January 24, 2007
Providers are increasingly being drawn into personal healthcare financing for consumers as patients' out-of-pocket costs rise. In order to develop new price strategies to meet this trend, CFOs will need to analyze the true costs of every service that patients want to buy, whether it's a gall bladder operation, hip replacement or normal childbirth. Open-ended pricing will be acceptable only in the case of unpreventable complications and life-saving emergency care. An article in the July 2006 issue of hfm magazine offers steps that CFOs and other healthcare executives will find useful when addressing consumer directed healthcare (CDHC).
Key Steps for CFOs
Few hospitals are positioned to reengineer their finance departments in response to increased consumerism or to hire the new employees needed to fulfill the functions implied by the expected growth of consumer directed healthcare. Following are some key steps CFOs should take now that can help.
1. Create a strategic plan for CDHC. Healthcare finance executives need to ensure expeditious development of a strategic plan that addresses the needs for rational pricing of services and for consumer financing of significant front-end payment obligations. Needless to say, the executive team responsible for this planning should include the CFO, COO, CIO, chief medical officer, chief medical information officer, chief nursing officer, and other key executives involved in production, pricing, and payment of medical services.
2. Put the CDHC plan in the budget. As soon as CFOs conceptualize the new functions and responsibilities for maximizing consumer payments under CDHC, they will need to develop budgets that allow the plan to be fully implemented. The budget should enable reorganization of the finance department as necessary (e.g., funding new staff positions for consumer financial counselors) and engagement of consultants needed for design and implementation of these new elements. Given the rapid growth of CDHC, some relevant resources almost certainly need to be allocated or reallocated in the current fiscal year budget. Budgets must also provide resources for development of consumer-friendly pricing, human resources staffing and IT support.
3. Begin the processes. Pricing analysis will take a significant amount of time and will necessarily involve a large number of individuals, from clinical department heads to data analysts. Developing a comprehensive consumer-centric price list will be a complex, time-consuming task. Creating a consumer financial counseling service will probably be less conceptually complex, but it will require an analogous investment of resources and time to achieve success. Both of these major activities will require ongoing evaluation and occasional redirection if the provider is to present consumers with a coherent, consistent, and comprehensible set of policies that prevent massive losses in the early years of CDHC.
4. Watch the competition. The development of consumer directed health plan(CDHP)-responsive capabilities will not take place in a vacuum. Competitors will likely be pursuing the same solutions at the same time. Consequently, consumers will judge every provider against the competition. As CDHPs and their funding mechanisms evolve, hospitals will be judged not just on patient care quality and service, but also on their ability to manage the consumer credit and personal finance aspects of the new arrangements. Ability to counsel consumers and work with financial services organizations better than the competition will become a critical success factor.
SOURCE: Jeffrey C. Bauer and Mark Hagland, Consumer-Directed Health Care: What to Expect and What to Do, July 2006 hfm magazine
Additional Resources:
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 2. Copyright 2007, Healthcare Financial Management Association. All rights reserved.