Owing to a confluence of market forces, industry innovation, and government action, consumers in more than half of US states now have at least some ability to see procedure charges in advance. The concept is to apprise patients of their out-of-pocket costs before they schedule appointments. Armed with such information, patients then can comparison shop and decide where to go for the most attractively priced services.
Massachusetts, for instance, shifted to this model of disclosure at the beginning of 2008. Jeff Ronner is CFO of Shields Health Care Group in Quincy (near Boston), which operates 33 imaging centers offering MRI, radiation-oncology, CT, and PET/CT services. Ronner says that one driver behind the push for transparency in Massachusetts was the burgeoning number of recession-hit businesses deciding to replace expensive, low-deductible benefit plans with more affordable, high-deductible insurance. Such plans compel patients to pay large out-of-pocket sums that can add up to several thousand dollars before the insurance company’s contributions begin.
For patients in this position, it makes good economic sense to examine procedure prices for several prospective providers prior to selecting one, Ronner says. A few years from now, both low- and high-deductible plans paid for by employers could go the way of the buggy whip, if a May 6 Fortune report¹ is correct. The magazine predicts that as the newly enacted national health-reform law takes hold over the next few years, businesses from coast to coast will have incentives to jettison all medical insurance.
This would leave employees to purchase their coverage directly. Under the new law, most could be eligible for government subsidies to assist them with that, but it’s very likely that all they will be able to afford are high-deductible plans promising abundant out-of-pocket expenses.
Ducks in a Row
One strategy for early adopters of price-transparency programs–Shields Health Care Group included—is to give consumers access to price data through a direct-access interactive website or an online portal. The transparency tool called My Cost, launched in 2007 by Alegent Health, a hospital system in Omaha, Nebraska, is both consumer-friendly and helpful.
My Cost allows patients to generate rapid estimates of their costs for specific tests and procedures. The calculations are based on patients’ health-plan provisions or on their personal financial situations. Estimates are available for the most frequently used hospital inpatient and outpatient procedures, including radiography, CT, MRI, and mammography. For now, the figures presented represent facility fees only; professional or physician fees are not included.
Estimates are helpful, but their shortcoming is that they are only estimates. My Cost, for instance, prominently posts disclaimers cautioning consumers that while it strives to produce the most accurate out-of-pocket cost predictions possible, the figures generated by the system carry no guarantees. Even with disclaimers, however, the potential exists for consumers to be dismayed upon receiving bills that are higher than an online estimate led them to expect.
Shields Health Care Group’s own transparency tool addresses this problem by presenting price ranges rather than actual dollar amounts, Ronner says. Consumers can obtain more refined estimates by calling a member of the Shields Health Care Group financial-services team. During this encounter, Ronner explains, “We obtain detailed information about the caller’s insurance coverage and imaging needs, which we then use to calculate a more precise number.”
The key to greater precision is having one’s proverbial ducks in a row before attempting to estimate costs. Patricia Whelan, MHA, CIO of Shields Health Care Group, says, “First, and obviously, you have to know your costs in order to calculate the price. Then, you also have to analyze the multitude of insurance plans and what the copayments are going to be under each of these plans.”
This daunting task requires abundant, ongoing interaction and communication with payors. Shields Health Care Group achieves this through an automated process overseen by a third party. “In addition to determining what the patient’s financial responsibility is under the terms of his or her plan, our approach also allows us to check and manage the patient’s eligibility, availability of coinsurance,