FI­NANCE: A Texas hospi­tal low­ers its prices and raises the level of de­bate

Texas hospi­tal low­ers prices, raises level of de­bate

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Hos­pi­tals’ glacier-like move­ment to­ward join­ing the rest of the busi­ness world in ac­tu­ally telling cus­tomers how much they’ll have to pay for their ser­vices may have reached a mile­stone this past April in a small town in south­east Texas.

Cleve­land (Texas) Re­gional Med­i­cal Cen­ter, which is about 40 miles north of Hous­ton, took the un­usual step of an­nounc­ing in a news re­lease that it had re­duced costs for a large num­ber of its ser­vices by 15% and was pass­ing those sav­ings along to its self-pay pa­tients. The hospi­tal an­nounced it was cut­ting prices for the fol­low­ing di­vi­sions: car­diopul­monary, di­etary, emer­gency and trauma, in­ten­sive care, la­bor and de­liv­ery, med­i­cal and sur­gi­cal, ob­stet­rics, oper­at­ing room/ post anes­the­sia and res­pi­ra­tory. Fees as­so­ci­ated with med­i­cal sup­plies also were cut.

De­spite those changes, 55-bed Cleve­land Re­gional, like most hos­pi­tals, is still far from what would be called a price-trans­par­ent op­er­a­tion. Cleve­land Re­gional doesn’t have a price list it can give to pa­tients or of­fer that in­for­ma­tion on its web­site. But the mere act of ac­knowl­edg­ing their prices to the pub­lic and sharply re­duc­ing them as well are un­usual steps, ac­cord­ing to in­dus­try ex­ec­u­tives con­tacted for this story.

“I have never heard of any­one do­ing this,” say Les Stern, pres­i­dent of health­care mar­ket­ing con­sult­ing firm L. Stern and As­so­ci­ates, North­brook, Ill., in ref­er­ence to the hospi­tal’s pro­mo­tion of its price cuts. “Pric­ing just never re­ally makes it into the con­ver­sa­tion.”

Sim­i­larly, the depth of the cuts are con­sid­ered to be note­wor­thy. “Large scale ... de­creases, we haven’t re­ally seen it,” says Jamie Cleverley, prin­ci­pal with Cleverley & As­so­ci­ates, a Wor­thing­ton, Ohio-based hospi­tal fi­nan­cial con­sult­ing firm.

But Cleve­land Re­gional ex­ec­u­tives aren’t try­ing to change the world or turn the in­dus­try on its ear. “I don’t think any­thing we’re do­ing any­thing is rev­o­lu­tion­ary,” says Patrick Ay­ers, pres­i­dent of Cleve­land Re­gional’s for-profit par­ent, New Direc­tions Health Sys­tems. “Ev­ery time you turn on the TV you hear about some­one low­er­ing their prices,” he says in ref­er­ence to con­sumer goods and ser­vices other than health­care.

The goal was to help out its self-pay pa­tients and to per­haps col­lect a lit­tle more from those pa­tients, who as a group typ­i­cally don’t pay their hospi­tal bills in full, Ay­ers says. He says that the in­dus­try in gen­eral has a less-than-pos­i­tive at­ti­tude to­ward self-pay pa­tients, and though he un­der­stands why that’s the case, he dis­agrees with it.

Inside the in­dus­try, self-pay pa­tients are some­times deroga­to­rily re­ferred to as no-pay pa­tients, which is un­fair, he says. Self-pay pa­tients of­ten are handed a huge bill and they’re over­whelmed, Ay­ers says. “These are real peo­ple fac­ing health is­sues,” and the price cuts might help ease their burden while mak­ing it more likely they will pay a big­ger share of their bills, he says. “We low­ered the prices 15%. That is not go­ing to make a huge dif­fer­ence, but it’s a start.”

Ay­ers says the idea to cut prices came from the hospi­tal’s busi­ness staff and was an in­ter­nally fo­cused col­lab­o­ra­tive ef­fort. Nonethe­less, the change makes Cleve­land Re­gional a part of two broader trends: the move to pro­vide more dis­clo­sure about pa­tients’ out-of-pocket costs, and ef­forts to give self-pay, unin­sured pa­tients a bet­ter deal than they have re­ceived his­tor­i­cally.

The height­ened trans­parency from providers is com­ing in part be­cause of the growth of high­d­e­ductible health plans in which pa­tients pay most, if not all, of the up­front costs of care un­til they meet a sub­stan­tial de­ductible. That growth is pro­duc­ing in­creased price sen­si­tiv­ity for cer­tain types of care, more so for non-acute-care ser­vices, says Dr. An­drew Ziskind, manag­ing di­rec­tor with Huron Con­sult­ing Group. Di­ag­nos­tic imag­ing is an area where price sen­si­tiv­ity is be­com­ing more prom­i­nent, but for acute in­pa­tient care it’s still rare, Ziskind says.

That doesn’t mean con­sumers don’t want the in­for­ma­tion, based on a poll con­ducted this year by what is now Tru­ven Health An­a­lyt­ics and Na­tional Pub­lic Ra­dio. The poll of about 3,000 Amer­i­cans, con­ducted in the first two weeks of April, showed that 16.2% of re­spon­dents or re­spon­dent house­hold mem­bers sought out pric­ing in­for­ma­tion be­fore re­ceiv­ing health­care ser­vices, up from 10.9% in a sim­i­lar poll con­ducted in 2010.

“It ap­pears as if there is a re­mark­able uptick in the role that price is play­ing in the de­ci­sion-mak­ing process,” says Dr. Ray­mond Fabius, chief med­i­cal of­fi­cer for Tru­ven Health. Fabius says there are mul­ti­ple driv­ers of this trend, in­clud­ing the greater avail­abil­ity of pric­ing in­for­ma­tion on the In­ter­net and from health in­sur­ers.

The steady rise in con­sumer prices—espe-

cially for health­care ser­vices, which typ­i­cally out­pace gen­eral in­fla­tion—is giv­ing pa­tients plenty of rea­son to be­come more price-con­scious. Con­sumer health­care prices, as mea­sured by the Con­sumer Price In­dex, are 3.3% higher in the first seven months of this year.

For elec­tive care, it does make sense to shop around, Fabius says. “We be­lieve that trans­parency is one of the so­lu­tions to our health­care cri­sis,” he says.

Hos­pi­tals, mean­while, are work­ing hard to cut ex­penses in an­tic­i­pa­tion of slower growth in re­im­burse­ment, tied in part to the el­e­ments of the Pa­tient Pro­tec­tion and Af­ford­able Care Act, but also be­cause of the in­dus­try shift to­ward pro­vid­ing value-based care. And there are ar­eas in a hospi­tal’s op­er­a­tions that of­ten cre­ate sig­nif­i­cant op­por­tu­ni­ties to cut costs, says Will King, se­nior ad­viser for HFS Con­sul­tants. Hos­pi­tals of­ten can save money through more ef­fi­cient staffing prac­tices, and some pay too lit­tle at­ten­tion to in­surer con­tract ne­go­ti­a­tions, he says. Nev­er­the­less, “a 15% re­duc­tion is a lot,” King says.

Ay­ers says it was a lot of lit­tle things that Cleve­land Re­gional did to achieve the sav­ings, such as in­sti­tute a telemedicine pro­gram and con­vert to all-pri­vate rooms. Ay­ers says that pa­tients had been turned off by Cleve­land Re­gional’s room con­fig­u­ra­tion in that many had two beds even though those beds were rarely used. They are re­as­sured by the knowl­edge that they won’t be shar­ing the room with an­other pa­tient, he says.

Ay­ers notes that the hospi­tal was not try­ing to un­der­cut the com­pe­ti­tion, be­cause there are no other hos­pi­tals within a 30-mile ra­dius, he says.

When New Direc­tions pur­chased the hospi­tal from for-profit Community Health Sys­tems for $900,000 in Oc­to­ber 2011, it was los­ing about $11 mil­lion a year. Now the hospi­tal is about break­ing even, Ay­ers says, and that’s with­out hav­ing to lay off staff, he adds.

Pa­tients at Cleve­land Re­gional are likely to ap­pre­ci­ate the hospi­tal pass­ing along the sav­ings, says Chad Mul­vany, tech­ni­cal di­rec­tor of the Health­care Fi­nan­cial Man­age­ment As­so­ci­a­tion’s health­care fi­nan­cial prac­tices team for reg­u­la­tory and re­im­burse­ment is­sues. There likely will be lit­tle ben­e­fit in its re­port­ing of community ben­e­fits to the In­ter­nal Rev­enue ser­vice, though the price-cut­ting can en­gen­der a lot of good­will in the community, he says.

“I sus­pect we’re go­ing to see a lot more of it,” Mul­vany says.

The HFMA has been a backer of im­proved pa­tient billing through its Pa­tient-Friendly Billing project, and many hos­pi­tals have ad­justed their rates for the unin­sured and self­pay pa­tients to lev­els that are more com­pa­ra­ble to what Medi­care or com­mer­cial in­sur­ers pay.

Cleve­land Re­gional touted its price cut in a news re­lease but that was the ex­tent of its pro­mo­tions, ac­cord­ing to Ay­ers. While the an­nounce­ment didn’t get a lot of me­dia at­ten­tion, Ay­ers says there was a pos­i­tive re­sponse from the community.

Mar­ket­ing ex­pert Stern says that ac­tu­ally mar­ket­ing the price cut to con­sumers would have been a bad idea, be­cause rais­ing the is­sue of pric­ing threat­ens to turn health­care into a com­mod­ity. Hos­pi­tals are bet­ter off pro­mot­ing their ser­vices and qual­ity, he says.

But Ay­ers says he dis­agrees with the sug­ges­tion that health­care can­not be con­sid­ered a com­mod­ity.

“This is about try­ing to make life a lit­tle eas­ier” for unin­sured pa­tients, he says. “Peo­ple with health in­sur­ance have the lux­ury of not think­ing of health­care as a com­mod­ity.”

Cleve­land (Texas) Re­gional has cut prices for self-pay pa­tients by 15%. “That is not go­ing to make a huge dif­fer­ence, but it’s a start,” says Patrick Ay­ers, pres­i­dent of the hospi­tal’s par­ent com­pany.

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