As health care costs spiral upward and HMOs, hospitals and others look for ways to gain control over pricing, one company is taking direct aim at the challenge: PA & Associates Healthcare, a Lutherville, Md., consulting firm that has developed an analytics solution that tracks costs associated with implantable medical devices, including artificial knees and hips, cardiac defibrillators, and leads and stents.
“There are too many problems associated with inaccurate or inflated pricing of devices and it costs hospitals a huge amount of money,” said founder and CEO Richard Palarea.
The firm offers a subscription-based, cloud-based spend management platform under the name of Kermit. The software uses a rapid application development platform from Mendix to deliver visibility and greater transparency into various Physician Preference Items (PPI). By centralizing billing information, automating contract compliance and conducting frequent price audits, it’s possible for medical providers—from surgeons to financial executives—to more closely track vendor agreements and pricing.
It’s no small matter. Unintentionally or otherwise, “Too much price inflation takes place in invoices,” Palarea states. Kermit, which offers analytics and data visualization tools, makes it possible to know whether contract pricing is being honored and hospitals are paying the right amount for PPIs. Typically, when a medical device rep sells a knee, hip or other device, the surgeon does not see the price tag. “They simply take it out of the box and it is considered ‘bought,’ whether or not they use it,” he said.
At that point, the salesperson submits an invoice to the hospital, which has zero visibility into what the surgeon did with it or whether he or she also used screws or other components.
“The contract may state that the hospital doesn’t pay for certain items but they are often submitted with the bill and that results in overpayment,” he noted.
Kermit transforms paper invoices and handwritten notes into actionable information that is accessible through dashboards, scorecards and key performance indicators (KPI). The system, which went live at two medical centers in Maryland in 2014 and another in Illinois in 2015, delivers a comprehensive set of capabilities and business rules that provide precise price-matching. It currently extracts data from faxes and scans, and it relies on APIs to integrate with a number of data repositories. Palarea said the company will soon introduce a mobile camera capture feature, similar to mobile deposit functions offered by many banks, that will further speed data entry from invoices and other documents and deliver faster and better visibility into billing for hospitals.
The Mendix platform helped PA & Associates develop Kermit with only a single internal developer and an outside mobile specialist (the company has since added another developer). It also allows the firm push out updates and changes rapidly, within an agile development framework. Palarea believes the technology will prove highly disruptive. For example, as a new provision of the Affordable Care Act (ACA) takes hold in April—it will introduce so-called “bundled payment reimbursements” that dramatically impact Medicare—”The need for clean and actionable data will grow.”
Most importantly, he said, “The days of vague and deceptive pricing are coming to a close. Analytics that provides insight into pricing represents the future of medicine.”
