As consumers face increased exposure to healthcare out-of-pocket payments, the issue of price and quality transparency has become more urgent, according to three experts interviewed. Because of its complexity, meaningful and manageable transparency will require consensus among multiple stakeholders, including hospital and physician providers, commercial and governmental payers, employers, and patient advocates.
What information is most valuable in helping patients make high-value choices of healthcare providers? For instance, are patients most interested in hospital charges, their own out-of-pocket expenses, or the total cost of care (that is, the cost to the employer or payer plus the patient’s out-of-pocket)?
Binder: The only thing patients care about is how much the care is going to cost them. They aren’t interested in what Medicare, their insurers, or their employers are paying the hospital or physician practice. Patients want to understand what they are paying for the best possible care. They would also like to know what they are paying for not-so-great care.
Gilberg: I agree that most patients care more about what the health services are going to cost them more than what the charges are. But there are many different purchasers of health care on the other end of these transactions that may care very much about negotiated rates and actual charges. Often purchasers (such as the government or employers) have different concerns than patients, who are not paying directly out of pocket for the majority of their care.
Gundling: An important caveat here is that patients want to know what they will be expected to pay before they incur the costs. HFMA’s Patient Friendly Billing® research shows that financial discussions that occur after health services are delivered deprive patients of the ability to make informed choices about their treatment options.
Patients who may have difficulty paying their medical bills will want access to Medicaid, charity care, or other financial assistance programs. Delaying financial discussions with these patients will reduce their ability to access these programs and will often result in additional administrative costs for providers to bill and attempt to collect amounts that they are unlikely to ever receive.
What are the major barriers to achieving meaningful price transparency?
Gilberg: Receiving information about a patient’s out-of-pocket expenses at the time of service is important to physician practices. But this information is not always available prior to the service, which would be ideal.
From the physician’s perspective, there is not much transparency from payers. Physician practices often don’t know what payers will pay, unless the claim is for a very specific service, like a diagnostic image. Even when there is a negotiated price, payers use payment policies, such as multiple procedure reductions and modifiers, to adjust the final amount of an adjudicated claim.
Just as problematic: No one typically knows what services will be provided until the physician sees the patient and delivers the care. The charge for an office visit is dependent on the extent of the problem presented to the physician, so all of this makes it difficult to give estimates prior to service.
The industry is getting better at point-of-service estimates. With the HIPAA Administrative Simplification standards now combined with the new operating rules that just went into effect for real-time eligibility verification, payers are required to provide deductible and copayment information to the provider within 20 seconds of a request. This new federal mandate will augment the real-time claims adjudication offered by many payers. While not required by law, and not available for all claims, real-time claims adjudication can allow physicians the opportunity to know immediately what the estimated payment is, as well as the financial responsibility of the patient.
However, this approach requires the physician practice to bill the insurer as soon as services are provided. Then the claim has to be adjudicated, meaning the insurer verifies that the claim is eligible for payment and calculates the payment based on contract terms. Then the practice has to communicate all of this information to the patient before he or she goes home. A lot has to happen for this to go smoothly.
Gundling: All of this complexity leaves stakeholders from all perspectives reluctant to take on this issue. The spotlight is on providers, even though they do not have unilateral control of the pricing decisions. Having not created the system on their own, providers can’t solve it on their own.
Some other specific significant barriers to price transparency include Medicare charge structures, private payer contracts, technological capabilities, community response/public relations, and antitrust concerns. For example, a concern for rebasing charges is that it will lead to reduction in Medicare payments for outliers. If a hospital drops its charge, its cost-to-charge ratio will increase, reducing the likelihood of triggering the threshold for outlier payments. The same principle applies to stop-loss thresholds used by commercial payers for high-cost cases.
Another example is that, in general, providers and payers use a wide range of IT systems with differing functionality, data formats, and interoperability. This makes it difficult to provide comparable pricing information.
The public relations challenges are associated with educating consumers and the need to develop strategies to respond to pricing disclosure. There is a high degree of concern about sharing charge information to avoid the appearance of collusion with competitor healthcare organizations. All of these concerns can be addressed; it won’t be simple, but they are actionable.
Should all price information be made public, or should public reporting be limited to, for example, Medicare charges or the average discounted rate for commercial payers?
Gilberg: The vast majority of transactions in physician offices relate to insured patients. A physician practice may have contracts with 20 to 30 payers. Each one of those payers may have multiple insurance products—for example, a high-deductible plan, a preferred provider organization, a limited benefit plan, and an HMO plan. And each one of those products may have a different payment structure, negotiated rate”, and ultimately, a final price to the patient. A physician practice may have 100 “prices” for a certain procedure or service.
So the patient’s real price is not going to necessarily be publicly posted. Not only are there potential antitrust implications that prohibit the sharing of contract terms, but some payer contracts prohibit physicians from public disclosure of prices.
That’s not to say that the patient should not be given as much information as possible about prices. But it is very difficult in our current healthcare system for patients to shop around. Even in a single community, each physician practice is going to have a different negotiated rate with an insurer, and it is not going to post that negotiated rate.
The Medical Group Management Association [MGMA] encourages physician practices to be very transparent with their practice’s standard fee schedule and to make that information readily available, especially when it’s particularly meaningful, such as for self-pay patients. But that information is less relevant for patients who are insured, in which case third parties determine rates and prices.
Binder: I don’t know why we would limit price transparency to one population or another. I don’t go to the grocery store and have to check in on what kind of person I am to find out whether I’m entitled to see the prices of the products. Everybody should have price transparency. We should have a true transparent market in health care.
CMS’s release of Medicare charge information was a wake-up call on the serious problem we have in the so-called healthcare marketplace, which is not a true market.
Gundling: The price information that should be made public should be of the type that is most useful for making a medical decision by the purchaser or patient. Better pricing information would address goals that support more transparency. For example, pricing information should be meaningful, timely, and relevant. It should be simple, rational, and fair. Transparency should also provide patients and purchasers with both comparable price and quality information.
Should price and quality data be adjusted to reflect a provider’s patient mix and costs associated with charity care, academic/teaching functions, specialized services (such as burn units) and other societal benefits?
Binder: I am simply not persuaded that a safety-net hospital or an academic medical center has higher costs than a community hospital. Since we have no marketplace, we do not know enough about actual pricing and actual costs to make a judgment at this point that anyone should be exempt from public reporting.
Gundling: A payment and pricing system should support key principles. Payments and prices should encourage and reward high-quality care. They should align incentives to maximize efficiency and the coordination of health services, and they should be fair and sustainable.
The resources needed to support broad societal benefits (for example, medical research and education) should be paid for explicitly. Of course, the pricing and payment methods should be simplified, standard, and transparent.
Do you think that price and quality transparency poses a significant risk of driving patients away from low-cost providers because patients equate low cost with low quality in health care?
Binder: This is absolutely a danger because, given the historical lack of transparency on pricing and quality, most people don’t know the sad truth that a high-priced provider can very well be a very low-quality provider. Most people find that hard to understand. The only way we’re going to solve that misperception by the public is transparency. People have to see it for themselves. And the only way they see it for themselves is if we have good transparency of both pricing and quality information.
Gilberg: Patients need to be educated about what this information means and doesn’t mean. But this brings up the issue of who is providing the price and quality information. Providers, payers, purchasers, and patient organizations need to come together to develop new ways to collectively communicate price and quality information to patients. A cooperative approach would remove the risk of patients receiving information from a single party with a vested interest.
Gundling: Currently, many patients still equate high price with high quality, as HFMA Value Project’s research has shown. And many patients still don’t use price as their main driver when choosing a provider. As quality and price information become more readily available, patients will be able to make better informed decisions. It will be very important for providers to communicate their value (quality and price) in easily understandable and meaningful ways.
In your opinion, what would a rational pricing structure for healthcare services look like?
Binder: Purchasers would be paying according to the quality of the care delivered, and providers would know about the quality of the care delivered. And providers would publicly report to patients and purchasers what they were paying. That would be rational.
We’re used to thinking of health care as a top-down enterprise, in which policymakers will pass laws that will govern how everybody will seek care. So we have assumed that, for example, the Affordable Care Act was going to be the driver of change in health care. And it certainly is a driver of change.
But there is another phenomenon that is probably every bit as impactful as anything coming out of Washington, and that is what goes on in the private sector. That’s why price transparency has suddenly emerged as a major issue. Purchasers in the private sector are moving toward high-deductible health plans and other strategies to pass more of the direct cost and direct risk on to their employees. I don’t know how price transparency will play out, I don’t know if it’s going to be good or bad, but it’s going to play out. And I would strongly advise providers to get ready.
Providers that can provide the best possible care at the best possible price will win. This is a ground-up movement, and there’s no option. It’s happening.
Gilberg: We need a more market-based system that gives patients clear, actionable information to make healthcare decisions. MGMA is privileged to partner with HFMA on the Patient Friendly Billing project and it’s a great place to start as we continue this dialogue.
Gundling: A more rational and transparent pricing system means that it needs to become more patient-focused. This means coming up with ways to identify and address patient needs, learning to communicate with patients as partners, and incorporating patient-friendly concepts, such as simplified price structures.
Providers will also need to provide meaningful information about the quality of care. This will require collaboration with other providers, payers, employers, regulators, and patients themselves.
Charges: The dollar amount a provider asks for medical services rendered before negotiating any discounts. The charge can be different from the amount paid.
Price: The expected amount to be paid by payers and patients for healthcare services.
Out-of-Pocket Payments: Portion of total payment for medical services and treatment for which the patient is responsible, including copayments, coinsurance, and deductibles.
Cost: The definition depends on the cost being referenced:
Source: HFMA, October 2013
McKesson: Leveraging Predictive Analytics to Rein in Operating Costs
A leader from McKesson discusses how healthcare reform is forcing hospitals and health systems to take a different approach to capacity management and patient flow.
6 Patient Revenue Cycle Metrics You Should Be Tracking (and How to Improve Your Results)
Patient financial engagement is more challenging than ever – and more critical. With patient responsibility as a percentage of revenue on the rise, providers have seen their billing-related costs and accounts receivable levels increase. If increasing collection yield and reducing costs are a priority for your organization, the metrics outlined in this presentation will provide the framework you need to understand what’s working and what’s not, in order to guide your overall patient financial engagement initiatives and optimize results.
Accretive Health: Partners with Providers to Excel in a Rapidly Transforming Revenue Cycle Environment
Emad Rizk, MD, president and CEO of Accretive Health, discusses the uncertainty facing hospitals and the transitions affecting revenue cycle management.
10 Ways to Reduce Patient Statement Volume (and Reduce Costs)
No two patients are the same. Each has a very personal healthcare experience, and each has distinct financial needs and preferences that have an impact on how, when and if they chose to pay their healthcare bill. It’s no longer effective to apply static billing techniques to solve the complex challenge of collecting balances from patients. The need to tailor financial conversations and payment options to individual needs and preferences is critical. This presentation provides 10 recommendations that will not only help you improve payment performance through a more tailored approach, but take control of rising collection costs.
Conifer Health Solutions: Helping Providers and Employers Build a Foundation for Better Health
Jim Bohnsack, vice president, solution & corporate development for Conifer Health Solutions, explains how the company helps healthcare providers leverage data to deliver better outcomes while optimizing reimbursement for all payment arrangements.
Reduce Patient Balances Sent to Collection Agencies: Approaching New Problems with New Approaches
This white paper, written by Apex Vice President of Solutions and Services, Carrie Romandine, discusses the importance of patient segmentation and messaging specifically related to the patient revenue cycle. Applying strategic messaging that is tailored to each patient type will not only better educate consumers on payment options specific to their billing needs, but it will maximize the amount collected before sending to collections. Further, targeted messaging should be applied across all points of patient interaction (i.e. point of service, customer service, patient statements) and analyzed regularly for maximized results.
Ontario Systems: Optimizing Accounts Receivable in a Rapidly Changing Environment
Steve Scibetta, senior director of channel sales for Ontario Systems' healthcare product line, shares insights into effectively managing receivables.
The Future of Online Patient Billing Portals
This white paper, written by Apex President Patrick Maurer, discusses methods to increase patient adoption of online payments. Providers are now seeking ways to incrementally collect more payments due from patients as well as speeding up the rate of collections. This white paper shows why patient-centric approaches to online payment portals are important complements to traditional provider-centric approaches.
Optum: Enabling Transformative Change
Elena White, vice president of risk, quality, and network solutions for Optum, discusses how healthcare providers can leverage data and technology as they enable risk in their organization.
Payment Portals Can Improve Self-Pay Collections and Support Meaningful Use
Increased electronic engagement between healthcare providers and patients provides significant opportunities for improving revenue cycle metrics and encouraging patients to access EHRs. This article, written by Apex Founder and CEO Brian Kueppers, explores a number of strategies to create synergy between patient billing, online payment portals and electronic health record (EHR) software to realize a high ROI in speed to payment, patient satisfaction and portal adoption for meaningful use.
Somnia: Bending the Healthcare Cost Curve Toward Improved Anesthesia Value
Somnia President and CEO Marc Koch, MD, MBA, explains how hospitals can drive transformative change in the perioperative experience for outstanding clinical and financial outcomes.
Large Health System Drives 10% UP (Patient Payments) and 10% DOWN (Billing-related Costs)
Faced with a rising tide of bad debt, a large Southeastern healthcare system was seeing a sharp decline in net patient revenues. The need to improve collections was dire. By integrating critical tools and processes, the health system was able to increase online payments and improve its financial position. Taking a holistic approach increased overall collection yield by 10% while costs came down because the number of statements sent to patients fell by 10%, which equated to a $1.3M annualized improvement in patient cash over a six-month period. This case study explains how.
PMMC: Navigating Revenue Cycle Management Challenges as Value Based Purchasing Emerges
PMMC President Roger L. Shaul discusses the effects of healthcare reform on revenue cycle management and how PMMC's products help clients adapt to a changing financial environment.
ICD-10: Managing Performance
With the ICD10 deadline quickly approaching and daily responsibilities not slowing down, final preparations for October 1 require strategic prioritization and laser focus.
Burgess: Simplify the Business of Healthcare
Greg Burgess, Founder and Chief Product Officer at Burgess Group shares insights and opportunities for payment integrity in the rapidly changing healthcare IT landscape.
Clarity Drives Collections
Read how Gwinnett Medical Center provides clear connections to financial information, offers multiple payment options for patients, and gives onsite staff the ability to collect payments at multiple points throughout the care process.
Orlando Health Gains Insight into Denials, Reduces A/R Days with RelayAnalytics Acuity
Read how Orlando Health was able to perform deeper dives into claims data to help the health system see claim rejections more quickly–even on the front end–and reduce A/R days.
Revenue Cycle Payment Clarity
To maintain fiscal fitness and boost patient satisfaction and loyalty, healthcare providers need visibility into when and how much they will be paid–by whom–and the ability to better navigate obstacles to payment. They need payment clarity. This whitepaper illuminates this concept that is winning fans at forward-thinking hospitals.
Streamlining the Patient Billing Process
Financial services staff are always looking for ways to improve the verification, billing and collections processes, and Munson Healthcare is no different. Read about how they streamlined the billing process to produce cleaner bills on the front end and helped financial services staff collect more than $1 million in additional upfront annual revenue in one year.
Wallace Thomson Hospital Automates to Maximize Limited Resources
Effective revenue cycle management can be a challenge for any hospital, but for smaller providers it is even tougher. Read how Wallace Thomson identified unreimbursed procedures, streamlined claims management, and improved its ability to determine charity eligibility.
7 Steps for Building and Funding Sustainability Projects
Before launching an energy-efficiency initiative, it’s important to build a solid business case and understand the funding options and potential incentives that are available. Healthcare leaders should consider taking the steps outlined in the whitepaper to ease the process of gaining approval, piloting, implementing, and supporting sustainability projects. You will find that investing in sustainability and energy efficiency helps hospitals add cash to their bottom line. Discover how hospitals and health systems have various options for funding energy-efficient and renewable-energy initiatives, depending on their current financial structure and strategy.
Key Capital Considerations for Mergers and Acquisitions
Health care is a dynamic mergers and acquisitions market with numerous hospitals and health systems contemplating or pursuing formal arrangements with other entities. These relationships often pose a strategic benefit, such as enhancing competencies across the continuum, facilitating economies of scale, or giving the participants a competitive advantage in a crowded market. Underpinning any profitable acquisition is a robust capital planning strategy that ensures an organization reserves sufficient funds and efficiently onboards partners that advance the enterprise mission and values.
Key Capital Considerations for Mergers and Acquisitions
The success of healthcare mergers, acquisitions, and other affiliations is predicated in part on available capital, and the need for and sources of funding are considerations present throughout the partnering process, from choosing a partner to evaluating an arrangement’s capital needs to selecting an integration model to finding the right money source to finance the deal. This whitepaper offers several strategies that health system leaders have used to assess and manage capital needs for their growing networks.