CFOs Brace For Increased Price Negotiations By Consumers

December 14, 2005

Consumer-directed health plans, which refer to a variety of plans that expose patients to the actual costs of medical care, have the potential to complicate the management of the revenue cycle. Challenges include patient registration, authorization, and verification; increased bad debt and cost of collections; and soaring demands for price and quality data.

HFMA recently brought together a group of healthcare finance executives to learn how they are adjusting their processes to accommodate the coming increase in consumer-directed health plans. The following is an excerpt of their discussion.

Question: Do you worry about patients calling different hospitals for pricing information like they would for other retail purchases?

We already have that happening, especially with obstetrics patients. They will call and ask, "What do you charge for a C-section?" The thing is, it depends. We don't know if there are going to be complications during the surgery or other extenuating circumstances, so we can't always say. It is hard to price a lot of the time, so you give them a range, but that typically doesn't make them happy.

If patients are truly self-payers or have a high deductible, they will call around. We have had this experience already where they will call each facility and then come back to us and say, "Well, the hospital in this town has this price. Are you willing to underbid them?" It's a difficult situation in trying to then figure out what you're bidding against. I see it becoming a huge problem if it occurs more often because it's difficult for us to pinpoint what the price is going to be in some cases.

Jeanna L. Adler, CPA, chief financial officer of Wise Regional Health System, Decatur, Texas

I think we are going to see web sites with comparative hospital pricing. Our immediate concern, because we, too, are experiencing this, is the negotiation process that may start occurring at the registration desk. What do you do in those situations? The patient has just bought a car and now they want to negotiate their appendectomy. They come with the mindset: "We don't care what your list price is."

A few months ago I was at a meeting where Steve Forbes gave an overview of the economy. When somebody asked him his opinion of health care today, he replied that he was more optimistic than ever before because he saw the wave of consumerism as fixing the industry faster than any legislation could ever do. He reasoned that there has been no industry in this country that the consumer has been unleashed on that hasn't responded almost instantaneously. When you think about that, it's unnerving if you're in the industry, but there's a lot of truth to it.

Jay S. Herron, CPA, vice president of finance and chief financial officer of Christus Health, based in Texas and Louisiana

In 1998 I needed a registration manager for a 150-bed hospital with about 40 people in the business office. I purposely asked a recruiter for somebody from the hotel industry. During the interviews, I would ask how the candidate handled the pricing process, because you can call a hotel and bargain for a better rate, and they change their rates depending upon what's happening in a market. For example, if there are a lot of tourists coming to town for a specific event, prices go up. If there's not much happening, prices go down. Hotels train their registration people with floor minimums and things like that, but the goal is to get the best price out of the consumer you can get without losing the sale.

Kenneth L. Simpson, administrator of Tyler Continued Care Hospital, Tyler, Texas

We're a small facility in comparison to a lot of you, and we have shopping going on. I've had people call up and want their money back after they've had the procedure because the hospital down the street was $200 cheaper.

Hal Mayo, chief financial officer of Glen Rose Medical Center, Glen Rose, Texas

A regional director for one of the biggest insurance companies in the nation recently asked us, "What do you think about these accounts?" We said, "We don't like them." He answered, "Well, get ready, because we're selling them like crazy."
J. Eric Reynolds, director of outpatient services for Timberlawn Mental Health System, Dallas

SOURCE:

Meeting the Challenge of Consumer-Directed Plans, an HFMA Executive Roundtable.

HFMA Wants You to Know ISSN: 1540-0697. Volume IV, Issue 24. Copyright 2005, Healthcare Financial Management Association. All rights reserved.