The Center for Medicare and Medicaid Services has proposed far-reaching new rules requiring hospitals and health plans across the U.S. to make prices for many of their more common procedures available to the public. The industry is realizing that this alone will not empower patients with the tools they need - and finding patient-first ways to comply.
On November 15, 2019 the Centers for Medicare & Medicaid Services (CMS) finalized their updated Hospital Price Transparency Requirements. Scheduled to be implemented by each hospital operating in the U.S. by January 1, 2021, these new policies were initiated by the current administration “so (patients) can be more informed about what they might pay for hospital items and services.” In essence, CMS is responding to the administration’s demands for a more market-driven healthcare delivery system. One that functions more like other sectors of the American economy, where price is a key consideration in nearly every financial transaction.
More information about these rules is available by viewing the CMS Fact Sheet or the entire rule proposal itself. It is also summarized nicely by Becker’s Hospital Review. Though these new rules are well intended, we at Loyale - along with many other industry experts - believe they will do little to provide consumers with the useful information patients really need. Instead of merely requiring healthcare providers and payers to open the curtain on the complexities of healthcare’s pricing, consumers need information and tools that empower them to make better informed decisions about their care and its costs. These new rules will confuse and frustrate consumers while placing an unsustainable, possibly illegal, burden on the most vulnerable providers.
How the New Price Transparency Rules Fall Short
Merely displaying prices does little to empower the healthcare consumer. In fact, according to a brief from The Advisory Board, this type of transparency could actually lead to higher prices by exposing the volume-based discounts that some larger hospitals have negotiated with payers because of their higher operating efficiencies. Insurance companies could very well resist pleas from smaller, less efficient providers to offer similar discounts and elect to eliminate them entirely. This would have the net effect of raising prices for consumers, while doing nothing to relieve the untenable financial burden afflicting smaller, regional and critical access hospitals.
The Case for a More Consumer-Friendly Patient Experience
Loyale Healthcare is a vocal proponent for healthcare price transparency. We firmly believe that patients should know beforehand what their care is likely to cost and what their out-of-pocket expenses will be. For patients who are burdened by large and growing personal financial responsibilities, it simply makes sense that cost - particularly out-of-pocket cost - is a crucial determinant for anyone seeking care for themselves or their dependents.
A growing field of evidence supports the thesis that the U.S. healthcare industry has entered into a consumer age. Driven largely by the rise in high-deductible health plans and soaring insurance premiums, patients now represent the third largest source of revenue for most healthcare providers. As a result, consumers and patient advocates are raising their voices to call attention to high prices, financially devastating surprise medical bills and egregious, aggressive billing and collection tactics. Legislators are responding. With more than 1,000 bills pending that address healthcare and its costs, the U.S. Congress is also poised to act.
For most Americans, the cost of healthcare is a big-ticket item. Even routine care events can cost hundreds if not thousands of dollars. For patients who lack the ability to meet an unplanned expense of $1,000 and whose average annual deductible has risen to $1,300, this cost represents an obstacle to care. Research varies, but it is estimated that 50% - 64% of Americans avoid or delay care because of concerns about their ability to afford it. Other big-ticket industries have found ways to deal with their customers’ out-of-pocket limitations. It’s time for healthcare to do the same thing - but without impinging on the competitiveness of larger providers and the survival of smaller ones.
That’s not as simple as putting published and negotiated prices in a machine-readable format on a hospital or health plan website. And it doesn’t deal with the real problem. As consumers, we care about price, but what really matters is affordability. I can get a good used car for $10,000 which I can’t afford. But if the dealer will offer me a payment plan for $250 - which I can afford - we’ve got a deal. I get the reliable transportation and the dealer gets paid. If in the end I spend more, what matters most is that I got what I needed when I needed it. The same principle now applies to healthcare.
In our view, the new CMS rules threaten to distract providers and payers from the larger, more important issue facing healthcare and patients. That issue is patient financial engagement, where we can again look to another industry for signposts to help guide the way.
The Dishwasher Allegory
No one would argue that a dishwasher is essential to survival, but when a dishwasher doesn’t work, it can seem like it is. Yet many households cannot afford to pay cash for a new dishwasher. Manufacturers and retailers know that, so they and their customers work together to find ways to make the purchase possible. Of course, price is one of the variables that goes into the consumer’s purchase decision. But the purchaser also makes judgments based on the financing (payments) that are offered, whether delivery and installation are included and the reputation of the store where the dishwasher was purchased.
Based only on the published prices of dishwashers, a consumer can compare the prices at Home Depot, Lowes, Best Buy, Costco and others, but that ability alone does not get the consumer where they need to be - which is anywhere but the kitchen sink after dinner. Knowing they can get the dishwasher they want, with a discount or payment plan that makes it affordable, they can commit to purchasing an item they could not pay for out-of-pocket. The consumer gets the home appliance they need. The seller gets the sale and revenue. And, knowing that the customer represents a prospective future purchaser with a lifetime value, both parties are invested in delivering a satisfying experience and outcome.
This is, of course, a gross over simplification. We know very well that achieving authentic patient financial engagement in healthcare is much more complicated than posting competitive prices and some financing terms. When a person is sick, injured or just working to maintain their health, there are a variety of other, highly personal stressors and emotional inputs.
In a setting characterized by intimacy and highly competent and compassionate clinical care, the financial dimension of a patient’s experience must also be considered. That is why my company, Loyale Healthcare, was founded. Our company has worked to influence positive consumer payment behavior in complex enterprise environments for thirty years. Over the last ten years, we’ve worked exclusively with healthcare providers. We were among the first to recognize healthcare’s unavoidable transition to consumerism. And we developed the most widely deployed patient financial engagement platform in the industry to help providers make that transition.
Five Requirements for Authentic Patient Financial Engagement and CMS Transparency Compliance
Working with large health systems and multi-facility specialty providers across the U.S., we’re proving every day that patients will get - and pay for - the care they need as long as their providers are prepared to work with them to remove cost as an obstacle to care. To do that, we believe providers must have the means to:
- Present upfront cost estimates for the anticipated course of treatment and all associated expenses, including pre-service eligibility so a reliable out-of-pocket estimate is also presented
- Offer multiple payment options to address patient affordability, the Loyale Affordability Workbench, for example, offers provider-configured options that may include discounts for prompt or upfront payment; short-term interest free financing; or longer-term payment plans funded by third party lenders with a reputation for client care
- Interactive self-service options with secure personalized experiences that measure up to the best online experiences consumers have with trusted brands like Amazon, Apple, Zappos and other industry leaders. This is the new standard by which providers will be measured.
- Personalized, contextual digital communications that honor each patient’s preferences and behavior. For some providers up until recently, every patient with an unpaid balance became little more than a number - a balance to be collected. In an industry dedicated to health and well-being, no provider can hope to compete without engaging in the financial dimension of care.
- End-to-end data analytics, so providers have the information they need to make evidence-based decisions about their patient-pay portfolios and manage for success - as care givers and as business operations.
Fortunately, the kind of pre-treatment cost estimates we support comply with the new CMS transparency rules. But we’re encouraged to see growing demand for a much more comprehensive, holistic approach to patient financial engagement. This approach calls for systems, policies and cultures that put patients at the center of everything they do - clinical, administrative and financial. So, while we appreciate the good intentions of CMS’ new transparency rules, we believe the industry is setting a higher standard for itself and for patients. To us, that’s good news.