What We Can Learn About Hospital Finance from the First Space Pirate

Recently, NASA verified that they are investigating what might be the first crime in space. The short version is that Anne McClain accessed her ex-wife’s bank account while stationed aboard the International Space Station. It should be noted that Ms. McClain denies any wrongdoing, but the incident has raised some interesting questions about crime in space.

Specifically, what do we do about crimes in space?

In case you’re curious, the short answer here is that the offender would be subject to the laws of the country from which they originated. The five nations involved in the ISS have also set up laws dealing with any cross over, including extradition.

So what does this teach us about hospital finance? Well, as you can read in the above paragraph, NASA, and indeed all the space agencies, weren’t caught completely off guard by this event. A group of people placed, literally, under pressure in a tiny space was going to produce chaotic results at some point. NASA has long expected some kind of ill intent in space, and conversations about it date back to long before the agency was even called NASA. This type of forward thinking, trying to anticipate issues and planning fixes ahead of time, is exactly the kind of thing we should be doing in our own organizations.

Hospital finance strategy, data acquisition and storage, bundled payment impact testing, competition from non-hospital institutions, employer group challenges, constantly shifting healthcare law, can all be nebulous obstacles with a variety of consequences. It is always worth the time and effort to sit down and try to plot out the possible pitfalls of any new situation or complication.

If this is something you think we can help with, give us a call at [X]. (Unfortunately, at this time, our international space consultations are extremely limited.)

What You Need To Know About The Federal Surprise-Billing No-Surprises Act

The No-Surprises Act, currently under consideration, would prohibit providers from balance-billing. It would also establish rates for payments from commercial health plans, based on the local market. There is a process (added on July 17) that includes a third-party arbitration process for resolving certain disagreements. 

The main focus of the bill, as with other recent surprise billing legislation attempts, the goal is to protect patients from large, surprise bills, especially from unexpected out-of-network care.

There are several important elements:

  • Health plans are required to treat out-of-network services as if they’re in-network in cost sharing cases, for deductibles, and out-of-pocket limits.
  • Out-of-network providers are prohibited from “balance billing” patients. Meaning, they cannot bill patients above the in-network cost-sharing limit.
  • Sets guidelines for determining how much health plans must pay to the out-of-network provider.

The act was co-authored by  Energy and Commerce Committee leaders Reps. Frank Pallone, D-N.J., and Greg Walden, R-Ore. It passed the Senate health committee on June 26th. The basic concept of the legislation, to protect patients by allowing them to settle out-of network payment disputes, is generally supported by hospital and physician groups.

Insurers, on the other hand, are generally in favor of arbitration and payment benchmarks. This may allow reimbursement for out-of-network care.

Reigning in surprise billing is clearly a focus of multiple legislative bodies. It will be interesting to see the changes that occur to the act over the next few months.  Understanding the scope of the at risk payment for providers and developing mitigation strategies may become important as we watch the legislation progress through Congress. 

Price Change, a Strategic Approach

As many hospitals are nearing the start of their next fiscal year, we thought it would be interesting to look at pricing strategies selected by a significant national sample during the first half of 2019.

Hospitals may take one of two approaches when setting prices by following either an across-the-board (ATB) price change or a strategic approach. The ATB method assumes all prices in the chargemaster change by a constant percentage. For example, targeting a 5% overall price increase would be achieved through increasing each item code in the CDM by 5%. Alternatively, a strategic approach suggests impacting service line specific rate changes based on local market sensitivities and associated financial implications.

Through our strategic modeling approach here at Cleverley, related groups of services may decrease/increase/remain constant based on considerations such as competitive position, payer mix, and overall goals. The summary below highlights selected strategies and the estimated results of our large national sample.


Overall Rate Increase– The median overall rate increase selected was 5% which is also consistent with the average at 4.7%. We observed fairly consistent rates of change for outpatient and inpatient.

Rate Corridor Range and Competitive Constraint– Rate corridors indicate how much groups of related services are permitted to decrease/increase/remain constant. The median rate corridors selected were 0% to 14%, which means prices for services could be frozen or increase by as much as 14% (while as we learned above, still achieving an overall rate increase of 5% for the hospital).

Rate corridors may work together with a competitive constraint to improve pricing position relative to peers. On average, we see 5 peers in the constraint group. In general, this implies that hospitals are defining their market with an average of 5 peer hospitals.

Room Rates and Surgery Assumptions– The observed median routine room & observation rate increased 5%, while surgery related areas increased 6%.

Financial Implications– Please note that high charges do not necessarily correlate with high payment. Performing a scenario analysis can help hospital finance leaders better understand overall payment and net revenue impact prior to implementing changes.

Other Key Findings – During our review, we also look at service line specific rates of change. These vary significantly by hospital. Many hospitals are evaluating patient-sensitive services in light of transparency disclosure requirements. We welcome the opportunity to talk with you about your specific strategy.

A Response To The CY20 OPPS Proposed Rule (CMS-1717-P) For Increased Price & Payment Disclosures

COLUMBUS OH, SEPTEMBER 6 2019 – The CY20 OPPS Proposed Rule contains additional information and requirements regarding hospital price transparency. There are nine areas pertaining to the proposed requirements for hospitals to make public a list of their standard charges. Some of the areas represent further clarifications or definitions of terms outlined in the FY19 IPPS Final Rule and others are entirely new components. Among the most critical proposals are:

1.  Expanding the definition of “standard charges” to include payer-specific payment rates for all payers and for all items and services

2.  Expanding the definition of “items and services” to include professional fees and “service packages” (aggregations of services provided in connection with an inpatient or outpatient encounter)

3.  An additional “consumer friendly” disclosure of payer-specific payments for 300 “shoppable” services and associated ancillary services

4.  Actions that would address noncompliance, including imposing civil monetary penalties of up to $109,500 per year on noncompliant hospitals

Click here to read the full response where we outline these key proposals with feedback to consider when responding. The comment window ends on September 27, 2019.  Given the significant changes being proposed, we are highly encouraging hospitals to provide the CMS with feedback.

Want to learn more? Check our webinar!

How Hospitals Can Create Cost Advantage Where Product Differentiation is Not Present

A challenge exists in finding accurate comparative data for bundled-payment arrangements, such as total hip replacement.

Cost advantage is necessary when a business is perceived as providing the same products or services as its competitors. In the eyes of many major healthcare payers, hospital services are not perceived as differentiated and are viewed as equally substitutable. While some payers are beginning to introduce value propositions into their payment methodology, many of these plans are merely new ways to reduce payment levels to providers.

To read the full article, from HFM Magazine, click here.