Executives and leadership must determine how “fair market value” is defined and interpreted at their organization. While the federal government does provide baseline guidance, it is ultimately up to the organization itself as to where on the market ranges they choose to pay.
Some organizations pay only up to the median. Others are fine with payments as high as the 75th percentile. And of course, there are always a some agreements that for whatever reason must be paid at or above the 75th or even 90th percentile. How does an organization go about determining what range of the market they are comfortable paying? We suggest creating a “profile” of your facility or facilities to help answer that question.
When you are deciding where the majority of your contracts should be in the market range you should consider the following attributes of your organization.
- Size
- Trauma status
- National reputation
- Academic medical center/teaching hospital status
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You can profile your organization internally if you have an experienced team who has done their research, including viewing opinions from experts who have characterized the facility previously.
Lastly, you must factor your leadership team’s comfort with risk. Some organizations are okay with hospitals setting rates anywhere below the 75th percentile, while other leadership teams want to be involved with any payment rate negotiated above the 50th percentile.
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