https://mailchi.mp/c9e26ad7702a/the-weekly-gist-april-7-2023?e=d1e747d2d8

As the locus of care continues to shift from inpatient hospitals to outpatient centers, health system executives face a growing conundrum over pricing. The combination of “consumerism” and tougher reimbursement policies raises a question about how aggressively systems should discount services to compete in the ambulatory arena.

Site-neutral payment remains a goal for Medicare, and consumers are increasingly voting with their pocketbooks when it comes to choosing where to have procedures and diagnostics performed. “We know we’re going to have to give on price,” one CEO recently shared with us. “The question is how much, and how soon.” 

Should hospitals proactively shift to match prices offered by freestanding centers, or should they try to defend their substantially higher “hospital outpatient department” (HOPD) pricing?

The former choice could help win—or at least keep—business in the system, but at the risk of turning that business into a money-losing proposition. 

To compete successfully, hospitals will not only need to lower price, but also lower cost-to-serve—rethinking how operations are run, how overhead is allocated, and how services are staffed and delivered in ambulatory settings. 

“We’ve got to get our costs down,” the CEO admitted. “Trying to run an ambulatory business with our traditional hospital cost structure is a recipe for losing money.” 

And as a system CFO recently told us, “We can’t just trade good price for bad, for doing the same work. We have to be smart about where to discount services.” The future sustainability of many health systems will hinge on how they navigate this transition to an ambulatory-centric model.