The following SHSMD Podcast is a production of DoctorPodcasting.com.

Bill Klaproth (Host): On this edition of the SHSMD podcast, it is another SHSMD Connections session preview, as we talk about designing ambulatory pricing strategies in a competitive marketplace. Joining us is Dan Clarin, who will be speaking on this topic during this year's SHSMD Connections annual conference.

So let's get to Dan right now.

 This is the SHSMD Podcast, rapid insights for healthcare strategy professionals in planning, business development, marketing, communications, and public relations. I'm your host, Bill Klaproth. In this episode, we talk with Dan Clarin, Managing Director at Kauffman Hall. Dan, welcome to the SHSMD Podcast.

Dan Clarin: Hey Bill, it's great to be here.

Host: Great to talk with you, Dan. Looking forward to learning more about your session. So, tell us, you're going to be talking about designing ambulatory pricing strategies in a competitive marketplace. What can we expect in your session?

Dan Clarin: Oh Bill, the folks that attend the session can expect a combination of theory and practical application. And so we'll cover the background of why this topic is important and what's changing in the marketplace that requires health systems to be thinking about not just ambulatory strategy, but the pricing for ambulatory services.

And then we'll also cover case examples and real client situations of what folks have considered and then worked through in terms of the strategy and then the implementation of that strategy for ambulatory pricing.

Host: Yeah, that's really interesting. So, can you tell us why there seems to be an industry shift to ambulatory care? And what are the benefits of that?

Dan Clarin: Well, at the end of the day, Bill, it all comes down to cost and convenience. And for certain companies and organizations that have been able to capitalize on providing greater cost advantages and greater convenience, they've been able to provide care in an ambulatory or, you know, that kind of an industry term, but in a kind of a freestanding, more retail oriented setting at a lower cost and a greater convenience to the consumer.

And so now hospitals, some have gotten on the train and have built out an ambulatory environment for themselves, but some are still catching up. But being able to provide that same level of cost advantage and convenience is challenging for health systems. And that's why we need to be thinking about specific strategies for how to do it and how to price those services.

Host: And it sounds like, from what you said, you're going to cover actual practical application of these pricing strategies, which is important. So, the industry or people at your session can take that back with them and potentially adopt this or at least continue the conversation, which is important. Is that right?

Dan Clarin: That's right, been doing this work with clients in different parts of the country, and we have lessons learned, we have stories from those situations, which have often focused on surgical services and imaging services and it really is a major shift to move from providing surgical services in hospital operating rooms to providing some of those same services in ambulatory surgery centers and having to do it at a different level of efficiency and convenience.

And so that's one example of something that we'll share examples and stories of how organizations have approached that, how they've analyzed it. How they've thought about implementing it.

Host: Right. So, you're going to cover a lot of this. You're also going to cover consumer driven pricing initiatives and best practices for developing a comprehensive pricing strategy. Can you tell us about that a little bit more of what you're going to cover?

Dan Clarin: Sure, Bill. So we've been doing consumer research now among healthcare consumers for about the last 10 years. We've been asking folks about preferences in terms of access, convenience, but also in terms of the cost of services and how services are priced and how that influences their decision making.

And we've learned that there is a meaningful difference in terms of what people are willing to pay for different services and in different settings. And so when you think about consumer driven pricing strategy, it's about incorporating those insights from consumers to say, okay, if we're delivering a certain service at a certain level of convenience in a certain setting, how does that map to consumer expectation in terms of access and price?

And at least we go into it knowing, how well we're going to be able to meet consumer desires and demands in that situation. And whether we're really going to be delivering a consumer friendly service, or if we're going to have to rely on other value drivers to really build that service other than consumer demand.

Host: So you mentioned cost and convenience for the consumer, obviously. For the healthcare system, is there a win in there for them as well?

Dan Clarin: There can absolutely be a win. In addition to just building new capabilities that they're going to need going forward, delivering care in a different setting at a different level of efficiency. One thing we've found with some clients is that if they're able to get basic orthopedic and GI cases out of the hospital ORs, they have an opportunity actually to use that capacity to provide care that needs to be in an inpatient setting.

And the economics on that can actually be favorable at the end of the day for a health system if they do it the right way. And so there can be wins both in terms of building capabilities that are going to be needed in the future, but there can also be economic wins and business wins in here too for the health system.

Host: So you could run more efficiently while potentially offering other services as well, which would be important to the bottom line.

Dan Clarin: Exactly Bill, you got it absolutely right.

Host: So then how difficult, Dan, is it to transport hospitals economic models to the ambulatory setting?

Dan Clarin: Well, it's pretty much impossible. Which is why this work around pricing is so important because in order to compete in an ambulatory environment with non health system competitors that are operating in a different cost structure and therefore pricing their services differently and still making a profit on it; hospitals have to have a different cost structure in the outpatient setting, because the price that they're going to be able to compete on is going to necessarily be lower. So the revenue per case is going to be lower, and so their cost per case is going to have to be lower. And there's so many things that go into being able to drive the cost per case lower. And we'll get into all of that in our session.

Host: Mm hmm. And then for session goers, Dan, you're going to talk about designing a new approach to ambulatory pricing, so at least they'll walk away with an idea of how this transformation can happen. Is that right?

Dan Clarin: Right, we'll look at what folks or what these organizations have been paid for similar services in the way that they've traditionally been providing them. And then we'll look at what they can expect to be paid or what they'll be able to price it at for similar services now that we're in an ambulatory setting and then what implications that's going to have, not just for the revenue that they'll be able to have in these ambulatory centers, but also for what the cost is going to have to be.

Host: Right, because both of those have to be factored in. So, earlier when you said, when I asked you about transporting hospitals economic models to the ambulatory setting, you said, it's just about impossible. Is that the biggest barrier right now for healthcare systems to adopt a more ambulatory pricing initiative?

Dan Clarin: It's certainly a big barrier. There's some other barriers as well in terms of having the right physician relationships and the right physician compliment to be able to deliver ambulatory services efficiently and in a way that maybe some physicians haven't been used to practicing historically.

It also requires having staff that know how to operate differently and kind of provide the support for those physicians to be efficient in an ambulatory setting. And then it also requires a different managed care strategy and approach. And so, there's a number of different barriers or challenges to work through here as it relates to physicians, managed care, the staff that you have for these sites, and we'll certainly get into the managed care element of it in our session. And we'll touch on some of these other challenges as well.

Host: Yeah. I'm wondering, is this ambulatory pricing strategy, is this right for everybody or only certain healthcare organizations that would meet the criteria for this pricing initiative?

Dan Clarin: I think this is for everybody. Even folks that are really well advanced in ambulatory care, I think would take something away from this because there's some elements of different thinking that we're going to bring to this. One example is, do you have ambulatory sites that are essentially focus factories where you do only orthopedics or only GI?

And that's a shift in thinking from how ambulatory surgery centers have been operated historically where they've been based around what physicians can we get to do the work there and not based on kind of an operating model. So I think there's something for everyone. And I think it's a topic that everybody within healthcare needs to be focused on.

Host: Yeah. Well, this is gonna be a great session and uh, you're going to bring this awareness with you of this new ambulatory pricing strategy in a competitive marketplace. It's really going to be interesting. Before we wrap up, Dan, anything you want to add?

Dan Clarin: No, Bill, this has been great. I really appreciate the opportunity and the time and the discussion.

Host: Well, Dan, thank you so much, and we look forward to seeing you in Denver.

Dan Clarin: Thanks, Bill.

Host: And once again, that's Dan Clarin. He will be speaking at this year's 2024 SHSMD Connections Conference in Denver, October 13th through the 15th.

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And to access our full podcast library for other topics of interest to you, visit shsmd.org/podcasts. This has been a production of DoctorPodcasting. I'm Bill Klaproth. See ya!