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Patient access departments are revamping cost estimate processes due to patients’ growing demand for cost transparency. Collections increased 19% with price estimate letters at Novant Health. Bad debt is expected to decrease by 25% with price estimator software at Mary Rutan Hospital.
Collections increased 19%, which was an additional $3.6 million, in 2014 compared to the previous year, and payment plans increased by 27%, which was an additional $2.8 million in revenue, after patient access leaders at Novant Health in Winston-Salem, NC, began giving price estimate letters to surgical patients prior to service.
“With estimates, we are often able to set up the self-pay patient on a payment plan prior to service, as well as set up the plan to kick off after insurance pays for our insured patients,” reports Craig Pergrem, MBA, senior director of revenue cycle, pre-service, financial counseling, and onsite access.
Patient access areas at Mary Rutan Hospital in Bellefontaine, OH, expect to move up to 25% of current bad debt to charity after implementing price estimator software. “There may be additional reduction, not just movement, of bad debt, as well,” says David Kelly, director of revenue cycle.
Patient access departments that provide patients with good estimates give the hospital a distinct competitive advantage in the marketplace, according to Steve Schaefer, vice president of finance at Seattle-based Virginia Mason Health System. “The hospital that can deliver around accuracy in out-of-pocket costs is going to have a leg up,” he says. “The patient is quickly becoming a consumer. As we all know, whenever we go shopping, we always look at our costs.”
Increasing the accuracy of estimates for out-of-pocket costs is a top priority for Virginia Mason’s patient access leaders.
“In the past, it wasn’t a big deal because you just paid a copay. There was really no reason to be transparent,” says Schaefer. “We are in a very tumultuous time, going from minimal patient costs to very transparent.”
Patient access leaders nationwide are responding to a growing demand to inform patients of costs on the front end. “We in healthcare need to educate and set expectations, so that patients can make healthcare decisions with their eyes wide open,” says Schaefer. (See related stories in this issue on Virginia Mason’s Patient Cost Estimator service and how incorrect CPT codes result in inaccurate estimates.)
The trend is largely driven by patients’ higher out-of-pocket costs. “We are moving into consumerism,” says Schaefer. “Patients are looking at cost, quality, and service as the three pillars that guide their purchasing decisions.”
Schaefer points to recent legislative debates surrounding price transparency in healthcare. “Invariably, somebody pounds the table and says ‘I can go to Starbucks and find out what a cup of coffee costs. How come healthcare can’t do the same thing?’” he says.
There is no mystery about what goods or services cost in other industries. “When we purchase something in our free enterprise system, we have a one-to-one relationship between price and cost. If it’s $1.50 for a soda at a vending machine, we know as a consumer the cost will be $1.50,” says Schaefer.
Patients are unprepared when healthcare costs turn out to be far more complex than in the retail world. “In the old days, every once in a while you got a patient with 80/20 coinsurance who unknowingly went out of network and got shocked by a big out-of-pocket expense,” says Schaefer. This expense typically was discovered only after the patient received a bill. Today, such unexpected high out-of-pocket costs are commonplace.
“Where else, other than healthcare, would that occur?” asks Schaefer. “It just doesn’t happen.”
At Mary Rutan Hospital, cost estimates are given only when patients call and request them.
“The calls are usually routed to the operational departments themselves. This yields only partial estimates and a lack of consistent methodology,” says Kelly.
The rehabilitation team estimates the patient’s total out-of-pocket costs, for example, whereas the cardiology department quotes gross charges. “At present, methods vary between departments. That yields wildly varying estimates,” says Kelly.
Surgery estimates often are given by one team, while other procedures are given by a different team. “Currently, our organization has a very disparate, inconsistent process for giving estimates,” says Kelly. “We’re consolidating the process to one team, so all estimates come from the same source.” The department is making these changes:
“There will be large amounts of training necessary for all three methodologies,” says Kelly.
When Mary Rutan’s financial counselors visit inpatients, they will take the opportunity to explain how the final cost ended up differing from what originally was projected and review the updated estimate.
“We’re drafting some of that scripting now,” says Kelly. “That verbiage will be printed on every single estimate we hand to a patient.”
This new process doesn’t prevent the unexpected higher costs from occurring in the first place, however.
“That needs to occur at the leadership level,” says Kelly. All involved areas need a better understanding of how slight changes in procedures can result in dramatic cost increases for patients. “There needs to be outreach across silos, from patient access leadership to operational leadership to case management leadership,” urges Kelly.
Novant Health’s price estimate letter states, “This is an estimate for services that we have at this time,” and patient access staff let patients know that the estimate is not an exact science.
“We also record all our calls with our patients and can use that to let them know how often we have told them it is an estimate,” says Pergrem. The recordings are used if a patient claims the patient access representative never told them it was an estimate or was unsympathetic to the patient’s financial needs. (For more information on this topic, see “Were access staff really as rude as caller claims? Recorded calls will give you an answer,” Hospital Access Management, March 2015.)
“It keeps the representatives on their toes and also protects them from anyone accusing them of something that didn’t happen,” says Pergrem. “It eliminates the ‘he said/she said’ process completely.”