Informing patients up front about 'out of pocket' costs aids POS collections

Mayo tool gives fast results for contracted, self-pay accounts

A new system for calculating patients' financial responsibility for care at the Mayo Clinic in Jacksonville, FL, is part of an organization-wide review of the revenue cycle, with an eye on gaining efficiencies while enhancing customer service, says Kelly White, MBA, section manager, patient financial services.

"There's a direct correlation between increasing service to patients and being able to tell patients [before treatment] what they will owe — so you don't hear, 'You never told me…' on the back end," she notes. "We want to do this for all patients, prior to service. Currently our options are face-to-face or over the phone, but in the future it could be via the web on a patient portal."

For the past two years, White says, the Mayo Clinic has been looking at business process opportunities at its three locations — in Scottsdale, AZ; Rochester, MN; and Jacksonville — in an effort to "bring the three organizations together and have them learn from each other."

The revenue cycle is one of several areas — others include human resources and materials management — being reviewed, White adds, and her responsibility has been to oversee the patient access component.

One of the discoveries has been that informing customers upfront of their out-of-pocket costs is not only integral to providing the best service, White points out, but is crucial in view of the attention given to price transparency and the handling of self-pay and charity care patients.

While the Scottsdale and Rochester facilities had been using their own homegrown products to estimate the cost of services for self-pay patients, she says, the process involved was laborious and time-consuming.

"They had put together, based on historical activity, the cost of, for example, a total hip [replacement]," White explains. "They had to look up codes and based on those, go in and determine fees and then store them electronically, so the next time [the price was needed] they could go in and check it."

The downside to the process was that since fees change continually, depending on the market and the product, it was "a maintenance nightmare," she says. "They were always updating fees, because the surgeons would start using different techniques or the surgical times would change, so keeping an accurate package [fee] was difficult."

Also, the homegrown products didn't have the capability of having that estimate "hit against our contract" with a particular insurance company to determine an out-of-pocket percentage based on the contractual rate, White notes. "The homegrown systems were for self-pay patients, but we [also] wanted to be able to [inform] our contracted patients."

With that goal in mind, the clinic selected a vended product and began the implementation process. Because hospital and physician operations are integrated at the Mayo Clinic, that process was more challenging than it otherwise would have been, she says. "The coding is different and the calculation of the final estimate is different."

While the facility component has been operational at the Jacksonville location since August 2005, the professional piece was expected to be in place by July 2006, she adds. "We're slated to roll out to Scottsdale by year-end and to Rochester sometime in 2007."

The results have been gratifying and dramatic, White says. "We have recognized a significant reduction in the amount of time it takes to complete an estimate. What used to take 35 to 40 minutes now takes an employee five to 10 minutes.

"We are able to offer additional service because we are freeing up that time," she notes. "Some of that is spent providing additional financial counseling services."

Before, White adds, staff would look up the code for the pertinent procedure, and then get the fee associated with that code from the hospital's chargemaster or from historical information.

Contracted patients would be given the code and told that they must contact their insurance company to get the out-of-pocket amount, whether copay, deductible, or co-insurance. Now, with the new system, White points out, "we can create the estimate, hit against the contract, and come back and tell the patient much more accurately [what is owed]. It takes those patients out of being in the middle of us and the insurance company."

However, if the patient is insured but not contracted, she explains, "the person is still in the middle. We give the estimate, and the patient goes back [to the outside insurance company] and says, 'I'm having a total hip [replacement]. Here is the code. What is your reimbursement rate?'"

With the time gained through use of the new system, however, staff are able to provide those customers with a higher level of service, White says, often assisting them in communicating with the insurance company.

There is improvement in the accuracy of the estimate, she adds, because it is based on historical claims data that take into account even the individual surgeon and the time he or she takes to do a procedure.

"We can pull the historical claims and take the median of those claims and that is [the estimate] we give," White notes. "We give patients an estimated price range, and they are much happier if we come in below. If we come in above, that's a big dissatisfier."

At present, the clinic is using the new system primarily for self-pay patients, she says. "It is giving a good picture of what they will owe, and we do expect payment upfront.

"We are starting to roll it out with contracted patients, with a high expectancy that out-of-pocket estimates will be very accurate," White adds. "The goal is that based on that, we will be able to collect [upfront] the amount owed by the patient."

Having the accurate and timely pricing data the system provides is crucial as patients incurring greater and greater out-of-pocket costs start to comparison-shop for health care, she suggests. "Having tools to make that information easily available is imperative.

"Before, it was such a labor-intensive, time-consuming process to create an estimate — especially when facility and surgeon are combined — that we haven't done it very proactively," White adds. "This gives us the flexibility to more readily provide that information."

'Advance EOB' touted

As part of a plan to move collections at its six hospitals to the point of service or before, Cincinnati-based Health Alliance is working toward the widespread use of what revenue cycle operations executive Patrick McDermott, MBA, has dubbed the "Advance Explanation of Benefits."

To achieve that end, his organization also sought a timely and accurate method for telling patients what they owe before a service is performed.

"Typically, what you get from an insurance company is an EOB, an 'Explanation of Benefits,' but it comes at a time when it is the least useful to the patient," McDermott points out. "Sixty or 90 days after an inpatient stay, patients are not really interested in financial information anymore. They've already received their CAT scan or expensive medical implant, and other bills are at the top of the queue.

"So why don't we move toward the 'Advance EOB?'" he suggests. "Tell the patients what their benefit situation is, how much they owe, and try to set up a payment plan prior to or at the point of service."

The proposal takes "a rotten idea" — the insurance company EOB — and "turns it on its head," McDermott continues. "You can't read them, can't understand them, but what if you were to get that [information] as you were registering for service, and had the opportunity to ask some questions?

"You could call the insurance company and ask, 'Why are you paying so little, why is the copay so high?' You'd be a lot more interested prior to service."

Calculating the cost

To meet the technological challenge of accurately estimating the patient's bill and knowing what the insurance company will pay, McDermott says, Health Alliance is working with Innovative Managed Care Systems (IMACS), a Dallas-based contract management firm.

Its web-based CarePricer technology uses the hospital's chargemaster, managed care contracts, and claims history to calculate the expected payment from the insurance company.

In 2005, McDermott notes, Health Alliance implemented a point-of-service collections program in the emergency departments (EDs) of all six hospitals. "We started there because ED copays are well-defined on the insurance card. We received little to no [negative] customer feedback, because customers are accustomed to paying copays at the physician's office, but they do want to know if it is exact.

"If they're confident the figure is accurate, they'll pay," he adds.

In late 2005, the health system started talking to IMACS about the ability to compute co-insurance for inpatient and outpatient stays when "the card doesn't say how much you owe," McDermott says.

What makes the IMACS system different from other tools that address out-of-pocket liability, says Julie Waddell, CarePricer product owner, is that "we take providers' historical claim data, all the charges they bill to all kinds of payers, all the UB92 data and do an in-depth analysis in order to create 'service packages.'

"So we take the CPT code or description or the DRG [diagnosis-related group] or chief complaint and look at the population of claims associated with it — from the perspective of physician, age of patient, etc. — and create a package of services," Waddell adds. "Then we apply the terms of the contract."

The product was introduced in 2004 at the request of a provider client that needed to provide uninsured patients with an estimate based on a contract with the government, she notes. From there, Waddell says, the company migrated in 2005 to an all-payer version.

About 80 health care facilities are using the CarePricer at present, she says, with a portion of those employing just the uninsured version.

Health Alliance, which was one of the first two health care providers to pilot the version for insured patients, began inpatient preservice collections at its facilities in January, notes McDermott. "Because CarePricer is an Internet-based tool, we were able to grant access to the admitting departments at all six hospitals."

The results have been very positive, he says, with increases in preservice collections in January, February, and March.

"We have a lot of kinks to work out in terms of solidifying policies and scripts and measurements," McDermott says, "and we're working closely with CarePricer to develop some measurement and reporting tools."

[Editor's note: Kelly White can be reached at (904) 953-2479 or by e-mail at Julie Waddell can be reached at (972) 755-6347 or by e-mail at Look for more information on the implementation of inpatient preservice collections in Health Alliance admitting departments in the next issue of Hospital Access Management.]