5 steps to tackling price transparency with strategic pricing 

Price transparency has taken on increased urgency in recent years, mostly recently with a February 2025 executive order signed by President Trump reigniting the federal government’s commitment to ensuring U.S. healthcare providers present clear, accurate, and actionable healthcare pricing information to their patients. 

 

The order directs the U.S Departments of the Treasury, Labor, and Health and Human Services to “rapidly implement and enforce” the Hospital Price Transparency rule, which HHS enacted in 2021. Provisions of the act include requiring hospitals and insurers to disclose actual prices (not estimates) and make prices comparable across hospitals and insurers. 

In addition, the executive order called for the abovementioned departments to update their enforcement policies to ensure hospitals and insurers comply with Price Transparency requirements. In addition to monitoring compliance through internal audits of hospitals’ websites, external analyses, and public complaints, the Centers for Medicare & Medicaid services is now using automation to streamline hospital reviews, allowing it to conduct more than 200 monthly reviews versus the 30-40 per month conducted prior to implementing automation. Hospitals found to be noncompliant face steep penalties. 

 

As you review your compliance policies in light of this year’s executive order and increased enforcement activities, it has perhaps never been a better time to revisit your hospital’s pricing strategy. Conducting a strategic pricing study can help your organization: 

• Compare your prices with peer organizations in your market. 
• If needed, standardizing your prices across and within your organization, e.g., charging the same price for the same procedure within your organization across different departments or, in health systems, at different locations. 
• Make your pricing more logical, e.g., an MRI with contrast should cost more than an MRI without contrast, yet unfortunately in some organizations currently that is not the case. 

 

Here are five steps to conducting a strategic pricing study using a best-in-class approach. 

 

An optimized strategic pricing and standardization study: 5 steps 

1. Plan 

First, determine the goals for your organization’s strategic pricing initiative. Consider qualitative goals, like using logical, standardized, and defensible pricing when publishing your chargemaster to the market, and quantitative goals, like creating a budgeted net revenue goal for your health system overall (if applicable) and by individual hospital or an overall goal to stay gross-revenue neutral as an organization. 

Next, define your internal and external pricing limits. An example of an internal pricing limit is having one hospital within your health system priced to the local market.. An example of an external pricing limit is constraining or limiting prices due to defensibility when publishing to the market.  

Finally, select your market competitors for price comparisons. A leading practice for health systems in particular is to select competitors for each hospital within the system, as each hospital might have different competitors. 

 

2. Execute 

The first part of this step involves gathering pricing data. Examples include: 

• Chargemaster by hospital 
• Revenue and usage reports 
• Contribution margin by procedure line item 
• Competitor pricing 

Then, build several strategic pricing models and run proposed price adjustment strategies. There should be at least one model for each hospital within a health system plus a combined overall health system model. 

 

3. Review and implement 

In this phase, organizations benefit from evaluating the best pricing strategy through three lenses: competitor pricing, logic pricing, and your overall strategic pricing vision. You should vet each possible strategy, and pricing scenarios and budget goals with hospital and system leadership to help land on your ideal pricing rates. Once decided, implement your new price structure at the beginning of a new fiscal year. 

4. Monitor 

Ongoing monitoring is key to making sure your newly implemented price structure is effective. You should monitor the impact of your new price adjustments for 12 months. At the end of that time, review key metrics to make sure your organization is achieving all planned margin and net revenue benefit goals.  Our market experience shows that 0.25% to 0.5% of additional net patient service revenue is achievable for most organizations.     

Build a more effective pricing strategy 

If you haven’t planned a pricing approach, now is the time. Today’s environment is the perfect opportunity to build a pricing strategy, optimize your margins and stay compliant with the current regulations 

 

Contact Kodiak today to find out how we can assist with your pricing strategy so you can maintain patients’ trust, stay competitive, and stay compliant. 

What is strategic pricing? 

• Line-item rate setting is designed to define an optimal rate structure, which maximizes net revenue for a given level of gross revenue. 
• Price structure is based on the calculation and analysis of each charge item’s contribution margin. 
• Contribution margin measures what portion of each additional dollar in gross revenue becomes net revenue when rates are adjusted. 
• Payor mix, bad debt and charity write-offs, and fixed-price payment arrangements are all factors that determine contribution margin. 
• Setting rates at the line-item level offers an alternative to across-the-board rate adjustments when an optimum mix of line-item rate changes is computed to achieve budgetary goals while maximizing net revenue opportunities.