Beyond the Mandate: Better Strategies for Price Transparency

Now that hospitals are required to make their standard charges public, leaders hope to allay confusion among consumers and offer more-useful information like out-of-pocket cost estimates.

Since the Centers for Medicare & Medicaid Services (CMS) directed hospitals to post their charges by the start of 2019, the question for many providers has not been, “How do we do this?” but rather, “How does this help the consumer?” 

That is why some healthcare organizations have taken the spirit of the price transparency regulations a step further by implementing new practices so they can inform patients in advance about their true out-of-pocket costs for care.

‘Packaging’ Charge Information

As described in the FY19 Inpatient Prospective Payment System (IPPS) final rule, CMS now requires hospitals to post standard charges for each diagnosis-related group (DRG) online in a machine-readable format and to update this information at least annually.

David Gregory, principal and healthcare consulting practice leader at Baker Tilly Virchow Krause, LLP, in New York City, fears that the regulations, though well-intentioned, could do more harm than good by creating confusion among consumers. For this reason, properly “packaging” charge information is critical.

He advises hospitals to provide charges in two tiers with different levels of detail. The first tier should list charges at the procedure level by DRG or service line bundle, while the second tier should include charge details at the line-item level via the charge description master (CDM), as the regulation suggests.

Gregory also recommends that hospitals include language on their website explaining that posted charges do not reflect a patient’s financial responsibility. Along the same lines, HFMA suggests that hospitals consider defining the difference between charge and price for patients:

Charge:the dollar amount a provider sets for services rendered before negotiating any discounts

Price:the total amount a provider expects to be paid by payers and patients for healthcare services

Along with the posted charges, hospital websites should direct patients to call their health plan for specifics on what they will pay out of pocket. Hospitals also should include their financial assistance policy and the phone number for the financial counseling department for patients who have additional questions.

Although CMS does not require hospitals to provide patients with an estimate of their out-of-pocket costs for services, forward-thinking hospitals are already doing that.

HFMA Resources on Price Transparency (click to enlarge)

 

 

 

Using Estimates to Improve the Patient Experience

 

“It is very difficult for patients to read the chargemaster list and understand what their care is going to encompass, so we like to take more of an individualized approach,” says Jennifer Alvey (pictured at right), senior vice president and CFO at Indiana University (IU) Health in Indianapolis.

 

For the past five years, IU Health patients have been able to request a cost estimate online via the patient portal. They also can call or email the eight-person cost estimator team, which includes nurses and experienced billing and collections staff. The centralized cost estimator team often contacts patients’ physician offices to understand the scope of their care needs and then follows up to provide an estimate of the out-of-pocket responsibility. 

In 2018, the health system provided more than 35,000 cost estimates. More than 85 percent of estimates got back to patients on the same day, and 95 percent were delivered within 24 hours, Alvey says.

To help patients avoid surprise bills, IU Health makes sure that all charges associated with the patient’s care are included in the estimate, including physician, radiology, and lab charges.

The system’s scheduling and registration team also provides out-of-pocket estimates for basic services, such as lab work, at the time patients book an appointment.

Providing patients with cost estimates is critical to providing an excellent patient experience—even if it can be challenging, Alvey says. “Just because it’s complicated doesn’t mean we can’t simplify it for the patient.”

Building on a Decade of Transparency

For more than 10 years in the state of California, hospitals and health systems such as Sharp HealthCare in San Diego have been required to post their charges on the Office of Statewide Health Planning and Development website. They also must post a list of average charges for 25 common outpatient procedures.

 

Heading into CMS’s Jan. 1 posting deadline, the only step that Gerilynn Sevenikar (pictured at right), Sharp’s vice president of revenue cycle, needed to take was to double-check that the CDM was in a machine-readable format (it was). 

 

Like many providers, Sevenikar questions the value of posting standard charges, which bear little relationship to patients’ ultimate out-of-pocket costs. “What most people want to know is, ‘What is it going to cost me?’” she says. To help answer this question, Sharp uses a third-party tool to provide patients with out-of-pocket estimates for all services. The estimate tool is used in pre-service for scheduled patients and during the admission process for unscheduled patients. 

The organization has a high degree of confidence in its quotes for scheduled services, Sevenikar says, and ultimately hopes to guarantee out-of-pocket costs in instances when there is a high degree of accuracy based on the plan information and the patient care provided. The same tool is used at the medical-group level when a patient’s out-of-pocket responsibility exceeds the copay for the visit based on coverage terms.

Sharp also is launching an online tool that would allow patients to request an estimate via the website. After answering a series of questions about the requested service and their insurance coverage and physician, patients would receive an estimate via email or phone.

Training Staff to Connect on Costs

 

Leaders at Maricopa Integrated Health System (MIHS), a safety-net health system serving Phoenix, follow HFMA price transparency guidelines, which state that providers should be the principal source of price information for uninsured patients, says Nancy Kaminski (pictured at right), vice president of revenue cycle.

 

MIHS posts sliding fee schedules on its website for uninsured patients. And for the past two years, the organization’s patient assistance center (which handles scheduling), financial counselors, and registrars have used a tool that can provide an estimate of a patient’s financial liability for scheduled services. Each month, the patient access department provides 900 estimates for all services, including at its family health clinics, using the tool.

Prior to launching the tool, leaders at MIHS provided extensive training, which included role-playing, for financial counselors and registration staff. Scripts also help staff feel more confident offering estimates and requesting that patients pay a portion of their financial responsibility up front.

Additionally, MIHS will soon launch a “revenue cycle academy” with 25 different modules that were developed in-house. Staff will learn about every phase of the revenue cycle, from patient access to billing and collections. “If they understand the entire revenue cycle, they understand the importance of having accurate data and a well-informed consumer at the front end,” Kaminski says.

In addition to improving patient satisfaction and point-of-service collections, training staff to provide estimates can boost revenue. “Patients are more likely to pay if they are informed,” she says.

Lessons Learned

Experts offer the following suggestions to help make prices more transparent—and meaningful—to consumers.

Start slowly when providing estimates. Prior to going public with its cost estimator service, IU Health convened a small team of revenue cycle staff to crunch the estimates. They started with easier services, such as labs and radiology, and then tested the process with the organization’s own employee patient population. It took a year to make the estimates more comprehensive and another year to make the process more robust, Alvey says.

Don’t ignore the ED. Sevenikar says unscheduled services, such as those in the emergency department, often cause the most problems for patients who lack insurance or have high-deductible health plans. To minimize the sticker shock of unscheduled services, Sharp trains its staff to communicate payment expectations as soon as is reasonable after the medical screening. 

Get outside help.Gregory believes finance leaders should view the CMS mandate and increased scrutiny on charges as another reason to examine their chargemasters more critically than is typical during annual CDM reviews. “Even though the posting date has already passed us, there are still plenty of opportunities to get it right—to actually look at the pricing, compare it to your competitors’, and refine your chargemaster so that it correlates to your cost structure in a meaningful way,” he says.

Each year, MIHS engages an outside service to compare its CDM to its peers in Arizona and out of state—a process that has brought many of its prices down. In fact, its last overall price increase was just 0.03 percent, Kaminski says.

Getting Ahead of Future Transparency Initiatives

Although CMS has given hospitals some flexibility in how they make their charges transparent for now, the government could become more prescriptive. In the next 12 months, Gregory says, the government will likely offer additional price transparency guidance.

To stay ahead of any additional regulations, hospitals may want to explore how they can provide consumers with estimates of their out-of-pocket costs. Beyond helping to meet potential mandates, offering estimates is a best practice that hospitals should pursue as part of their focus on the total care of the patient, Alvey says.

“We can’t just take care of their health and not worry about what their financial situation is or could become,” she says.

Interviewed for this article: Jennifer Alvey, senior vice president and CFO, Indiana University Health, Indianapolis; David Gregory, principal and healthcare consulting practice leader, Baker Tilly Virchow Krause, LLP, New York City; Nancy Kaminski, vice president of revenue cycle, Maricopa Integrated Health System, Phoenix; Gerilynn Sevenikar, vice president of revenue cycle, Sharp HealthCare, San Diego.