Abstract
Pricing is one of the key decisions for financial success of businesses and organisations including hospitals. We briefly introduce the health care system in the US and discuss pricing optimisation challenges for the hospitals.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
Notes
The Commonwealth of Massachusetts passed a legislation in 2006, requiring all citizens of the state to obtain health insurance, effective from 1 July 2007. This is the first exception to the national nonrequirement of health coverage.
Exceptions do occur and are widely publicised in the media, for example, when emergency rooms are overcrowded and ambulances are rerouted to other hospitals. A patient, however, will never be ‘rejected’ based on his/her ‘revenue potential’ or financial situation.
Christenson (2006) discusses the processes, the business rules, and challenges involved in scientific charge master optimisation. Born et al. (2004) describe how a hospital has used risk-based optimisation to determine contract prices with insurance providers. In this latter, the risk is associated with the unknown cost of service for the patients at the time a hospital negotiates the contract terms with the insurance provider. We refer the reader to these articles for more information.
References
Bell, P. (1998) ‘Revenue management: that's the ticket’, OR/MS Today, April 1998, p. 28.
Born, C., Carbalaj, M., Smith, P., Wallace, M., Abbott, K., Adyanthaya, S., Boyd, E. A., Keller, C., Liu, J., New, W., Rieger, T., Winemiller, B. and Woestemeyer, R. (2004) ‘Contract optimization at Texas children's hospital’, Interfaces, 34, 1, 51–58.
Boyd, A. (2004) ‘Dramatic changes in distribution will require renewed focus on pricing and revenue management models’, Journal of Revenue and Pricing Management, 3, 1, 100–103.
Christenson, R. (2006) ‘Scientific charge master rate optimization, knowing things that can go wrong and how to avoid them’, Journal of Revenue and Pricing Management, 5, 2, 152–156.
LeCuyer, N. A. and Singhal, S. (2007) ‘Overhauling the US health care payment system’, The McKinsey Quarterly, Web Exclusive, June 2007.
Reinhardt, U. E. (2006) ‘The pricing of U.S. hospital services: chaos behind veil of secrecy’, Health Affairs, 25, 1, 57–69.
Schoen, C., Doty, M. M., Collins, S. R. and Holmgren, A. L. (2005) ‘Insured but not protected: how many adults are underinsured?’ Health Affairs, Web Exclusive, W5-289-W5-302.
Author information
Authors and Affiliations
Corresponding author
Additional information
1 Itir Z. Karaesmen is an assistant professor of operations management at the Robert H. Smith School of Business, University of Maryland where she teaches pricing and revenue management, and continues to do research in the same area. She holds MPhil and PhD degrees in management science and operations management from Columbia University.
2 Igor Nakshin is the founder of Logycon Corporation, a consulting and software development firm specialising in applications in healthcare and marketing industries. Prior to founding Logycon, he worked as the Director of Software Development at First Consulting Group, where he led the development team in creating decision support and data analysis software for hospitals.
Rights and permissions
About this article
Cite this article
Karaesmen, I., Nakshin, I. Applying pricing and revenue management in US hospitals — New perspectives. J Revenue Pricing Manag 6, 256–259 (2007). https://doi.org/10.1057/palgrave.rpm.5160091
Received:
Revised:
Published:
Issue Date:
DOI: https://doi.org/10.1057/palgrave.rpm.5160091