Pricing sensitivity’ one way to optimize hospital revenue

Balance competitiveness and reimbursement

One of the concepts Joe Denney, CHAM, has become familiar with in his position as director of revenue management at The Ohio State University Health System (OSUHS) in Columbus is something called "pricing sensitivity," he says.

"Our latest question here is, Where do we set our prices?’ We want to be competitive, but we also want to optimize our reimbursement."

What’s the buzz?

Pricing sensitivity, which Denney describes as "the current buzz in the charge description master world," has to do with increasing the organization’s net revenues as much as possible without much increase in gross revenues.

"Where do you get your biggest bang for the buck?" is the operative question, he explains. "If I increase the price of a procedure that we do a huge volume on by just a few dollars, then our gross revenues won’t go up that much, and if we get paid well for that particular procedure, we will see a bigger increase in net revenue."

The result is that the organization stays competitive on the pricing, but because of the large volume, gets more reimbursement with just a small increase in gross revenue, Denney adds. "On the pieces you do the greatest volume, increase prices accordingly, but don’t go over what the market will endure."