Commercial risk will be a critical catalyst of progress – it’s complicated, but is it possible? We think so.


April 18, 2019

Zuckerberg San Francisco just overhauled its billing practices. Here's its new approach.

Daily Briefing

    Read Advisory Board's take: Why ED billing should be treated differently

    Zuckerberg San Francisco General Hospital (ZSFG) is overhauling its billing practices following pushback over a policy not to contract with private health insurers, the San Francisco Department of Public Health announced Tuesday.

    ZSFG's past billing practices raised a backlash

    ZSFG, a public hospital and the area's only top-tier trauma center, historically has not contracted with private insurance plans. Instead, the hospital billed insurance companies as an out-of-network provider "as a courtesy" to patients, the hospital forms stated. As a result, many patients wound up facing "balance bills" for amounts that their insurers decline to cover.

    ZSFG's billing practice came under fire in January when Vox profiled Nina Dang, a ZSFG ED patient who received a $20,243.71 bill after a bike accident that left her with a broken arm. After the story was published, ZSFG lowered Dang's bill to her insurer's $200 copayment.

    But Dang is far from the only insured patient to have faced a surprise bill from ZSFG. According to the San Francisco Chronicle, 300 patients last year faced unexpectedly high bills.  Approximately 6% of patients who are treated at the hospital are privately insured, according to a release from the mayor's office.

    The hospital in February announced that it would suspend balance billing for 90 days in order to determine a new approach to billing.

    New: The patient financial experience toolkit

    The new approach

    ZSFG and the health department on Tuesday unveiled the hospital's new billing approach, which the health department said will permanently suspends the hospital's balance billing  practices.

    Under the new policies, which were developed at the request of the mayor and the city supervisor, the hospital will charge all privately insured patients in-network provider rates. DPH in a release said it "will no longer bill ZSFG patients with private insurance any more than they would have paid out-of-pocket for the same care at in-network facilities, based on their insurance coverage."  DPH said it "will continue to seek full reimbursement from private insurance companies."

    In addition, DPH said it will limit what ZSFG patients could end up spending out-of-pocket based on their annual income. For example, out-of-pocket costs will range from $0 for patients with incomes up to 138% of the federal poverty level (FPL) to $4,800 for patients earning more than 1,000% of the FPL.

    In addition, DPH is expanding eligibility for financial assistance through the state's Charity Care program and increasing access to San Francisco's Sliding Scale program. .

    DPH said the changes will be implemented "in the coming month" and will apply to patients who currently have pending bills with ZSFG. DPH estimated the changes will affect a small proportion of patients, as 94% of ZSFG patients are uninsured or covered by public insurance. 

    ZSFG projects revenue loss due to change

    The billing changes are projected to reduce the hospital's annual revenue by $1.9 million to $2.2 million annually, the health department said in a statement. A representative for ZSFG said the hospital is "exploring several options" to make up for the loss in revenue, but did not expand on any strategies, Time reports.

    Susan Ehrlich, CEO of ZSFG, said she is pleased that the hospital is making changes to "align our hospital billing practices with our values, reflecting our true partnership with the community," adding that "it is critical that every community member feels welcome and cared for at ZSFG."

    Similarly, Grant Colfax, director of Health at ZSFG, said the hospital's "mission is to provide high quality health care and trauma services with compassion and respect." He added, "Although the vast majority of our patients do not have private insurance, every patient matters equally. We believe that the insurance industry should pay its fair share for the care patients deserve and we provide, and that neither patients, nor taxpayers should be made to pick up the slack" (Ducharme, Time, 4/16; Kliff, Vox, 4/16; San Francisco Department of Public Health, release, 4/16).

    Advisory Board's take

    Robin Brand, Senior Director, Revenue Cycle Advancement Center

    I'm glad to hear that ZSFG has reversed their policy of not accepting private insurance and actually gone in the exact opposite direction by treating all ED bills as in-network.

    It's critical to think about how the ED is different from other types of hospital care. The emergent nature of care provided in the ED means that it's almost completely immune from the forces of 'patient consumerism' that are supposed to encourage patients to be thoughtful consumers. For instance, if your child has an extremely high fever, your leg is broken, or you've gone into anaphylactic shock, you don't have the time to think about where care will be covered. Indeed, geography and EMS are far more likely to determine where you'll end up.

    “I'm glad we're starting to see policies that take into account the unique nature of ED emergent care.”

    Removing the financial fear of ED stays is absolutely doing what's right for the patient, and I'm glad that we are starting to see policies that take into account the unique nature of ED emergent care.

    As far as ZSFG's decision to limit patient financial obligations based on income, this isn't too different from what many hospitals are already doing with charity care policies that reduce bills based on "lifetime limits." But making sure that these policies work in practice is critical. Patients need to know what these reductions will be prior to care, they need to be connected to financial counseling, and they need to understand their options for paying what they do owe. This is based on what our research has revealed are the three most essential aspects ensuring a positive patient financial experience: providing a pre-service bill, pre-care payment options, and financial counseling.

    For ZSFG, these policies will clearly have a financial impact. This $1.9M to $2.2M predicted reduction in revenue, while not huge, will likely have an outsized impact where margins are particularly slim. It will be interesting to see if ZSFG will be able to maintain revenue neutrality with these initiatives, and to see how payers will react. Certainly, if payers feel that these contracted rates are somewhat arbitrary, they might feel they have more leverage in negotiations—a change that could further hurt revenue.

    To learn more about our research on the patient financial experience, and how several key elements can increase patients' satisfaction and willingness to pay, download our new patient financial experience toolkit.

    New: The patient financial experience toolkit


    As hospital margins remain narrow, health systems face enormous pressure to protect their revenue. At the same time, the rise of patient consumerism has pushed hospitals to offer a best-in-class patient experience. These goals can actually support each other: by offering an ideal patient financial experience, providers can increase a patient’s satisfaction, as well as a patient’s likelihood to pay.

    Access this toolkit to get 8 resources to help revenue cycle leaders implement the ideal patient financial experience.

    Download Now

    Have a Question?


    Ask our experts a question on any topic in health care by visiting our member portal, AskAdvisory.