John Muir Health is improving its bills to make it easier for patients to understand charges and what they owe.

 

As the call for price transparency in health care intensified earlier this year, John Muir Health, a two-hospital system in California, found itself in the local newspaper. A columnist was trying to help an 85-year-old woman understand why the bill for her emergency department visit topped $11,500.

Of course, that amount reflected the health system’s chargemaster prices, not the amount that the patient owed or necessarily the amount the insurer paid. “At the end of the day, that patient had $0 out-of-pocket responsibility for that bill, but she didn’t understand how it worked,” says Chris Pass, senior vice president of revenue cycle and analytics, John Muir Health in Walnut Creek, Calif. “To make headway on this common problem, we need to make the billing process simpler.”

Like all health systems, John Muir Health faces daunting barriers, many of which are imposed by payers and regulations, to providing true price transparency for its patients. Its executives have chosen to focus on one aspect of price transparency—the patient’s out-of-pocket responsibility—and they are carrying out a three-pronged strategy:

  • Redesigned patient statements that are easier to understand
  • Unified patient statements that reflect hospital, physician, and ancillary services in a single document
  • Consolidated customer service so that patients can call a single number and speak with one person to get answers regarding hospital, physician, or ancillary bills

 

What is Price Transparency

 

Leah Binder, CEO, The Leapfrog Group, says that transparency means one thing to patients. “The only thing that patients care about is how much the care is going to cost them,” she says. “They aren’t interested in what Medicare, their insurer, or their employer is paying the hospital or physician practice. Patients want to understand what they would have to pay for the best possible care. They would also like to know what they would pay for not-so-great care.”

Creating a true marketplace in which patients make choices based on cost and quality will require upfront information about a patient’s out-of-pocket costs. “Patients want to know what they will be expected to pay for healthcare services before they incur the costs,” says Richard L. Gundling, HFMA’s vice president of healthcare financial practices. “Financial discussions that occur after services are delivered deprive patients of the ability to make informed choices about their treatment options.”

Meanwhile, private insurers and self-insured employers want to know the total charges to both payers and patients. “There are many different purchasers of health care who may care very much about prices, and their concerns may be different than those of patients who are not paying directly for the majority of the cost of their care,” says Anders Gilberg, senior vice president of government affairs, Medical Group Management Association.

The Providers’ Dilemma

 
Until the framework is established, individual health systems are limited in their ability to provide true transparency. For one thing, hospital chargemaster prices are important to the private insurance system. “A lot of insurers give discounts off chargemaster prices to their customers,” Pass says. “So if we lowered our chargemaster prices to what we get paid, the perceived discount goes away. That really upsets their business model.”

Meanwhile, regulations prohibit providers from some billing practices that might reduce patients’ confusion when they open their statements. For example, providers are not allowed to show only an insurer’s negotiated rate on a patient billing statement. For commercially insured patients, hospitals must show:

  • The chargemaster price
  • The discount that reflects the hospital’s contract with the insurer
  • The amount the insurer has paid 
  • The amount the patient owes

For Medicare patients, the bill must show the chargemaster price, the Medicare payment, and the amount the patient owes.

John Muir Health is looking for opportunities to lower some of its chargemaster prices, which are based on competitors’ charges and the health system’s contract terms with various insurers. The analysis that is under way seeks to find if John Muir Health’s prices are higher than necessary for certain services, relative to the market, and whether the health system could lower those prices without losing any revenue.

“We feel like there probably will be some pockets of charges that, because of contract changes, we could reduce some prices,” he says. “My past experience tells me that that won’t solve the issue of price transparency, but we may be able to close the gap between charges and payments somewhat.”

Patient-Friendly Statements

 
Pass thinks patients will be better served by John Muir Health’s work to improve its patient statements. That initiative began in 2011 when the system decided to acquire a new information system to support both clinical transformation and revenue cycle improvements. John Muir Health’s efforts to improve its bills include the following:

Easier-to-read statements. “We are redesigning the look and feel of the statement, how it reads, and everything about it,” Pass says. Patient feedback is being used to make sure the new statements are easy to understand

Consolidated statements. By next March, patients will receive a single statement that shows the charges of all hospitals, ancillary providers, and physicians (except independent physicians who are not contracted with John Muir Health) on a single document. Each individual service will be delineated, but a single overall charge, the insurer’s total payment, and the patient’s total responsibility will appear at the end.

New billing protocols. After experimenting with various approaches, John Muir Health no longer sends patient statements until insurance claims have been paid. Previous attempts at communicating with patients before claims were paid resulted in confusion. For example, the health system tried sending patients a courtesy notice 60 days after a service was rendered that explained the insurance claim was still outstanding. “We got a lot of negative feedback from patients about this notice. They wondered, ‘Why are you even bothering sending me this?’ So now we wait until we get clarity around what patients truly owe before we send them a bill,” Pass says.

Single point of contact. John Muir Health’s customer service unit has been reorganized so all representatives work together, but currently patients still have to call different numbers to discuss different bills. When the new information system launches next year, patients will be able to call a single number and speak to a single representative who can address questions about any component of a John Muir Health statement.

Upfront estimates. John Muir Health is also planning to improve the kind of upfront transparency needed to support a true marketplace. To date, few patients in John Muir Health’s market seek out-of-pocket cost estimates before they seek healthcare services. But Pass is preparing for the day that such requests become commonplace. When the new software is in place, a new process for providing upfront out-of-pocket estimates will be established.

Patient Feedback

 
John Muir Health offers an opt-in automated telephone survey for patients who contact the health system with questions about their bills. The survey seeks feedback on patients’ experience with the bill payment process. The concerns and questions that patients provide are logged so staff can identify opportunities for improvement.

If fewer patients express frustration in that survey—and in their comments to front-line staff—about their top issue, Pass will know that progress is being made. “The No. 1 concern that patients report is ‘I don’t understand my bill,’” he says.


Lola Butcher is a freelance writer and editor based in Missouri.

Interviewed for this article:

 

Leah Binder is CEO, The Leapfrog Group, Washington, D.C.

Anders M. Gilberg is senior vice president, government affairs, Medical Group Management Association, Washington, D.C.

Richard L. Gundling is vice president, healthcare financial practices, HFMA, Washington, D.C.

Chris Pass is senior vice president of revenue cycle and analytics, John Muir Health, Walnut Creek, Calif., and a member of HFMA's Northern California Chapter.

Publication Date: Wednesday, September 18, 2013