Hospital leaders currently have multiple pricing-related pressures to contend with, including accelerating consumer expectations for value, looming federal pricing transparency requirements for hospitals, and increased steerage by private payers into lower-cost alternatives. But the mounting external threats are also an opportunity for hospitals to transform historically siloed, narrowly focused pricing activities into a consumer-driven, goal-oriented strategic discipline.

Hospital standard charges for 2021 CMS transparency requirements

As economic hardship continues in the wake of COVID-19, consumers increasingly expect value in the care they receive, regardless of the setting where it’s provided. Even before the pandemic, an increasing proportion of consumers were enrolled in high-deductible health plans, elevating awareness of out-of-pocket costs. In addition, many millennial consumers are comfortable shopping for needed healthcare services among traditional providers, telehealth providers, and retail clinics alike. These generational trends have increased overall consumer shopping activation in healthcare—or the proportion of consumers actively engaged in researching the price of their care. Moving forward, strategies for effectively delivering and pricing ambulatory services—which represent a primary opportunity for hospitals seeking to build their customer base—will be critically important.

Over the past several years, Kaufman Hall has monitored the level of consumer shopping for healthcare and has developed a metric to track that behavior over time. The Kaufman Hall Consumer Shopping Activation score, or CSA™, measures the percentage of commercially insured consumers who have actively shopped for care on the basis of price and are incentivized to choose a lower cost option. That figure has nearly doubled over the past two years to more than 11%. In addition, according to a survey conducted by NRC Health, 62.7 percent of consumers said they would be slightly or very excited to use an online cost estimator from their preferred healthcare facility.

At the same time, the Centers for Medicare & Medicaid Services is moving forward with new pricing transparency rules that would require hospitals to publicly share information about their charges for items and services starting in 2021. Starting on Jan. 1, hospitals must make public a comprehensive file of standard charges for all items and services, divided into five categories (see Fig. 1), as well as a consumer-friendly list of 300 shoppable services.

All too often, hospitals have focused their pricing strategies around attempts to grow volumes through price reductions for standalone services. The combination of rising consumer expectations and looming regulatory pressure underscores the urgent need for providers to take a more strategic approach that integrates pricing strategy with their broader ambulatory strategy.

Successful consumer-driven pricing strategies are predicated on understanding and meeting consumer demand—with the end goal of delivering the right care at the right place and the right price.


Developing a consumer-driven pricing strategy

Identify shoppable services

The consumer value equation is not driven exclusively by price, given the role of access, convenience, and other key variables. From a business perspective, identifying shoppable outpatient services (see Fig. 2)—which consumers often pay for out-of-pocket before they reach their deductible—is a critical first step.

Understanding Shoppable Services


Assess your brand’s market power

After organizations identify shoppable outpatient services, it’s imperative to evaluate how their brand is perceived both in the market writ large and for specific services. For instance, some consumers might visit an academic medical center for a complex procedure or a heart transplant, but would not necessarily consider it as an option for more routine care needs. Understanding the nuances of brand power can inform subsequent changes in pricing or service offerings.

Categorize and manage your services

Through the emerging practice of healthcare category management, hospitals and health systems can sort and prioritize where services fit within their broader strategic vision and tailor their objectives for each category accordingly.

This approach is described in more detail in Fig. 3.

The Opportunity: Utilize a Market-Specific, Yet Consistent, Framework to Inform the Delivery Model, Positioning and Pricing for Ambulatory Services


Improve access, experience, and price together

Being competitive does not mean uniformly lowering prices across all markets. According to Kaufman Hall research, 62 percent of consumers cited convenient location as a top factor for deciding where to obtain care; only 39 percent cited cost considerations (see Fig. 4). A market-by-market, service-by-service evaluation can uncover shortfalls in access, experience, and price, and help quantify the implications and trade-offs from potential pricing and service delivery changes.

Develop a plan of attack

Armed with a better understanding of their ability to deliver the right care at the right place and the right price, hospitals and health systems can build an action plan to price, grow, and deliver shoppable services for superior value. Specific tactics might include rebalancing services to reduce wait times, building partnerships to enhance retail or virtual care options, and developing lower-cost, higher-quality services. And the entire initiative should be underpinned by a focus on pricing simplicity and transparency—addressing the twin external threats of consumer expectations and regulatory pressure in one fell swoop.

Most Important Consumer Factors When Deciding Where to Obtain Healthcare Services*
Meet the Authors

Paul Crnkovich

Managing Director
Paul Crnkovich leads Kaufman Hall’s consumer practice, working with healthcare leaders to enhance their understanding of consumer expectations and develop strategies for access, experience, and pricing.
Learn More About Paul

Dan Clarin

Managing Director
Dan Clarin is a leader in Kaufman Hall’s Strategic and Financial Planning practice, with a focus on consumer-centric strategies.
Learn More About Dan