ECRI: Enterprise-wide, objective pricing data could save money

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Without the confidence of a full enterprise-wide perspective and objective, accurate clinical and pricing data, a hospital’s quality of care and bottom line could be at risk, according to a new paper from nonprofit health organization ECRI Institute, which advises hospital administrators on capital purchases.

Faced with rising technology costs and numerous clinical department demands, U.S. hospital executives are being forced to make tough choices with scarce capital technology dollars, according to the Plymouth Meeting, Pa.-based ECRI.

“Insist on a clear picture of what is being requested across your organization to find opportunities for bundling and ‘group buys’ across departments and facilities,” the report recommends. Administrators may find that certain items have different names depending on which department uses them, but are actually similar.

“A good normalizing process ‘cleans’ your data and identifies discrepancies in the naming of like items across different departments. Match the device descriptions you provide in your capital budget requests to those listed in an accepted classification system. Once identified, the disparate names/descriptions can be standardized and ‘de-duped,’” the report noted.

The institute suggested to benchmark items against an "actual prices paid" database and compare items to top models per device. Afterwards, the organization can then benchmark against the national average list price, quoted price and discounted prices paid by other hospitals across the U.S. “This process enables you to plan with confidence and later, negotiate the best deal with your manufacturers,” the report stated.

According to ECRI, a “best practices” model for capital budgeting includes:

  • Engaging key stakeholders with an objective, evidence-based management approach;
  • Adopting a process and enforcing deadlines;
  • Communicating criteria for prioritizing and justifying capital expenditures; and
  • Proactively assessing needs by department based on current trends, market pressure and demographics.

“Department heads should submit essential details related to their budget requests, including device names and descriptions, model selections, rationale for the purchase, life expectancy, financial and clinical impact and reimbursement rates,” the paper noted.

“Each organization is different. But…you’ll rest easier when your capital budget is built on solid ground...and answering the difficult questions,” the paper concluded.