Consumer-Centric Focus on Billing Improves Patient Satisfaction
The world of healthcare has undergone a somewhat littlenoticed, but nevertheless profound change. In the past, while patients were the actual recipients of physician and hospital medical services, the real customers – or the ones who paid the bills – were the insurance companies and managed care plans.
All that is changing.With healthcare costs growing at unprecedented rates, employers and insurance plans are shifting more costs and responsibilities to patients. As the one who not only receives the care, but pays for it, today’s patient is the “new healthcare consumer.” And perhaps for the first time, hospitals and physicians are recognizing that the patient must be treated as the true customer.
Shifting Costs
The driving force behind the emergence of the patient as the new healthcare consumer is found in costs that continue to rise at a seemingly unstoppable pace. For example, in 2005 the average American consumed $6,280 in healthcare services – twice the average of any other industrialized nation. Employers absorbed much of that cost in the form of rising insurance premiums. As a result, the average annual premium for employer-sponsored family health coverage is expected to be $6,000 higher in 2006 than it was in 2003.
Until now, the patient was something of a bystander on the financial side of healthcare. Those with insurance coverage were often only concerned with minimal co-pays, or at worst, a small percentage of the bill. Those days are gone for many patients as consumer-directed health plans begin to channel an increasing amount of the cost from third-party payers to consumers. Even employers who have yet to adopt such plans are steadily increasing their employees’ share of insurance costs.
For uninformed patients, cost shifting is producing something akin to sticker shock. They are surprised not just by the cost of care, but by the sheer unpredictability of costs. Unlike other products or services they purchase, medical procedures vary widely from one provider to another. Trying to estimate in advance what a surgical procedure or hospital stay may cost can be difficult for even the most determined consumers.
Transitioning to a system where patients pay their own way is going to be challenging for both providers and consumers. The roadblocks to change are obvious, but not easy to remedy. Creating a financial relationship in healthcare is quite different than in the retail sector. There is little transparency, and providers are still unused to thinking of patients as primary payers. It is nearly impossible for patients to compare prices of medical services as they can, for example, for new cars. Clearly, the sick are at a disadvantage when it comes to choosing the most economical – as opposed to simply the most convenient – provider, even if such choice exists.
Consumer Demand and Industry Pressure
Patients are increasingly being cast in the role of consumers. As they begin to pay more, they are also beginning to demand the kind of transparency and accountability they have long enjoyed in the retail sector. Consequently, a consensus is emerging that consumers have the right to greater information about all aspects of their healthcare. This includes greater transparency in pricing, more data on quality of care and more and better tools to access and understand the complex streams of data contained in medical bills, insurance payments and medical records.
In response, hospitals are being pushed in this direction by the government and various industry groups. In August 2006, President Bush signed an executive order directing federal agencies that administer or sponsor federal health insurance programs to:
- Increase transparency in pricing by sharing with beneficiaries information about prices paid to healthcare providers for procedures;
- Increase transparency in quality by sharing with beneficiaries information on the quality of services provided by doctors, hospitals and other healthcare providers;
- Encourage adoption of health information technology (IT) standards through the use of improved health IT systems to facilitate the rapid exchange of health information; and
- Provide options that promote quality and efficiency in healthcare.
Also worth noting is The Patient Friendly Billing® project, a national, cross-industry initiative led by the Healthcare Financial Management Association to improve hospitals’ and physicians’ financial communications with patients. A number of institutions have used its guidelines to develop clearer, more concise and more correct financial communications.
Even some health plans such as Aetna, Cigna, Humana and United Healthcare are providing online pricing tools that enable members to see the rates that payers have negotiated with local physicians. Financial software maker Intuit, Inc., is planning to use its expertise in financial and tax preparation software to help consumers better manage and understand their healthcare. Over the next several years, a number of products are likely to appear that will give consumers a new level of insight into the healthcare revenue cycle.
Hospitals at Risk
Some hospitals have already joined the push toward disclosure by providing patients with an estimate of what they can expect their visits to cost.While still limited in scope, many of these efforts provide not just retail rates, but estimates of what a patient with a particular insurance coverage can expect to pay.
Hospitals definitely have the largest stake in learning to deal more effectively with the new healthcare consumer. Today inpatient hospital care accounts for nearly $800 billion. This staggering figure represents nearly one-third of every dollar spent on healthcare, making hospitalization the single largest component of spending in this sector of the economy, according to the U.S. Department of Health and Human Services’ Healthcare Cost and Utilization Project.
To succeed in this brave new world, providers must understand market-shaping forces and develop a willingness to address changing environments. For hospitals, the shift in responsibility from third-party payers to consumers can also make collection more difficult and expensive. To minimize this risk, hospitals must provide patients with tools that allow quick access to personal and financial healthcare data and help patients understand the cost of care.
Just as consumers quickly moved to the Internet to manage everything from their bank accounts to vacations, the innovators in healthcare are moving to powerful new tools to help patients manage and understand bills. These progressive institutions have learned that consumers also want to pay multiple accounts in a single transaction, with the option to pay by credit card or e-check.
This means developing online business offices that allow access to billing information on a 24/7 basis. These innovations can provide patients with the information they want – such as hospital and doctor billing all in one place – along with a single source of third-party payment activities. Some patients even have the ability to turn off paper statements to instead see regularly updated bills online.
Most of all, consumers want access to trusted content to help them appeal insurance denials, learn about new Medicare programs, review options for the uninsured and understand other issues of importance. They also want full-disclosure paper communications that include all open accounts – both hospital and physician – on a single document.
For patients and guarantors, online tools provide greater control and the ability to make sense of what has often been a confusing and confounding experience. For hospitals, the payoff includes fewer calls to billing offices, decreased mailing costs, increased (and often faster) payments and higher customer satisfaction rates.
Just as consumers must change both their thinking and actions when it comes to dealing with the healthcare system, hospitals must do so as well. This means moving away from the traditional model of treating patients as a secondary group whose bills are paid by someone else. The revenue cycle must include consumers in new ways. And for hospitals to be competitive, successful consumer relations will have to assume a role almost equal to that of clinical care quality.
Technology as an Enabler
Technology makes it easier for hospitals to achieve these goals, without a substantial and burdensome investment in either IT or human resources. In fact, this low cost of entry enables institutions to achieve a rapid return on investment while also giving patients a new level of customer support and satisfaction.
To help meet this demand, McKesson is helping providers simplify and enhance their financial interactions with patients. Applications such as the Patient Compass™ solution create a simplified billing experience for patients via a “virtual business office” featuring online self-service and consolidated, patientfriendly billing on a single statement. The patient billing area offers providers some of the greatest opportunities for consumer- focused improvement.
Early Innovators
A good example of a progressive focus on the new healthcare consumer can be found at Rockford Health System in Rockford, Ill. With net revenue of $364 million a year, Rockford provided $81 million in uncompensated care in fiscal year 2005. This category was up from $71 million in fiscal year 2004.
Rockford created a virtual business office using technology from McKesson and is providing its patients 24/7 access to statements through an “online business office.” Patients can access their accounts through the hospital’s website using a passwordprotected sign-on. A patient can view regularly updated billing information, make changes to personal information and communicate via email with the hospital’s billing office.
Since implementing the online patient statement, Rockford has enrolled more than 14 percent of all guarantors into the program. While the numbers are small compared with Rockford’s total patient population, many represent multiple accounts, and providing online access has yielded benefits for both patient and hospital.
The online business office encourages patients to make payments faster by offering the convenience of online credit card payments. Total payments through June of this year reached $562,860, with an average payment of $187.53.
Spectrum Health, one of the nation’s top integrated delivery systems, has also achieved considerable success. This network of seven hospitals in Western Michigan has net revenue of more than $921 million; roughly 95 percent comes from third-party payers including Medicare, Medicaid and insurance plans. About 5 percent of Spectrum’s revenues are self-pay.
The health system faced a number of challenges, including devising a patient-friendly statement and establishing a Webbased payment infrastructure. The virtual business office implementation went smoothly, and Spectrum was able to roll out combined statements that eliminate confusion and reduce duplicate mailings to patients.
Novant Health, one of North Carolina’s largest healthcare providers, is another organization that gave its patients the ability to turn on electronic notices and turn off paper billing statements. Since implementing the technology in 2003, Novant found that an average of 250 to 300 new patients per month opted to discontinue paper statements in exchange for online access to their accounts.
By using the Web, guarantors can see all their accounts in one place. Novant’s information portal has helped reduce the time customer service representatives spend talking to callers from five minutes to just 2.3 minutes. In addition, Novant has realized a $5 million increase in self-pay collections and reduced A/R days by 32 percent.
Munson Healthcare in Traverse City, Mich., has seen more than 20 percent of its guarantors use its virtual business office. Since deployment in September 2001,Web traffic increased more than 34 percent. In addition, Munson has cut 18 A/R days since the system was implemented.
Online access to patient bills helps consumers to not only better understand their bills, but also pay them faster.With its online business office rollout and an increased focus on patient education, Chicago’s Northwestern Memorial Hospital collected more than $600,000 in the first 60 days following deployment of its virtual business office in August 2005.
Hospitals who implement this system say the success of the online business office portal is also associated with extensive marketing. Patients are directed to the online tool through notices on paper statements as well as through brochures and information supplied by the patient financial services office.
The cost of entry for virtual business office technology is relatively low, particularly in light of the rapid return on investment achieved by these providers.With its great potential to increase collections and improve customer satisfaction, it’s a sound investment for nearly every institution.
Redefining Success
These are just a few examples of how hospitals around the country are tackling the challenge of providing greater consumer pricing transparency and easier access to healthcare billing information. These hospitals are redefining success by providing tools that enhance consumer-satisfaction levels and foster patients’ willingness to shoulder their share of costs. Hospitals that engage patients early can realize greater savings, increased collections, improved customer satisfaction – and reap the rewards of being a leader in the ever-changing world of healthcare.
