Patient-Friendly Billing - Brief Article

Healthcare Financial Management, August, 2000 by Richard L. Clarke

When I returned from HFMA's very successful 2000 Annual National Institute (ANI) in Orlando, I noted another editorial from Clark Bell, editor of Modern Healthcare, related to hospital billing. Bell's piece, titled "A simple wish" (Modern Healthcare, June 26, 2000) recounted his recent experience as a surgery patient and the resulting bill. As he noted in his editorial, his simple wish is for a "...hospital bill that is understandable."

Dick Davidson, president and CEO of the American Hospital Association agrees. At this year's ANI, he noted the problems inherent in the current billing process, and confirmed that this issue is a major public relations problem for hospitals.

Patient billing is confusing, and patients complain that the billing statements they receive are unclear. They often do not understand the charges, what their insurance should pay, what they owe, and why they owe it. Research suggests billing is the public's main complaint against hospitals. "The medical bill continues to be for the public a symbol of the confusion, mystery and the perception of high costs and overcharging," was the finding of the 1998 "Reality [surd] II" study performed for the American Hospital Association.

Patient billing is complex and costly A three-day stay can generate a billing statement with 10 to 15 pages of detailed charges. The process of accumulating these charges is a confusing meld of automatic and manual input spliced to electronic and paper hand-offs. Hospital charge masters often contain more than 15,000 chargeable items, each of which must be coded and maintained on a routine basis. It is estimated that the complexity of the billing system adds billions of dollars in cost to provider organizations each year.

Patient billing often is wrong. The complexities of the charging and billing processes increase the potential for errors at all steps between service delivery and final payment. In her March 9, 2000, testimony to Congress, Inspector General June Gibbs Brown estimated that HCFA's payments to providers for net billing errors totaled about $13.5 billion, or about 8 percent of total Medicare fee-for-service benefit payments. These errors produce increased cost in terms of rework, auditing, and fines. Concern about the extent to which these errors have caused overpayments has resulted in investigations and prosecutions of fraud and abuse, thus increasing overall cost and fostering a negative public opinion of hospitals in general.

It is vital for hospitals and health systems to be able to produce clear, concise, and correct bills to regain public trust, enhance understanding, reduce cost, decrease the potential for error, and redirect resources to patient and community services.

As I noted in my HFM column in December 1999, "Getting Billing Right," hospital billing is a nightmare. The best care and customer service provided during the patient's hospital encounter can be overshadowed quickly by confusing, complicated, and incorrect billing. And potential compliance problems are inherent in the complicated and cumbersome system we use. It is a problem that must be fixed.

While the opinions Clark Bell, Dick Davidson, and I have expressed are shared by many others, talking about the problem will not fix it. Action is needed. But how does the healthcare industry in general, and healthcare financial managers in particular, address this issue?

Fixing this problem, or at least improving current practices will require the coordinated effort of all stakeholders to identify the barriers to, and best practices for, producing and communicating clear, concise, and correct billing information to patients. And that is the objective of a new initiative led by HFMA in partnership with AHA.

This initiative, called Patient-Friendly Billing, will examine the issues involved with hospitals and health systems collecting and communicating billing information to patients and other interested parties. The expected outcome of this project includes identification of the reasons for the complexity of current billing systems, the barriers to billing simplification, and current best practices in patient billing communication. The project also will develop recommendations for actions to simplify the system.

HFMA and the AHA are working with a major university and major providers, payers, and auditing and consulting firms to develop an approach that will produce these results. We hope to complete the project by the end of 2001.

Patient-friendly billing systems that produce clear, concise, and correct bills should be the goal of every healthcare provider and payer.