May 15, 2018

How a price transparency program helped this health system recoup financial losses

Daily Briefing

    Policymakers and public health experts for years have touted the virtues of self-pay price transparency tools, and one early adopter—Arizona-based Maricopa Integrated Health System (MIHS)—suggests hospitals can recoup financial losses by publicly posting self-pay prices, Jack O'Brien reports for HealthLeaders Media.

    Patients are shopping for prices—are you making it easy for them?

    MIHS sees financial struggles as safety-net provider

    MIHS is a 578-bed safety-net provider that "faced significant financial challenges through the early 2000s," according to HealthLeaders Media. MIHS officials said, as a safety-net provider, the health system treated a substantial number of the area's Medicaid population, as well as the area's population of undocumented immigrants, who accounted for 80% of MIHS' self-pay patients between late 2005 and early 2006, HealthLeaders Media reports.

    MIHS implements self-pay price transparency program

    To address the health system's financial challenges, MIHS in 2012 formed a nine-month internal task force that developed, and in 2013 implemented, a self-pay price transparency program, becoming the first health system in the state to do so. Arizona's Legislature the following year passed a bill that requires health care providers in the state to publish online self-pay prices for their 25 most common services or to give price estimates when requested, HealthLeaders Media reports.

    Under MIHS' program, called Copa Care, the health system publishes on its website its self-pay prices for its "10 most frequently requested inpatient and outpatient procedures," HealthLeaders Media reports.

    MIHS under the program displays and charges patients with incomes between 0% and 200% of the federal poverty level (FPL) different prices for certain care, based on a sliding scale.

    Nancy Kaminski, VP of revenue cycle at MIHS, explained that the scale consists of four categories for dental and medical services and five categories for hospital services. She said the categories align with federally qualified health center requirements, as well as professional fees for providers. According to Kaminski, patients with incomes between 0% and 138% of the FPL are charged rates equal to 25% of Medicare rates for outpatient ancillary procedures, and individuals with incomes between 139% to 200% FPL are charged rates equal to 50% of Medicare rates for such services.

    According to HealthLeaders Media, for some patients, that works out to copayments as low as a $5 for some services. MIHS also offers bundled payment options that give discounts to patients who pay for services in advance, HealthLeaders Media reports.

    In most cases, patients are required to pay 50% of their costs prior to receiving the services, Kaminski said. MIHS can make exceptions for certain cases if they are approved both by Kaminski and MIHS' CMO. Kaminski said patients with urgent medical conditions are able to pay in full after care is provided, but in most instances are required to pay deposits up front.

    Kaminski said educating employees about the program was key to publishing available discounts and providing patients with price estimates. In addition, she said knowledgeable financial counselors and registrars are needed to successfully implement a sliding scale because they must be able to understand the payment model and explain it to patients before they receive care. "We have a pretty robust financial counseling program up front where we work with the patient, and the sliding scale is actually the last resort," Kaminski explained, adding, "So if we can't get them enrolled in Medicaid or they don't qualify for programs like disability, then we'll work with them to get them in an appropriate category on the sliding scale."

    Program tied to fewer self-pay patients

    According to HealthLeaders Media, MIHS' main goal "was to reduce the large self-pay population that MIHS has serviced for years, which coupled with the Medicaid population, has constituted over 60% [of] patients"—and the initiative appears to be paying off.

    For instance, HealthLeaders Media reports that although the proportion of Maricopa County residents who have incomes lower than 200% of FPL has remained stable over the past 10 years, the share of self-pay visits to MIHS has decreased from 41% in fiscal year (FY) 2014 to 22% in FY 2018. Meanwhile, MIHS' operating revenue increased by 28.5% from FY 2011 to FY 2016, reaching a total of more than $722 million. Over that time, MIHS' net patient revenue increased by 14.7%, and its bad debt expenses decreased by 24.9%, according to HealthLeaders Media.

    Suzanne Delbanco, executive director of Catalyst for Payment Reform, in Health Affairs in 2014 wrote that program represents "one of the core building blocks of payment reform and a higher-value health care system." She wrote that the program helps the health system inform consumers of their financial responsibilities, contain costs, and reduce price variation (O'Brien, HealthLeaders Media, 5/7).

    Patients are shopping for prices—are you making it easy for them?

    Demand for price information is increasing, but many providers struggle to generate meaningful estimates.

    Every provider's price transparency strategy will depend on internal capabilities, brand strategy, and their price point relative to the market. Based on Advisory Board research, we compiled best practices we've seen when it comes to implementing price transparency.

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