May 30, 2007
Given today's complex payment system, gathering pricing information and disseminating it in a manner that will be of use to the healthcare consumer is of considerable challenge. In the following discussion, sponsored by 3M Health Information Systems, HFMA asked several senior financial executives to describe how their organizations are adapting to this changing environment and their subsequent strategies for collecting and communicating pricing information. The following is an excerpt from their comments.
What are the toughest barriers hospitals face when providing and communicating pricing information? Have any processes been successful for handling these issues at your organization?
Hamilton Todd, section manager, patient financial services systems support and training, Mayo Clinic, Jacksonville, Florida:
The toughest barrier is the availability of tools with which you can present data to patients. If you look in the marketplace, there is not much functionality within our patient accounting systems for providing price quotes or estimates. Many hospitals today are still working with a blue bar sheet from their CDM [charge description master] that's about two feet thick. They page through to pull prices, or they have some type of automated database that they can query to find the past 10 examples of total charges for a particular DRG [diagnosis-related group].
We are in the process of implementing an automated solution with the vendor of our contract management system that leverages off the data it contains. We are doing so because, if you think about it, a contract management system contains a lot of information that you need to estimate what it costs for a particular diagnosis or procedure, what a payer will pay, and what a patient can expect the balance to be.
Another problem is that we don't have tools to easily determine what amount a patient's health plan will pay. I have not seen an example of a full-blown price-estimating system that can take into account a patient's contract.
David Hadley, FHFMA, CPA, CHE, senior vice president of finance, Texas Health Resources, Arlington, Texas:
We have an internal product that will allow employees to field specific pricing questions from patients. If a patient calls and says, "I need to have an MRI [magnetic resonance imaging scan]," employees will use this estimator to find the history of MRI charges. When a patient is going to have multiple outpatient procedures, the estimator allows staff to look under general diagnostic categories and say, "Here's what the pricing history has been, here's an estimate of what your insurance pays, and here is what we anticipate you will pay."
We won't provide a price quote over the phone unless patients can give us their insurance information and we can validate that they do have insurance, so we stop competition from price shopping. But if they give us an insurance number, we can use our estimator to verify their benefits coverage, and let them know, "You have a $200 deductible and a 10 percent co-share after that."
Doug Smith, CFO, northern Utah division, Intermountain Healthcare, Ogden, Utah:
Many factors affect how much a patient has to pay. A patient's bill will include charges from the hospital and independent physicians, which is all mixed up with how the insurance company adjudicates the case and what their benefit structure is. But the hospital doesn't have all those pieces of information.
We have put more resources in our pre-registration processes, so we can call insurance companies in advance of service and get information on behalf of patients about their co-pays and deductibles. We also have developed scripts and education, so we can explain to patients what they may expect to receive in a bill. It's not perfect, but patients appreciate that we've taken the time to find out about their benefits and insurance.
Todd Nelson, vice president and CFO, Grinnell Regional Medical Center, Grinnell, Iowa:
In some of the contracts we have with suppliers, there are confidentiality clauses that limit our ability to communicate the cost of certain types of devices. In the past couple of years, a lawsuit was filed by a device company in relation to the confidentiality clauses. A ruling upheld the secrecy of information, such that we are prohibited from telling a patient the price paid for supplies.
We are trying to overcome this situation by making sure that we don't have these confidentiality clauses in our contracts, or, if there is a confidentiality clause, that it allows us to release the information to patients and other necessary business partners.
Donald Clark, CPA, CPC, health care revenue cycle management expert, 3M Health Information Systems, Salt Lake City, Utah:
The toughest barriers are systems, processes, and staffing resources. Best practice is to establish a consumer price line supervised by contracting staff. This involves maintaining a database of top outpatient procedures, having staff calculate allowable amounts based on contract terms, and verifying available benefits with the payer. Staff then apply self-pay discounts and provide quotes within 24 hours of the request. Scheduling is linked to the price line at the time of the call. Reporting includes the trend of calls converted into encounters and the trend in variances between quote and actual fee.
What actions can providers take to help ensure their pricing strategy is defensible?
Todd: There will always be questions about how you come up with what you are charging for something. When addressing these concerns, openness is the key. You can array your charge data and do a statistical analysis of where you are in relation to some of your regional institutions, which helps you determine if you are at or below the regional norm. If you are the outlier, you had better be prepared to defend your pricing strategy. We also have a good decision support system that is utilized.
Smith: Prices are most defensible when they are based on cost. We have a good cost-accounting system to identify our underlying costs so we can price effectively.
Nelson: The days of doing across-the-board price increases without looking at how they impact individual charges for procedures or tests are pretty much over. People may still do some type of across-the-board increases, but then they need to drill down into the information, looking at the marketplace and deciding what's reasonable based on cost.
What's more, as more people start getting high-deductible health plans and take on greater payment responsibility, the hospital's charge is going to grow in importance to them. So having a method for pricing that is understandable to the average person just makes sense.
Clark: A few key considerations include variability of fee increases for services more heavily utilized by non-fixed-fee payers; price ceilings, such as market percentiles; price floors, such as mark-ups above Medicare allowable amounts or cost; frequency of pricing adjustments based on comparison with market and cost; and packaged pricing, for example, what one often sees with cosmetic procedures.
SOURCE: HFMA Executive Roundtable, Provider Views—and Strategies—for Price Transparency, May 2007
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If you have questions or comments about HFMA Wants You to Know, contact editor Maxine Harrison.
HFMA Wants You to Know ISSN: 1540-0697. Volume VI, Issue 11. Copyright 2007, Healthcare Financial Management Association. All rights reserved.