Get the E-newsletter
Money is a fundamental human motivator, a fact many healthcare payment innovation programs are using to encourage patients to choose the most efficient, highest-quality providers.
Innovations such as reference pricing and employer-designated centers of excellence get patients to consider their wallets as they decide which provider to use. In turn, these innovations aim to save money for employers and other payers.
“Over the last few years, employers have become increasingly well-educated about the tremendous variability in the quality of care as well as healthcare prices,” says Suzanne Delbanco, executive director of the Catalyst for Payment Reform in Berkeley, Calif., and co-leader of HFMA’s inaugural National Payment Innovation Summit this past February. “They have also learned that the amount they pay is rarely correlated to quality, so they want to try to make sure they get good value for every dollar they spend.”
The healthcare system in the United States cannot be described as a marketplace, says Doug Emery, program implementation leader of the Health Care Incentives Improvement Institute in Newtown, Conn., and co-leader of the HFMA summit.
“There’s never been a market in health care,” Emery says. “Instead there have been incredibly opaque systems—and feedback loops, as economics students would understand them, have not been available.”
Payment innovations that create a market atmosphere—in other words, that prompt users to consider cost when choosing their provider and services—aim to change that situation. For that to happen, participants in the system need a lot of information, meaning the opacity of the system must change to transparency. It’s no surprise, then, that one characteristic in common among many of the innovations discussed at HFMA’s summit was the need for providers to supply data about care quality and costs.
What Does Transparency Mean?
“Employers are increasingly going to insist on transparency so they understand the value they are getting for their spending,” Delbanco says. “And concurrently they are going to want to see better patient outcomes over time. The expectations are high that the healthcare system will respond.”
The following innovations, discussed at the summit, strive to prompt patients to consider value.
Certain physicians and health systems treat certain conditions better than others. Some large employers are taking note of that fact and developing programs that encourage their employees to use those providers when appropriate.
The centers of excellence concept can be driven by the provider facility itself—there are countless examples of cancer, transplant, or cardiac centers of excellence, among others created by hospitals and health systems—but the concept becomes a payment innovation when an employer or coalition of employers taps the idea as part of a strategy to optimize the value of care for its employees.
For example, the Pacific Business Group on Health in San Francisco has helped develop a centers of excellence program that is available to its 60 members and other large employers.
“This is designed for and by employers and their employees,” says Bill Kramer, executive director for national health policy at the Pacific Business Group on Health (PBGH). “Many of our members have found that most of the existing centers of excellence programs really weren’t delivering significant value. So Walmart and Lowe’s led the development of the idea of designating centers of excellence for their employees, and we took up that challenge and built a program that works best for them and other employers.”
The PBGH program, launched in 2013, identifies top-performing healthcare centers, contracts with them to provide care to group members’ employees at negotiated bundle prices, and then monitors the care to ensure it continues to meet the standards. The network includes six healthcare organizations—two of which provide joint replacement surgery and spine care, two that provide just joint replacement surgery, one that provides just spine care, and one that provides bariatrics treatment.
The six providers were chosen based on clinical outcomes reported through the Centers for Medicare & Medicaid Services and on patient-reported outcomes, which primarily are provided by the organizations themselves. In addition, PBGH evaluated the organizations’ use of clinical guidelines, such as those promulgated by specialty societies, and ensured that the programs included a shared decision-making model and good follow-up care.
“We have very strong selection criteria and high standards, and as a result our network is an elite group of providers that deliver outstanding care and have demonstrated superior results,” Kramer says.
The key to encouraging employees to use the centers is, of course, financial: Patients who use the centers are covered at 100 percent of the cost, including travel expenses for the patient and a caregiver.
“Employers have to create sufficient incentive for employees to disrupt their current care process,” says David LaMarche, administrative director of managed care contracting and business development for Virginia Mason Medical Center, Seattle, one of the centers of excellence in the PBGH program. “Benefit design is a key lever in fostering employee utilization of a centers of excellence program. If there is not a material cost advantage for the employees to use the centers of excellence, they may not seriously consider using the program. However, if the employee is faced with potentially being responsible for costs up to their maximum out-of-pocket because they did not use a centers of excellence for their surgery, depending on their income level that could be a really significant motivator.”
And paying the full cost is worth it for the employers. Their cost variability is removed, total costs are probably lower, and their employees are likely getting the best care possible—thereby speeding their return to work.
Lowe’s experience during 2014 bears this out. Among Lowe’s employees who sought joint replacements, 231 chose the appropriate center of excellence and 350 did not. None of those who chose the designated centers required discharge to a skilled nursing facility or a revision within six months, compared with 9.1 percent and 1.1 percent, respectively, of employees who did not choose the centers. The 30-day readmissions rate was similarly impressive: 0.4 percent for patients using the centers, 6.6 percent for those who did not use them.
An innovation that resembles the centers of excellence concept, but with a more local focus, is the QualityPath program developed by the Alliance, a cooperative organization based in Madison, Wis., and composed of 240 self-funded employers.
QualityPath, which was launched in 2014, identifies high-quality providers and negotiates set bundle prices, much like a centers of excellence program does. Among the requirements a provider must meet is a commitment to transparency and data sharing with employers. At the moment the QualityPath program includes only joint replacement providers, but CT and MRI will be added beginning in January. (Unlike surgical episodes that typically span a period of 90 days or more, CT and MRI services are single-day episodes. Providers who apply for QualityPath designation follow a similar process in terms of meeting quality standards, although the reimbursement is structured differently.)
Where QualityPath differs from other centers of excellence programs is in its local focus, with patients rarely traveling more than an hour or so to get to a designated provider, and in the fact that physicians and hospitals are certified in pairs.
“The designation process couples a hospital’s orthopedic programming with the surgeon’s experience and outcomes,” says Heather Oliva, director of provider relations for the Alliance. “It’s a pairing. So maybe Dr. Smith is a great surgeon and works at two hospitals, but he’s only designated for QualityPath at one hospital, because the other hospital didn’t apply to QualityPath or its program is not as robust as the other’s.”
The motivation for patients to choose a QualityPath designated provider is, again, monetary. Employers who incorporate QualityPath into their benefit plans pay for these services in full, with no deductible or coinsurance charged to the patient.
The Alliance has taken steps beyond the financial incentive to encourage patients to use QualityPath providers. For example, the program aims to inform patients about the QualityPath option as soon as it becomes apparent that they need care.
“Even with the strong financial incentives, we still find it’s important to reach that patient and communicate with them at a point when they are still open to being steered,” Oliva says. “Once they’ve had an initial consultation, the odds of steering them to a designated provider are low.”
In addition, the program employs a “patient experience manager” who guides patients through the process.
“She functions as an intermediary to help the patient get connected to a QualityPath provider,” Oliva explains. “Because if you are steered to a provider who is not in your home system, that can be scary, and you probably will have a lot of questions: ‘How will I get my records transferred? What if my doctor gets mad at me?’ That’s where the patient experience manager comes in. Her role is to make appointments, facilitate the transfer of records, and facilitate the patient’s return to the home healthcare system. She helps ease that transition and remove some of the uncertainty.”
About two dozen patients have gone through the program or are in the process of doing so, Oliva says. She expects the program to grow as more providers and lines of care are added.
“Unlike Walmart’s program, which involves traveling long distances, we’re looking at regional domestic medical tourism,” Oliva says. “Our model is recognizing and rewarding providers who are already doing business with our employers, allowing them to gain more market share with an agreed-upon performance and a fair price.”
A slightly different type of incentive to encourage patients to make value-based decisions is the concept of reference pricing, which establishes a price for a bundled procedure and reimburses the patient only up to that amount.
“The basic problem we saw was enormous variation of cost for standard hip and knee replacement, with no significant difference in quality,” says Kramer of PGBH. “These variations in cost were not justifiable or appropriate. So CalPERS [the California Public Employees Retirement System, one of the organizations in PGBH] put in place this reference-pricing program that set a threshold, in this case $30,000.”
Individuals in the CalPERS system could still choose any provider they wanted for standard hip or knee replacement, but they had to cover all costs in excess of the threshold.
“The results were very dramatic,” Kramer says. “There was a shift in patient demand from the high- to the low-price hospitals, and as a result the amount paid was dramatically less. By establishing this reference price, CalPERS reintroduced price competition. What happened was what the economists would predict: The patients migrated to the low-price hospitals.”
The three benefit designs use financial incentives to encourage patients to choose certain providers. Lower out-of-pocket costs are what drive these plans, not promises of higher quality. But patients are probably safe in assuming that the payers have done their quality evaluations and are not encouraging the use of substandard providers. After all, the payer should also prefer a good result, and the consequent continued health of the employee or dependent.
“Let’s not forget about the patients,” Delbanco says. “Health care is such a big business that we can sometimes forget about delivering quality care to individual patients. At the end of the day our purpose is to make health care more equitable, affordable, and safe. And if we don’t make things better for the patient, then it’s not really that valuable.”
And value, for all the parties involved, is what these payment innovations seek.
Ed Avis is a freelance writer based in Chicago who frequently writes about healthcare management topics.
Interviewed for this article:
Suzanne Delbanco, executive director, Catalyst for Payment Reform, Berkeley, Calif.
Doug Emery, program implementation leader, Health Care Incentives Improvement Institute, Newtown, Conn.
Bill Kramer, executive director, national health policy, Pacific Business Group on Health, San Francisco.
David LaMarche, administrative director, managed care contracting and business development, Virginia Mason Medical Center, Seattle.
Heather Oliva, director, provider relations, The Alliance, Madison, Wis.
Grant Thornton: Helping Organizations Embrace Robotic Process Automation
Two senior leaders at Grant Thornton talk about the advantages of robotic process automation to improve office efficiency, reduce costs, and mitigate risk.
VitalWare: Creating a Transparency Strategy: Meeting the Mandate to Post Standard Hospital Pricing
A senior leader of VitalWare talks about the need to create a comprehensive pricing strategy for consumers and how to get started.
HealthTrust: Solving Workforce Management Challenges
Two of HealthTrust’s senior leaders talk about strategies for optimizing the hospital workforce to improve productivity and reduce waste.
Grant Thornton: Optimizing the Ambulatory Workforce
One of Grant Thornton’s senior healthcare consultants addresses the topic of workforce management and the importance of a data-driven approach.
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.
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.
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.
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.
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.
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.
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.
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.
Trend Watch: Providers adapt as value-based care moves from hype to reality
Announcements from several commercial payers and the Centers for Medicare and Medicaid Services (CMS) early in 2015 around increased efforts to form value-based contracts with providers seemed to point to an impending rise in risk-based contracting. Rather than wait for disruption from the outside in, health care providers are now making inroads on collaborating with payers on various risk-based contracting models to increase the value of health care from within.
Yuma Regional Medical Center case study
Yuma Regional Medical Center (YRMC) is a not-for-profit hospital serving a population of roughly 200,000 in Yuma and the surrounding communities.
Before becoming a ZirMed client, Yuma was attempting to manually monitor hundreds of thousands of charges which led to significant charge capture leakage. Learn how Yuma & ZirMed worked together to address underlying collections issues at the front end, thus increasing Yuma’s overall bottom line.
Reforming with a New 50-Bed Acute Care Facility
Kindred Hospital Rehabilitation Services works with partners to audit the market and the facility’s role in that market to identify opportunities for improvement. This approach leads to successes; Kindred’s clinical rehab and management expertise complements our partners’ strengths. Every facility and challenge is unique, and requires a full objective analysis.
5-Minute Briefing on Revenue Integrity Through HIM WhitePaper Hospitals FS
As the critical link between patient care and reimbursement, health information enables more complete and accurate revenue capture. This 5-Minute White Paper Briefing shares how to achieve cost-effective revenue integrity by your optimizing HIM systems.
5-Minute Briefing on Accelerating Cash Flow Through HIM WhitePaper Hospitals FS
Speedier cash flow starts with better CDI and coding. This 5-Minute White Paper Briefing explains how providers can improve vital measures of technical and business performance to accelerate cash flow.
5-Minute Briefing on Reducing the Cost of RCM WhitePaper Hospitals FS
Qualified coders are getting harder to come by, and even the most seasoned professional can struggle with the complexity of ICD-10. This 5-Minute White Paper Briefing explains how partnerships can help improve coding and other key RCM operations potentially at a cost savings.
Providers Focus Too Much On Revenue Cycle Management
The point of managing your revenue cycle isn’t just to improve revenue and cash flow. It’s to do those things effectively by consistently following best practices— while spending as little time, money, and energy on them as possible.
Lucille Packard Children’s Hospital Stanford Case Study
How Lucile Packard Children’s Hospital Stanford increased payments received within 45 days by 20% and reduced paper submission claims by 70% by using ZirMed solutions.
Using Predictive Modeling To Detect Meaningful Correlations Across Claims Denials Data
The reasons claims are denied are so varied that managing denials can feel like chasing a thousand different tails. This situation is not surprising given that a hypothetical denial rate of just 5 percent translates to tens of thousands of denied claims per year for large hospitals—where real‐world denial rates often range from 12 to 22 percent. Read about how predictive modeling can detect meaningful correlations across claims denials data.
ZOLL and Emergency Mobile Health Care Case Study
Emergency Mobile Health Care (EMHC) was founded to be and remains an exclusively locally owned and operated emergency medical service organization; today EMHC serves a population of more than a million people in and around Memphis, answering 75,000 calls each year.
Maximizing Medicare Reimbursements White Paper
Since the Physician Quality Reporting Initiative (PQRI) introduction, CMS has paid more than $100 million in bonus payments to participants. However, these bonuses ended in 2015; providers who successfully meet the reporting requirements in 2016 will avoid the 2% negative payment adjustment in 2018, so now is the time to act! Included in this whitepaper are implications of increasing patient responsibility, collections best practices, and collections and internal control solutions.
Denials Deconstructed: Getting Your Claims Paid
Getting paid what your physician deserves—that’s the goal of every biller. Yet even for the best billers, achieving that success can be elusive when denials stand in the way of success, presenting challenges at every turn. Denials aren’t going away, but you can learn techniques to manage and even prevent them.Join practice management expert Elizabeth W. Woodcock, MBA, FACMPE, CPC, to: Discover methods to translate denial data into business intelligence to improve your bottom line, determine staff productivity benchmarks for billers, and recognize common mistakes in denial management.
Automation and Operational Improvement Drive Sustainable Results
Physician practices must improve organizational efficiency to compete in this era of reduced reimbursement and escalating administrative costs.
Revenue Cycle Management Resolves Migration Implementation Issues
Many healthcare organizations are pursuing next-generation health information systems solutions. Learn more about Navigant's work with University of Michigan Health System.
Partnering For Success – Provider Achieves Strength in Stability
The proper implementation of healthcare information technology systems is crucial to an organization’s financial health.
Building a Clinically-Integrated Network
As value-based payment models evolve, providers are challenged to maintain superior clinical outcomes while controlling costs.
Winning in the Post-Acute Marketplace
Read more about factors contributing to the changes in the post-acute marketplace and what it means for manufacturers, physicians, clinicians, patients, and post-acute facilities as they anticipate the transition to the second curve.
Building A Common Vision with Employed Physicians
HSG helped the physicians and executives of St. Claire Regional in Morehead, Kentucky, define their shared vision for how the group would evolve over the next decade. As well as, develop the strategic and operational priorities which refocused and accelerated the group’s evolution.
Practice Performance Improvement
The client was a nine-hospital health system with 14 clinics serving communities in a multi-state market with very limited access to care, poor economic conditions, high unemployment, and a heavy Medicare/Medicaid/uninsured payer mix. In most of these communities, the system was the sole source of care.
Though the clinics were of substantial size (they employed 98 physicians) and comprised of multiple specialists, the physicians functioned as individuals and the practices lacked any real group culture.
Clinical Integration Without Spending a Fortune
Clinical integration can be expensive, but it doesn’t have to be, as this four-step road map for developing a CIN proves. Does it have to cost millions to initiate a clinical integration strategy?
Contrary to popular belief, we have clients who have generated substantial shared savings and a significant ROI over time, without massive investments. Yes, some financial capital is required for resources the CIN providers can’t bring to the table themselves. But the size of that investment can be miniscule relative to the value it produces: improved outcomes and documentation for payers.
Adding Value to Physician Compensation
Today’s concerns about physician compensation are the result of the changing healthcare environment. The transition to value is slow, but finally becoming a reality. Proactive hospitals want to ensure that provider incentives are properly aligned with ever-increasing value-based demands.
This report focuses on the three big questions HSG receives about adding value to physician compensation; Why are organizations redesigning their provider compensation plans? What elements and parameters must be part of successful compensation plans? How are organizations implementing compensation changes?
Effective Revenue Cycle Management in Your Network
Revenue Cycle Management has become an even more complex issue with declining reimbursements, implementation of Electronic Health Records, evolving local carrier determinations (LCD), and payer credentialing [The emphasis on healthcare fraud, abuse and compliance has increased the importance of accuracy of data reporting and claims filing).
The efficiency of a medical practice’s billing operations has critical impact on the financial performance. In many cases, patient billings are the primary revenue source that pays staff salaries, provider compensation and overhead operating cost. Inefficiencies or inaccurate billing will contribute to operating losses.
Succeeding in Value-Based Care
This publication identifies and outlines the necessary characteristics of a fully-functioning clinically integrated network (CIN). What it doesn’t do is detail how hospitals and providers can participate in the value-based care environment during the development process.
One common misconception is that the CIN can’t do anything significant until it has obtained the FTC’s “clinically integrated” stamp of approval. While the network must satisfy the FTC’s definition of clinical integration before single signature contracting for FFS rates and contracts can legally start, hospitals and providers can enjoy three key benefits during the development process.
Therapy: Benefits at All Levels of Care
Nearly half of all Medicare beneficiaries treated in the hospital will need post-acute care services after discharge. For these patients, a stay in an inpatient rehabilitation facility, skilled nursing facility or other post-acute care setting comes between hospital and home.
Does Your Budgeting Process Lack Accountability?
With the proper process, tools, and feedback mechanisms in place, budgeting can be a valuable exercise for organizations while helping hold organizational leaders accountable. Having a proper monthly variance review process is one of the most critical factors in creating a more efficient and accurate budget. Monthly variance reporting puts parameters around what is to be expected during the upcoming budget entry process.
Cost Accounting: the Key to Cost Management and Profitability
Managing the cost of patient care is the top strategic priority of most hospital CFOs today. As healthcare shifts to more data-driven decision making, having clear visibility into key volume, cost and profitability measures across clinical service lines is becoming increasingly important for both long-range and tactical planning activities. In turn, the cost accounting function in healthcare provider organizations is becoming an increasingly important and strategic function. This whitepaper includes five strategies for efficient and accurate cost accounting and service line analytics and keys to overcoming the associated challenges.