Could pricing transparency improve your market share?
Legislative Changes
The healthcare industry is undergoing dynamic tr...
physician is not a contracted physician with the payer, the patient may have considerably more
out-of-pocket expense by un...
such as interest free loans, financial assistance or Medicaid applications, if needed, to assist
them with their health ca...
o Renegotiating payer rates to reduce reimbursement on “commodity-type”
services (i.e. radiology, laboratory, high volume ...
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Price Transparency - Newsletter Article - Final Draft - 03312015

Published on: Mar 4, 2016

Transcripts - Price Transparency - Newsletter Article - Final Draft - 03312015

  • 1. Could pricing transparency improve your market share? Legislative Changes The healthcare industry is undergoing dynamic transformation on many fronts in this era of healthcare reform, with hospital pricing practices being no exception. Not only has there been a media focus on the need and demand for hospital pricing practices to be more reasonable and transparent, the federal agencies and state legislature have begun to take direct aim on this issue. In the spring of 2013, CMS issued data detailing charges and reimbursement for the top 100 inpatient and outpatient Medicare services by provider. Approximately a year later, CMS proposed guidelines requiring hospitals to publicly display charges for services or be able to produce such a list upon request. In January 2014, Massachusetts implemented a consumer price transparency law. Under the new law,providers must respond to patient queries about costs by providing patients either direct cost estimates or information about specific services, such as procedure codes, that patients can supply to their insurers in order to obtain a cost estimate. Other states have or are in the process of implementing similar legislation. The time for providers to implement price transparency measures is now. Types of Price Transparency Patients As the industry works through reform and we enter the new health economy, price transparency is taking on various meanings depending on your perspective. From the patient’s perspective, price transparency can be summed up with one question: “How much am I going to pay?” This involves the ability to obtain solid estimates of self-pay balances before care is rendered. This is typically a complicated process for providers since the patient’s balance after insurance is based on the provider’s negotiated rate as well as the patient’s current deductible status. Payers From the payers’ perspective, price transparency is being viewed as an opportunity which they are aggressively pursuing. Payers are offering websites to patients, calculating the after insurance balances at participating provider locations to assist them at identifying those with the lowest cost. These payer websites allow patients to search for network providers performing a specific procedure while considering their insurance benefits and providing estimates of the patient’s out-of-pocket expense based on the given provider’s negotiated rate. The patients are being offered price options for various types of facilities including physician offices, free standing or hospital locations based on the provider’s contracted fees. Some payers are incorporating quality ratings as well in an effort to drive patients to high quality, low cost providers. Additionally, payers are heavily considering changing reimbursement methodologies such as “bundled payments” for the facility and professional fee. These bundled arrangements reduce the patient’s financial exposure and increase patient satisfaction. Bundled payments are particularly important in cases where the payer is unable to contract with the provider for technical and professional services such as emergency room, radiology, etc. If the hospital based
  • 2. physician is not a contracted physician with the payer, the patient may have considerably more out-of-pocket expense by unknowingly seeking services at a participating facility and finding the physician services are provided by a non-contracted physician. This is an especially pressing issue in the emergency room as patients often have limited time, if any, to review plan participation of individual physicians given the urgent nature of the medical episode. Providers Providers also have complex issues to overcome regarding price transparency implementation. Providers contract with multiple payers with potentially hundreds of insurance plans having varying benefits structures and negotiated rates. To quickly meet price transparency requirements, some providers are listing the charge description master (CDM) on their provider website. The CDM, however, means little or nothing to patients relative to their quest to determine their eventual out-of-pocket spend. This is particularly true for patients with insurance compared to self-pay patients. Line item services may provide some information such as plain film x-rays, but these types of services are few and far between. Most patient bills represent a compilation of services such as technical, professional, supplies, treatment rooms, etc. explaining why estimates are difficult. Physicians providing direct patient care add additional complexity. Some physicians utilize higher cost resources (i.e. implants, time in the operating room) substantially increasing the variability of the billed charges. Additionally, providing the CDM to patients without the appropriate patient education may scare patients away from seeking care as they may assume the CDM price equates to their expected out-of- pocket expense. Other Organizations Finally, other types of organizations exist such as the “Healthcare Bluebooki ” where patients search for procedures based on their zip code and are able to determine an average service price. These websites are not inclusive of all hospital and physician services, but provide high volume and potentially high cost services such as radiology and laboratory along with commonsurgical procedures. Once the procedure search is complete, the average balance is shown and the patient is prompted to print a contract with the estimated procedure fee to take to their provider to negotiate a set fee. Next Steps Could these payer websites and other sources such as the Healthcare Bluebook be affecting your patient volume? If your facility is not offering patient price estimates, patients may be seeking information from other sources. It is becoming apparent that price transparency is becoming an integral part of the new health economy landscape. Further, providers that are proactively embracing pricing transparency and some believe they are improving market share and preserving their bottom line. Today, patients want to know their out-of-pocket costs to better manage their health savings and flexible spending accounts, as well as personal spending. More and more patients are concerned about their health care costs and want to know their expected out-of-pocket costs before they receive their healthcare services. Patients are also seeking providers offering payment options
  • 3. such as interest free loans, financial assistance or Medicaid applications, if needed, to assist them with their health care spending. Providers across the country are implementing comprehensive pre-processing service centers that include on line scheduling, pre-registration, order verification, insurance verification, pre-authorization and financial clearance, and some are stating that they are seeing a rise in patient volume as a result. What should your organization do to provide patients price transparency and solidify patient service volumes? Here are some considerations and actions your organizationshould consider when developing a price transparency strategy.  Determine whether your organization has developed a comprehensive pre-processing center for patient scheduling, insurance verification, authorization, patient estimation and financial clearance. If not, consider establishing such a comprehensive center with appropriate oversight and controls.  Evaluate the provider’s market share both historically and quarterly going forward for key pricing change opportunities.  Identify “commodity-type” outpatient services (i.e. radiology, laboratory, emergency room) that are easily estimated.  Perform an analysis of commonsurgical procedures by physician to document the average charge levels, including low-end and high-end parameters with articulated reasons for this variation.  Compare competitor rates using publically available data, including any free-standing and retail facilities; specifically focusing on ancillaries or services that are viewed as commodities. Research available public price estimation tools to gain a consumers perspective, review your facility’s quality reputation and position, and identify potential service areas where prices are considerably above average levels thereby risking loss in patient volume.  Based on the above findings, develop an action plan for improvement which may include: o Implementing a pre-processing department o Reviewing pre-processing metrics such as number of completed calls, number of abandoned calls, number of completed estimates, number of scheduled procedures post estimate, methods of financial assistance (i.e. payment plans, loans, charity care), o Adopting a formal price transparency program complete with a governance structure, policies and procedures, representation from key financial, clinical and operational leaders, etc., o Considering reducing negotiated rates or the charge description master for services that are at a high risk for patient loss in areas that are above the market to mitigate potential market share loss, o Considering negotiating bundled prices for hospital based physicians that are not contracted with the facility payers to reduce the opportunity for patients to choose participating providers,
  • 4. o Renegotiating payer rates to reduce reimbursement on “commodity-type” services (i.e. radiology, laboratory, high volume ambulatory surgeries), and subsequently increase prices on other services to stabilize payer reimbursement, o Implementing price estimation software, o Training staff to facilitate discussions with patients on point of service collections, utilizing a variety of payment options to gain patient confidence and streamline the procedure scheduling process, and o Implementing self-pay and prompt payment discounts in accordance with Federal and State regulations. As the need for price transparency increases through changes in the regulatory and competitive environment, it will be increasingly important to be an early adopter and implement customer friendly processes and tools to meet and exceed the patient’s expectations. Patients are increasing their knowledge of health care purchasing and will choose options that are quick, easy and at a price point they can afford. Be prepared for the change, and place your facility at the forefront of price transparency by developing operational processes and implementing price estimation tools to meet the patient’s expectations for the long-term! © 2015 PricewaterhouseCoopers LLP, a Delaware limited liability partnership. All rights reserved. PwC refers to the U.S. member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see for further details. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. i

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