Miami Children's Hospital Cuts Chargemaster Rates by 30%

To make up for lost revenue, the CFO of Miami Children's Hospital says he is renegotiating price rates with health plans such as Blue Cross, Humana, and UnitedHealth.

In an effort to appease frustrated and angry parents asking for the cost of certain tests or procedure for their children, Miami Children's Hospital is taking a pre-emptive step. It is slashing its Chargemaster prices—amounts that have very little to do with what most patients actually pay—by 30%.

"We've probably been getting 20 calls a day from people who ask, 'What will it cost me for my child to have ear tubes?' or 'What will it cost me to have my child in the hospital one day," says Timothy Birkenstock, chief financial officer of the 289-bed hospital.

"[We'd] been quoting them from our Chargemaster, which is antiquated, and so, gave them numbers that in no way resembled what they would really have to pay."

The price cuts are intended to "communicate better with patients and family members, so they understand better about the payments that they'll be required to make, and then we can move on and talk about how we're a Children's hospital that only takes care of children, and we do this better and this better and this better. We can talk about the things that matter, and not get hung up on the price," Birkenstock says.

Birkenstock says that for those contracts and billings that hinge, or are roughly based on some percentage of the Chargemaster's listed prices, payments indeed will be 30% less, resulting in a drop in revenue of $10 million a year.

The cuts will most directly benefit self-pay patients, those with no health insurance coverage, who are billed the Chargemaster rates, and who may or may not be able to negotiate downward from that.

Making it Revenue-Neutral
To make up for that lost revenue, he explains, Miami Children's is now renegotiating with health plans such as Blue Cross, Humana, and UnitedHealth. For a network negotiated rate with a plan that is loosely based on a 50% discount of the Chargemaster price now, for example, renegotiation may result in a lower discount offered to that plan. In that way, the hospital's revenue will not drop.

"I expect to do all of this and make it all revenue-neutral," Birkenstock says. "Although some contracts may go up, and some may go down. We aren't going to change our budget because of the 30% rollback."

He adds that many other hospitals are making similar adjustments to their Chargemasters to more fairly reflect cost and value within their organizations.

"We're not doing this in isolation. And this is not a publicity stunt," he says. "It's part of a process to improve how our revenue is generated, and the understandability of what goes on in our hospital."

See Also: Kill Your Chargemaster

The irrelevance and absurdity of the Chargemaster became a hot-button issue in February after a Timemagazine article highlighted outrageous charges for certain hospital procedures at some organizations.

The controversy was reignited in May when the Centers for Medicare & Medicaid Services for the first time released its Chargemaster data, a voluminous document showing how much hospitals bill versus what Medicare pays, for 100 of the most common diagnostic and treatment codes. Health plans and Medicare, as well as Medicaid, pay hospitals far less than what the document shows.

"I don't think there's any mystery," Birkenstock says. "It's just our way of doing what almost every other hospital is doing now. "Maybe everybody isn't rolling back their charges by 30%, but I would guess that almost everybody who reads what you write has made some modification in their pricing structure with (the Chargemaster) being the driver.

"We're trying to get better at how we charge for what we do," he says. "The rules have all changed."