee-ki-yay!

How To Prepare for An Insurance Audit

How To Prepare for An Insurance Audit

Insurance audits can be an intimidating prospect, but they’re necessary and, unfortunately, inevitable. Even if an insurer didn’t single your facility out for an audit, you may be part of a random selection. Whether you’re preparing for a pre-payment review or a post-payment review, the general purpose of an audit, from the insurer’s perspective, is to check for fraud abuse, and waste. There’s no such thing as a routine audit. They’re all a little bit different, but there are some things you can do to prepare ahead of time.

1. Words!

Read the language of the audit notification very, very carefully. Obviously, you’ll need to know timeline information and deadlines, but every audit is a little different and giving special attention to what they’re asking for can save you time. Why do they want the audit? What are they looking for? What documentation are they asking for? Make a list so you can tackle each part systematically.

2. Scope!

Focusing on the language leads us to the second step – scope. What does the audit include? What isn’t included? Your list of necessary items will help you get a handle on not only what is necessary, but how much of your facility will be impacted. You can determine who needs to be involved. How much help do you need? Do you need to loop in an attorney or compliance officer? Of course, your facility may consider every audit worthy of all-hands-on-deck, but if not, it’s good to be prepared.

3. Stuff!

Get all your stuff – medical records, invoices, and whatever else they’ve requested – all together in one place. If you need to have your physicians sign off on the medical records, prepare that too. If you’re missing something, it’s easier to determine that if you haven’t been sending information piecemeal. You may need to ask for a deadline extension, but once you have everything, you can conclude the audit.

4. Help!

A good option, when preparing for audits, is to get more people in your corner! We have several approaches that could clarify and improve the process. We can help you understand how CDM changes impact payers and how potential changes might disproportionately impact some payers, which might raise red flags. We can analyze how your decision-making will impact your payment from individual payers. We’ll look at your contracts closely and show you how a change in prices might affect your payment. If this change is too dramatic, it may trigger an audit. We also offer services to benchmark terms and help hospitals evaluate how payment changed through contract alterations from year to year.

Audits can be frustrating, and they’re often a huge amount of work, but, besides being necessary, they can provide a wonderful look at the health of your organization, as well as your data collection and storage systems. Being honest and comprehensive is the best way to give yourself, as well as the insurer, the best look at your facilities.

To learn more about how we can help give us a call at 888.779.5663 or contact us here!

Another Way to Gauge Your Hospital’s Financial Health

Beckers recently published an article on how to gauge your hospital’s financial health, and they make excellent points. You can read the full article here.

They cover many of the basics, including Aggregate Volume, Operating Ratios, Labor Costs Relative to Patient Volume, and Liquidity Ratios, but we believe there is another measurement that can shed light on your facility’s health and financial stability – Equivalent Discharges.

Equivalent Discharges is an alternative to Adjusted Patient Discharges as a measurement of patient load and resulting revenue.

Virtually every hospital finance executive knows that relative pricing methodology can influence Adjusted Discharges or Adjusted Patient Days. Increases in Relative Outpatient Prices will artificially increase Adjusted Discharges, while decreases in Relative Outpatient Prices will artificially decrease Adjusted Discharges.

In addition, modifying an Adjusted Discharge value by the inpatient case mix makes little sense because the complexity of an organization’s outpatient case mix does not always correlate with that of its inpatient case mix.

Equivalent Discharges is expressed as follows: Equivalent Discharges = Case Mix Adjusted Discharges + Conversion Factor X Case Mix Adjusted Visits

Hospital financial health can’t be measured by one metric alone, and ideally, we use many metrics and frequent checkups and reassessments. One of these can be Equivalent Discharge.

To learn more about Equivalent Discharges, and how we can use them to measure your hospital’s financial health, you can read our white paper here. Or give us a call at 888.779.5663 or contact us here.