Communicating the cost of care

Healthcare Financial Management, Oct, 2008 by Joni Williams

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"Guess what. I just told the Omaha World Herald that in a year, we'll have the coolest web tool for price transparency."

Scott Wooten, senior vice president, finance, and CFO for Alegent Health in Omaha, Neb., remembers the day his CEO came to him and said he'd just told a reporter that the health system would unveil a web-based price transparency tool within a year. At the time, the health system had not yet begun to develop such a tool.

"My jaw dropped," Wooten says.

It was January 2006, and although an increasing number of hospitals were beginning to act upon the demand for price transparency in health care, there were no examples of online cost calculators within the industry. Hospitals that had taken steps toward transparency did so by posting their list charges for sample procedures online and consumers wanted more. "It doesn't matter what the charges are; what consumers are interested in is how much they're going to pay," Wooten says.

Wooten and Tim Meier, CFO for Alegent Health's Bergan Mercy Medical Center and Midlands Hospital, decided to design a system that would produce an explanation of benefits (EOB) for consumers before they receive care or services. "We went about developing that process on the front end to estimate what the consumer was going to owe after insurance," Meier says. "It was very complex, very complicated, because every insurance company and every plan is different. We combined a web-based tool with an insurance verification tool in a way that had never been done before."

Alegent debuted its "My Cost" tool, which estimates the out-of-pocket cost consumers will pay for more than 500 procedures, in January 2007. Since then, the tool has completed more than 41,000 cost estimates for consumers. Nearly 80 percent of Alegent's payers partner with the health system to provide insurance verification and estimations of consumer benefits for the tool.

"The 'My Cost' tool has been a real win for our system, although we didn't do it for the ROI," Wooten says. "It was really part of our strategy to actively engage the consumers in our community, and to do that, we needed to provide consumers with the correct purchasing information. We decided it was our leadership responsibility--and part of our mission--to provide this tool."

At a time when consumers are shouldering a greater portion of the cost of their care, hospitals across the country are experimenting with ways to provide increased price transparency for consumers. The initiatives are as much mission-oriented as they are strategic: An increasing number of consumers are inquiring about the price of a healthcare service or procedure before deciding where they'll take their business for hip replacement, cardiac surgery, diagnostic imaging, and more.

Today's transparency initiatives take many forms. Some hospitals provide a list of charges for their most commonly performed procedures and services online. Some require patients to call the hospital billing department for a detailed analysis that would include estimates of out-of-pocket charges after insurance. There are also providers that supply out-of-pocket estimates upon registration, based on the information received from the consumer. A small number of providers offer this service online.

Communicating the cost of care makes good business sense for hospitals. It provides opportunities to connect patients who don't have insurance with financial assistance programs, when possible; reduces the number of calls to billing departments after bills have been sent out; enables financial representatives to establish payment arrangements with patients before care is delivered; and improves consumer satisfaction.

"Our industry is being severely criticized for discussing finances with patients before rendering nonemergent care," Terry Allison Rappuhn, an original sponsor of HFMA's PATIENT FRIENDLY BILLING[R] project and its project leader from 2002 to 2007, said in accepting an award for the project's substantial contributions to health care at the 2008 ANI: The Healthcare Finance Conference. "We know it is critical to a good patient experience that patients understand the financial aspect of their care as soon as possible." Doing so, she says, is an important part of enhancing the patient's healthcare experience.

How can hospitals provide the increased price transparency that consumers are looking for? Here, four hospitals share their strategies for communicating price information with consumers.

Catholic Health Initiatives (www.catholichealthinit.org)

Last year, Catholic Health Initiatives (CHI), Denver, took its first steps toward adopting technology that could answer a question that more and more consumers are beginning to ask: "How much can I expect to pay for my care after insurance?"

In spring 2007, CHI partnered with a vendor to pilot a software program that would tell consumers what they will pay out-of-pocket for a service or procedure before registration. Several of CHI's 77 hospitals, located in 20 states, participated in the pilot program from April through July 2007. Afterward, focus groups were held with consumers who participated in the pilot to identify ways to enhance the program before rolling it out across all CHI hospitals.