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Comparison Shopping
for MRI? Price Transparency in Medicine It’s not happening yet, but giving consumers a better sense of what healthcare services cost may help curb healthcare expenditures. The thought of comparing healthcare services on price is foreign to most. However, that could soon change. Policymakers and health plans are looking to create more of a medical marketplace, a healthcare mall of sorts where the public can shop around the same way it does for refrigerators or automobiles. The objective of price transparency is to simplify medical service providers’ price/charge structures in a way that consumers can understand, thus creating patient-friendly billing and price competition. This drive to make healthcare prices more transparent is a complex undertaking involving a serious culture change. To help push things forward, the Healthcare Financial Management Association (HFMA) created the Patient Friendly Billing Project, a collaborative endeavor spearheaded by the HFMA, with support from the American Hospital Association, the Medical Group Management Association, providers, and other interested parties to promote clear, concise, and correct patient-friendly financial communications. Participants in the project believe price information provided to consumers must be meaningful to them; that means focusing on the patient’s financial obligation. The Patient Friendly Billing Project’s ultimate objective is “to provide patients with easy and timely access to information that clearly explains their financial obligation to pay for health services—in most cases, in advance of receiving those services.” Other objectives include price transparency, simplified charge and payment structures, agreement on payment expectations and terms between providers and patients, easy patient access and scheduling, and appropriate staff with requisite training and tools. The HFMA has issued a call to action to all responsible parties: government, employers, consumers, insurers, and providers. According to HFMA Vice President Rick Gundling, one of patient-friendly billing’s guiding principles is that if consumers could better understand and more effectively use health services, community health status would improve, the value of healthcare to the consumer would be enhanced, and the rate of cost increases would be reduced. Price Transparency’s Effect
on Spending Charles M. Cutler, MD, vice president and national medical
director of Quality & Clinical Integration at Aetna, doesn’t
believe consumer-directed health plans are the cure-all for controlling
healthcare costs. He concedes that they affect peoples’ spending
in that they are encouraged to change from brand-name to generic drugs
and people may be less likely to visit an emergency department when
they can visit their primary care physician. Cutler told a national
Webcast these are the types of changes Aetna would like to see people
make—changes that can add up to significant savings. “Most hospitals do not currently use cost accounting and setting up such a system could involve several hundreds of thousands of dollars in accounting time, but that would be a one-time expense,” he says. “The maintenance of the system should be pretty reasonable and could be automated if the hospital uses this opportunity to improve its financial information systems. But, once installed, the new system should significantly reduce bad debts and accounts receivable, as patients will be more willing to work with the hospital to pay off what they now see as reasonable charges.” Gundling says hospitals won’t face a huge financial burden by offering patient-friendly billing, but he notes that human resources departments will have to offer customer service training on how to discuss prices up front with patients and consumers. Hospital financial policies and procedures will have to be in place first. “If patients understand what they owe, they’re more likely to pay it,” says Gundling. “We believe there will be a reduction in collection expenses on the back end.” Scandlen says hospitals are being forced to accept patient-friendly billing and price transparency because of competition from healthcare providers overseas. He says growing numbers of Americans opt to travel abroad to have both necessary and/or elective procedures, ranging from heart surgery to plastic surgery, because the costs of medical care in other countries is much lower than in the United States. “I think price transparency is going to be beneficial, although it depends on the hospital,” says Gregory Snow, vice president of revenue cycles at Geisinger Health System in Danville, Pa. “I think healthcare is the only place where one obtains a service and doesn’t necessarily know all the costs involved. It will force patients to become more involved in the selection of their healthcare provider and make providers more accountable.” Price Structure “Patients won’t choose a hospital solely on cost but on value,” says Scandlen. “Value considers both cost and the quality of care offered. Quality includes not just statistical outcomes but also convenience, speed, amenities, and the overall patient experience. Very few hospitals will prosper by advertising that they are the cheapest, but they will have to justify higher prices by convincing patients that their services are worth the extra money. The pricing structure has to reflect those trade-offs and not just be compared to the facility down the road.” Snow agrees that people will not choose healthcare providers
based on cost alone; their out-of-pocket expenses will be an important
consideration in choosing a provider. Geisinger Health System is one of just a few providers that notify patients in advance what their out-of-pocket expenses will be once they make an appointment for a certain procedure. However, Snow says dealing with the status of a patient’s deductible can be a tricky proposition. If another claim has been submitted to the insurance provider but not received by the time a Geisinger representative calls to check on the status of a patient’s insurance and deductible, it can affect the consumer’s deductible, and thus his or her out-of-pocket expenses. Snow says the next step in price transparency will be to guarantee out-of-pocket expenses so patients will not have any surprises. Transparency, whether it’s pricing, quality, patient experience, or some combination, is not going to solve all the problems of chronic diseases, end-of-life care, and those kinds of issues, according to Robert Doherty, senior vice president of Governmental Affairs & Public Policy for the American College of Physicians (ACP). Nor will transparency deal with the cost shift when it happens because the United States has such a large number of uninsured. “There are huge problems, and if we expect that transparency itself is going to solve all that or be the magic bullet, I think we’re going to be disappointed,” he told a national roundtable. However, Doherty did acknowledge price transparency’s impact. “I think price transparency is here to stay … I think we are in a time where people expect to get information about the quality of care that their physicians and other healthcare professionals provide,” he said. Gerard Anderson, PhD, professor of health policy and management at Johns Hopkins Bloomberg School of Public Health, told the roundtable that “unless we get the methodology right,” price transparency could be just another healthcare trend. Because of the complexities involved in trying to bundle services, deal with patients who have multiple chronic conditions, accommodate multiple doctors, and measure accountability for price, he believes the proper methodology is many years away. The Patient Friendly Billing Project says that “a major impediment to pricing transparency is the fact that healthcare list charges in many cases are higher than expected payments.” Inpatient charge structure will be harder to simplify than outpatient services because the latter are usually paid on a per-procedure basis. According to the project, the government can make it easier for providers to make a change by adequately funding health programs, simplifying initiatives by changing payment methodologies that rely on charges, and refining the Medicare cost report. The variety of payment methods adds complexity and cost to healthcare administration, so for providers to streamline the payment processes, they need to cooperate with payors to manage the effect of payment changes. Transparency’s Future The ACP, he added, is recommending pilot testing of this model with Medicare and other payors who would receive a global fee for patient-centered services. The practices would be accountable and transparent because they would be required to meet certain standards and prove that they can deliver patient-centered chronic disease services. Accountability would be required at both the front and back ends of this model. According to Doherty, such a model could have tremendous potential to increase transparency because of its front-end information, global fee payment, and measurement of services. Most notably, it’s specially tailored for chronic disease patients who require expensive care. “I think it [price transparency] is here to stay because capitation didn’t work and other programs failed over time. Patients are becoming more involved in healthcare and want to know the costs,” explains Snow. “Something has to be done to help control healthcare costs and price transparency is another tool to help us do so.” The movement toward patient-friendly billing and price transparency could have further implications and be the basis for other models similar to the one for chronic disease patients. However, it remains to be seen whether price transparency will meet the expectations of healthcare providers, payors, and consumers. — Laura Gater’s medical and business
trade articles have been published in Medical Imaging, 24x7, Podiatry
Management, Veterinary Forum, Corrections Forum, and other national
and online publications.
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