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By Ken Carr

Earlier this week, Monica E. Oss explored the increase in consumer out-of-pocket (OOP) spending – and the implications for health plans and provider organizations (see The Challenges Of Rising Consumer Spending On Health Care). To give you a sense of the situation, OOP spending reached $329.8 billion, or 10.9% of the total $3 trillion in health spending in 2014 (see U.S. Health Spending Hits $3.03 Trillion In 2014, 5.3% Over 2013).

The magnitude of this increase in consumer OOP spending requires managers of provider organizations to develop new strategies for revenue cycle management. My colleague Jamie Stewart, Chief Administrative Officer, Grafton Integrated Health Network and OPEN MINDS Advisory Board member, talked about some of the new consumer payment policies that he has seen:

Jamie Stewart

At a recent Healthcare Financial Management Association conference, almost all of the discussion was focused on how health care reform and health insurance marketplace plans are changing the revenue cycle. Many hospitals are asking for payment prior to service, and if you walk into an emergency room as a consumer, you will be asked for insurance and a credit card on the front end of that visit (unless, of course, it’s a true emergent case, in which case your next of kin are asked to provide the information). Many hospitals are also providing some form of discount for immediate payment. The “front end” intake staff are now almost universally seen as an arm of the revenue cycle in a hospital setting. This has truly changed the roles of support and billing staff in a health care environment.

What does this look like in practice? Consider the new approach at INTEGRIS Health, a non-profit health care system with eight hospitals in Oklahoma. First, the management team noted that consumers with high-deductible health plans were “price shoppers” – which spoke to a need to develop “reasonable” service costs – and market those costs directly to consumers. Responding to that, INTEGRIS offers steeply discounted pricing for consumers with high deductible plans who pay in full at the time of scheduling. They require consumers who choose their “cash up-front” prices to sign an agreement not to file the claim with their insurer and to pay the charges when the service is scheduled (see Offering Up-Front Cash-Pay Prices).

We took a look at the pricing information on their web site – very interesting. They have an entire pricing section of their web site – Learn About Pricing at INTEGRIS – with a consumer resource on pricing, Understanding Healthcare Prices: A Consumer Guide. And, there is a tab for “special pricing for cash payment” (see INTEGRIS Pricing: Cash Pay) and a “consumer priceline” for quotes on services (see Consumer Priceline: Get a Quote).

This is an interesting approach to the quandary that rising deductibles and copayments are creating for consumers and provider organizations. When we consider these new billing and collections strategies, I think there are three key takeaways for provider organization executives:

  1. Know your market – As part of strategy development, provider organization executives need to know what their competitors are charging, standard payer reimbursement rates, and consumer market segmentation with regard to value (price, service attributes, etc.).
  2. Know and manage your costs – Organizations need to understand their fixed and variable costs and how their costs relate to the realities of payer reimbursement rates and what consumers are willing to pay out-of-pocket. To keep costs low, managers need to negotiate with vendors to target affordable costs and develop strategies to enhance productivity. There are also new costs in this market shift, including costs of marketing and costs for revenue cycle management – billing, collections, and bad debt costs are on the rise. But, while the cost of revenue cycle management has increased in this market overall, the costs of this activity can be eliminated from a cash-up-front price, making the service more affordable for the consumer who pays at the time of scheduling.
  3. Develop a winning pricing strategy and communicate it to the market – Developing new reimbursement strategies for health plans and new pricing models for consumers are key to staying competitive. Those strategies, however, are unlikely to be successful if they are not communicated to consumers who need to know that your organization is an option for them in the market, and are able to price shop your services with other options in the market.

Revenue cycle management will be an increasingly important and increasingly complex issue for provider organizations. For more on this topic, check out these resources from the OPEN MINDS Industry Library:

  1. A Revenue Cycle Management Primer
  2. Getting Paid For What You Do
  3. Revenue Cycle Management: Improving Collections With Analytics
  4. How To Succeed With FFS: Budgeting, Billing & Revenue Cycle Management
  5. Getting Paid For What You Do: A Look Into Developing A Revenue Cycle Management Process
  6. More Cash, More Consistently: Reducing the Claim Life Cycle
  7. Tips for Improving Collections
  8. The Collections Conundrum

For even more, be sure to join Jamie when he co-presents, “Need Capital? A Non-Profit’s Guide To Financing New Services”, at The 2016 OPEN MINDS Strategy & Innovation Institute, with Amy Gallagher, Psy.D., Vice President, Whole Health, LLC, a subsidiary of Mind Springs Health, Inc.; and Robert Q. Kreider, President & CEO, Devereux.

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