Phoenix hospi­tal of­fers price trans­parency and dis­counts for self-pay pa­tients

Modern Healthcare - - BEST PRACTICES - By Beth Kutscher

Ari­zona hos­pi­tals were flum­moxed when the state Leg­is­la­ture passed a law last year re­quir­ing hos­pi­tals, ef­fec­tive Jan. 1, 2014, to pub­lish the prices self­pay­ing pa­tients pay for the 50 most com­mon in­pa­tient and out­pa­tient ser­vices.

Early in the leg­isla­tive de­bate, the Ari­zona Hospi­tal As­so­ci­a­tion con­vened a price trans­parency task force of about 10 mem­ber hos­pi­tals. Af­ter much dis­cus­sion, only one hospi­tal—Mari­copa In­te­grated Health Sys­tem, a 578-bed pub­lic safety net hospi­tal in Phoenix— chose to start post­ing prices on its web­site be­fore the law went into ef­fect.

“Ev­ery­one else was re­luc­tant, and there were lots of ex­cuses,” said Mary Lee DeCoster, vice pres­i­dent of rev­enue cy­cle at Mari­copa. “Look­ing back a year and a half later, that seems so old school now.”

Many states have con­sid­ered or en­acted leg­is­la­tion re­quir­ing hos­pi­tals to pro­vide pa­tients with more in­for­ma­tion on the prices of com­mon pro­ce­dures. Last year, the CMS re­leased data on hospi­tal charges for the 100 most com­mon in­pa­tient and out­pa­tient ser­vices, re­veal­ing wide vari­a­tions even in the same mar­ket.

This month, a mul­ti­stake­holder price trans­parency task force or­ga­nized by the Health­care Fi­nan­cial Man­age­ment As­so­ci­a­tion rec­om­mended hos­pi­tals and health plans take the lead in pro­vid­ing price in­for­ma­tion. That would be a big change be­cause hos­pi­tals his­tor­i­cally have kept prices close to the vest.

Mari­copa has led the way. In March 2013, Mari­copa be­gan pub­lish­ing its prices on its web­site for the 10 most com­mon in­pa­tient and out­pa­tient elec­tive pro­ce­dures. About 35% of its pa­tients are self-pay, a dis­pro­por­tion­ately high share. The hospi­tal started giv­ing cost es­ti­mates to pa­tients who re­quested them. It also in­tro­duced a sin­gle, bun­dled price for groups of ser­vices, in­clud­ing ma­ter­nity care.

In ad­di­tion, Mari­copa Chief Fi­nan­cial Of­fi­cer Michael Ayres or­dered a 50% rate de­crease in charge­mas- ter prices, bring­ing rates just 1%-2% above the Medi­care fee sched­ule. That meant that self-pay pa­tients could po­ten­tially pay lower prices than be­fore since self-pay rates had been based on the charge­mas­ter. Low-in­come Mari­copa County res­i­dents also can qual­ify for additional fi­nan­cial aide.

Through its fi­nan­cial as­sis­tance pro­gram, Mari­copa gen­er­ates about 250 pa­tient cost es­ti­mates a month.

Since the trans­parency and self-pay dis­count pro­grams were rolled out, DeCoster said Mari­copa has seen a “mean­ing­ful re­duc­tion” in un­com­pen­sated care, though ex­act fig­ures are not avail­able be­fore its fi­nan­cial re­sults are re­ported. But she ac­knowl­edged that it’s dif­fi­cult to tease out how much of that is due to the new trans­parency and pric­ing pro­grams. The trans­parency ini­tia­tive co­in­cided with open en­roll­ment for the Oba­macare in­sur­ance ex­change, which may have re­duced un­com­pen­sated care. De­spite that un­cer­tainty, al­low­ing self-pay pa­tients to es­ti­mate their out-of-pocket costs has made Mari­copa more com­pet­i­tive with other hos­pi­tals in metro Phoenix, DeCoster said.

The hospi­tal found that its new dis­counts for self­pay pa­tients did not af­fect its to­tal col­lec­tions, mainly be­cause it al­ready had a high rate of bad pa­tient debt, DeCoster said. The ef­fect of re­duc­ing rates is ex­pected to be $30 mil­lion on gross rev­enue in fis­cal 2014, but only $5 mil­lion on net rev­enue. For the year ended June 30, 2013, Mari­copa re­ported $313.3 mil­lion in net pa­tient ser­vice rev­enue and $64.7 mil­lion in bad-debt ex­pense.

As a re­sult of its bun­dled price for ma­ter­nity care, Mari­copa of­fi­cials es­ti­mate the hospi­tal is de­liv­er­ing 50 to 60 more ba­bies a month.

Joseph Fifer, CEO of the HFMA, said Mari­copa’s pro­gram is timely be­cause con­sumers are be­gin­ning to pay at­ten­tion to prices, and that trend will grow as more people move into high-de­ductible health plans and be­come more cost­con­scious health­care shop­pers.

For providers, he ac­knowl­edged, the re­turn on in­vest­ment for start­ing a trans­parency pro­gram like Mari­copa’s is “ei­ther very, very low or nonex­is­tent. But that’s not the mo­ti­va­tion for this.” Some providers are start­ing to do it be­cause it’s the right thing to do, he said, while oth­ers are do­ing it be­cause they face po­lit­i­cal or mar­ket pres­sure.

DeCoster said the prob­lem now is con­sumers’ lack of fi­nan­cial lit­er­acy and un­der­stand­ing of med­i­cal eco­nom­ics. “I wel­come pric­ing trans­parency,” she said. “I’m thrilled the groundswell is start­ing to move in this di­rec­tion. Con­sumers need to need to grab hold of us and start ask­ing, ‘How much will this cost?’ ”

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