SECA 10

    * How does your organization determine the prices charged for its products?

Kaiser Permenante has its own policy for setting prices for tens of thousands of different items on its price list. Kaiser uses the estimated amount it costs to provide the service or item as the major factor. In addition to that, Kaiser has to factor in the various payment arrangements they have with insurance companies.  Some of these arrangements make it necessary to set a base price that is higher than the cost to provide the service in order to get paid enough to cover the costs.

    * To what extent does it use multi-part pricing, bundling, price discrimination, time-of-use pricing, and other strategies?

Kaiser has functioned in the pricing domain with the bundling strategy.  Medicare, Medicaid, and HMO (which followed the government’s lead) set the prices they pay for services independently of individual hospital prices. With the increasing gap between billed charges and the prices paid by most payers, Kaiser was forced to bundle it’s health care services into one plan.  This system is characterized by the fact that the bulk of payers never pay full charges as they would do in a retail market.  Therefore, Kaiser adopted the bundling price strategy.

    * How do your company's pricing policies compare with best practice methods for selecting prices?

Shaped by each provider’s unique payer mix of health insurers and government reimbursement systems, which combined pay the vast majority of healthcare bills, current pricing strategies are as complex and varied as the hospitals that employ them.  When developing a pricing strategy, organizations must consider as series of objectives: meeting mission and providing community benefit, balancing budgets while remaining competitive, and complying with relevant laws and regulatory standards. The bundling price strategy has created a non-linear relationship between government payments, chargemaster prices, and other measures.  Other measures such as multi-part pricing, time-of-use pricing also offer a non-linear relationship, therefore pricing reform in the healthcare system has become a huge concern.