Terry Allison Rappuhn

Consumer-directed health care has made it inescapable. Healthcare providers must be able to let non-ED patients know, before they receive healthcare services, their expected out-of-pocket costs for those services. Four providers offer insights into how to approach this challenge.

At a Glance 

  • Geisinger Health System has developed a preservice program, called "MyVisit," that serves all the health system's inpatients. 
  • Texas Health Resources has developed a patient coinsurance estimator that covers all of the health system's payers and procedures. 
  • The Health Alliance of Greater Cincinnati can provide each patient with an "advance explanation of benefits" for about 200 of its most common procedures. 
  • A large southeastern health system has developed a central pricing office to formalize the process of providing patients with preservice estimates. 

Question: What is more difficult than providing price transparency?

Answer: Providing meaningful price transparency.

The latest report of the HFMA-led PATIENT FRIENDLY BILLING® project, Consumerism in Health Care, notes that to be meaningful, pricing information must be relevant to the patient who needs it. Think about a patient who is anxious about an upcoming procedure, and worried about what it will cost and how to pay for it. The patient wants to know what the cost of the services will be out of his or her own pocket.

To give a patient an advance estimate of his or her expected financial obligations, a provider must be able to overlay the patient's insurance benefits with his or her specific medical condition and expected treatment. Patients then could use such estimates from various providers in combination with information about each provider's quality of care to make a meaningful interpretation of the value of care that each provider can deliver. That's true price transparency.

Provider Readiness and Approaches

Many providers have or are developing the ability to provide patients with advance estimates upon request. Typically, this is a manual process, requiring a highly skilled and knowledgeable individual. The next step for these providers is to be able to routinely and proactively provide each patient with an estimate of his or her out-of-pocket financial obligations-and then use this information as a basis for discussions with the patient about matters such as up-front payment, payment terms, and financial counseling.

Following are descriptions of approaches, lessons learned, and tools that four providers are using to achieve price transparency by giving individual patients advance estimates of their expected financial obligations.

See Exhibit 1 


A Fast Start: Geisinger Health System

As 2002 got under way, patient satisfaction scores for Geisinger Health System in central Pennsylvania were below peer norms. Revenues could have been better. Payers were requiring more and more documentation to justify patient services. Where others might have seen cause for discouragement, Geisinger saw opportunity.

"We recognized that we could improve the patient experience while enhancing revenues by reengineering the patient access process," explains Gregory Snow, Geisinger's vice president for the revenue cycle. "We saw that we could eliminate the gaps that existed in the financial clearance process, with specific focus on precertification and referrals, patient benefit levels, and communication of the patient obligation amount." When it comes to estimating patients' out-of-pocket costs in advance of services, Geisinger has gone about as far as any hospital or hospital system in the country today. Geisinger's preservice program "MyVisit," with a dedicated staff of 100, currently serves all inpatients at the health system's three hospitals, about 80 percent of scheduled outpatients, and 30 percent of patients making office visits to the system's 700 physicians. In the first nine months of FY06, Geisinger financially cleared about $420 million in net revenues, resulting in nearly $6.7 million in losses avoided or net revenues increased.

Geisinger achieved these results by performing in advance, before patients receive services, functions that historically came at the point of service or later in the revenue cycle, including:

  • Registration
  • Insurance eligibility checking
  • Verification of patient insurance benefit levels
  • Precertification
  • Medical necessity checking
  • Referral authorizations
  • Identification and communication of each patient's out-of-pocket obligation (copayment and deductibles)
  • Financial counseling, including payment plans and alternate payment arrangements
  • "Special handling" accounts (package pricing)

Uncharted Waters: Texas Health Resources

Many hospitals provide patients with out-of-pocket estimates before a few selected services, such as cosmetic surgery, or when specifically asked to do so. But only a few organizations are fully committed to calculating and collecting the patient's estimated financial obligation in advance of services across the board. Typically starting small and feeling their way into what are essentially uncharted waters, these organizations are telling examples of the state of the art.

And there is art as well as science involved, according to Jack Roper, senior vice president of finance at Texas Health Resources, which is headquartered in Arlington and has 13 hospitals in the Dallas-Fort Worth area. "Patients don't all fit into a single formula. We're making estimates that are reasonable based on the information we have in hand, but we also have to be flexible should information change, and it frequently does."

Three years ago, THR started out with a simple spreadsheet of common procedures. Then, in the next year, THR expanded the spreadsheet to include more procedures and all payers. "We had such success that, in the third year, we developed a database application, a coinsurance estimator, that covers all payers and all procedures," says Roper. Still in the early stages, THR is in the process of rolling the program out to different services and training the different hospital admitting departments in how to use it.

"All our managed care contracts are coded and defined using DRGs," Roper explains. "When an admissions person enters a DRG-say a C-section-the application will take that input, search for the appropriate contract and the appropriate rate, and come up with the total allowable. If it's an inpatient with a percent-of-charge contract, the application will search through utilization records, calculate a historic average charge, and find and apply the contract discount." The resulting printout shows the calculations and includes a statement that both patient and staff member sign.

See Exhibit 2


Central Pricing: A Southeastern U.S. Health System

At one southeastern U.S. health system, which has several hospitals plus outpatient, diagnostic, urgent care, and surgery centers, the central pricing office, with five (soon to be six) full-time staff, started five years ago to formalize the process of providing estimates for self-pay patients. Housed in the division of managed care, where it has access to all insurance contracts and payers' online tools, the office expanded two years ago to calculate up-front payment for insured patients as well.

The system's vice president of managed care explains that it is up to the registrars to verify insurance information via a phone call or a visit to the payer's web site. That information then goes to the central pricing office, which verifies it again and does whatever is necessary to identify procedure codes, including calling the physician, checking the online CPT code system, and working with the coding department.

Finally, the clinical information is fed into the computerized decision support system to determine charges for the relevant procedure. Then the central pricing office manually uses the historical data to calculate a dollar amount, including copays, coinsurance, and deductibles.

See Exhibit 3


Elective self-pay patients, who must pay before receiving service, get a qualified guaranteed package price; other patients get an estimate, which is collected before delivery of the service 75 percent to 80 percent of the time.

In addition to increasing up-front collections, the health system has been able to standardize pricing estimates throughout the system, despite the fact that registration is not centralized among or even within hospitals. "Everybody throughout the system knows to call central pricing," the vice president says. "Even the telephone operators know."

Advance EOBs: Health Alliance of Greater Cincinnati

In January 2006, the Health Alliance of Greater Cincinnati began moving to preservice and point-of-service collection for both inpatient and outpatient services. Using specially designed software, the health system is now able to provide what it calls an "advance explanation of benefits" for about 200 of the most common procedures at each of their six hospitals, according to Patrick McDermott, the system's revenue cycle operations executive.

By "turning the EOB on its head and presenting it before service," says McDermott, "we make it more helpful to patients, in terms of understanding and setting expectations about their out-of-pocket obligation."

Because payment prior to service is so new, says McDermott, the alliance feels that for right now it has to be flexible in the options it offers patients, who may choose to pay at the point of service or at discharge.

"At a minimum, if the patient says, 'I'm not comfortable paying for that; I've never paid for that before,' we can say, 'That's OK. We wanted to give you this information ahead of time. We will be requesting payment at the time of the service when you come to registration.'"

Beginning this summer, the alliance's preregistration teams, which are responsible for generating the advance EOB statements, will be able to send them electronically to the onsite facility registrars to present to patients, who currently receive the news by phone. The alliance has an online payment system that allows people to pay by credit card or check over the phone, as well as online or at the point of service.

ED First, ED Last

Providing preservice estimates in the emergency department warrants special consideration. Two years ago, the Health Alliance of Greater Cincinnati started down the road to its advance EOB with a point-of-service collection program in its EDs. McDermott says that the alliance started with the ED "because the copays there were well-defined." Copays are one thing, of course, and other patient financial obligations are another. Because the latter are so hard to pin down in the ED, the ability to estimate the out-of-pocket charges for the ED patients typically lags behind that for other types of patients in the rest of a system.

At Geisinger, for example, Snow says, "In the ED, unlike with scheduled patients, we're not so much trying to provide an estimate as just to make sure that there aren't any unpleasant surprises after the fact. Do we have all the demographic information? Did we get the precertification? The MyVisit program takes the burden off the ED staff, who have plenty of other things to do. This is important, because about 45 percent of our admissions come through the ED."A bigger challenge, according to the Health Alliance of Greater Cincinnati's McDermott, is retraining preservice and access/check-in staff "to be comfortable and skilled at requesting and collecting payment." To that end, the alliance is working to develop clear scripts and provide intensive training, using role playing. "We're drawing on the experience of our self-pay collections team, which is highly skilled at this and led by a previous manager of training for Citibank."

Will retraining be followed by upgrading of these critical positions? "The issue really goes beyond registration to the entire revenue cycle, especially information management and patient financial services," says McDermott. "All these functions have become more complex. In addition to reevaluating base pay, we are exploring the use of financial incentives. To do this, however, a revenue cycle must have measurement tools in place so that we can hold people accountable for results." 

The Big D: A Moving Target

Perhaps the biggest thorn in the side of hospitals trying to estimate patients' out-of-pocket charges is deductible status. Even when payers provide real-time information on an individual's deductible status, it may change later the same day when a claim comes in from another provider.

THR asks patients for their status and reports little trouble getting it. "You'd be surprised how many people are on top of this now," says Jack Roper. "They'll often bring their last EOB with them."

Other organizations, including Geisinger, prefer to rely on the insurance companies. "We try to ask the patient for very little," says Gregory Snow. "Usually we can get an immediate response from the payer when we call."

The southeastern system often gets deductible status from the payer's web site, skipping the phone call. The organization's vice president notes, however, "We do work with the patient. If they have a $1,000 deductible and the patient says he was just at the doctor and used up $200, we'll usually take their word for it, collect the part they haven't paid, and reconcile any differences on the back end."

Roper says, "We'll [eventually] get to where the insurance companies provide the deductible information directly, but first they have to implement the HIPAA data set, which will allow for the quick exchange of information."

Challenging-But Worth It

Restructuring front-end financial positions also is a challenge for many organizations trying to perform preservice estimating. And there are still other challenges. THR, for example, would like to issue refunds in as timely a manner as a department store, which is usually able to post a refund by the time customers get their next credit card statement. "The problem is that we have to wait until the insurance company pays, which is usually about 14 days after they get the claim," says THR's Roper.

Managed care contracts are yet another barrier. "Historically," says Roper, "we've had a few rates covering a lot of services, so there was some revenue shifting going on. As patients begin to see more clearly what their share of the bill is, we're going to have to restructure those contracts in a way that better allocates revenue based on the actual resources consumed in a case. As it is, things may average out fine for the hospital and the insurance company, but it doesn't necessarily correlate with the value equation going through the patient's mind."

Turnover in registration areas can also pose a challenge. The southeastern health system, struggles with such turnover, which has resulted in a central pricing staff member having to perform front-end in-services throughout the organization every two weeks.

Still, none of the four organizations highlighted in this article would turn back, even if they could. There are just too many benefits within reach.

Here are some of the benefits that Gregory Snow cites for Geisinger:

  • Patient satisfaction
    • Patient encounters focus on the clinical experience.
    • The multiple-registration hassle has been eliminated.
    • Patient privacy is protected by communicating from home.
    • Check-in wait times are shortened, reducing patient anxiety and frustration.
  • Operational benefits
    • Physician schedules are on time.
    • Clinical scheduling and productivity have been optimized, with reduced no-shows.
    • Employee satisfaction is improved due to fewer administrative tasks and more time to meet patients' needs.
  • Financial benefits
    • Closing financial clearance gaps has mitigated financial risks.
    • A foundation has been created for introducing proactive patient financial policies, such as transparent pricing and Patient Friendly Billing.
    • Organizational risks are better managed, as payers increase requirements for medical justification.

Snow notes that these developments are timely, of course, given the "surprising speed" with which consumer-directed health care has taken off. "We were fortunate in that we had already begun implementation of our program."

For other hospitals and systems that have yet to get under way, there's no time like the present.

Terry Allison Rappuhn, CPA, is principal, Rappuhn Consulting, Nashville, Tenn., project leader of HFMA's PATIENT FRIENDLY BILLING® project, and a member of HFMA's Tennessee Chapter (terryrappuhn@bellsouth.net).






Publication Date: Tuesday, August 01, 2006

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