Consumer price transparency: The healthcare CIO’s looming headache
Posting chargemasters online is just the first step; hospitals should also offer cost estimators based on patients’ insurance plans. Here’s what CIOs need to know as hospitals move into the era of healthcare price transparency.
Some healthcare CIOs are thinking ahead of the new government requirement that they post their chargemasters (price lists) online. Their hospitals and healthcare systems are also offering patient cost estimators that tell people how much common tests and procedures will cost them out of pocket.
The healthcare organizations that do this have found they are meeting pent-up demand from their patients, especially those on high-deductible plans. At the same time, they’re positioning themselves for the future as the Centers for Medicare and Medicaid Services (CMS) ramps up its initiative to help consumers compare healthcare prices.
Since January 1, CMS has required hospitals and health systems to post chargemasters in a machine-readable format (e.g., Excel) on their websites. It’s not very difficult for hospitals to share their chargemasters — although there are some challenges in making them consumer-friendly. Most hospitals appear to be complying with the new regulation. But CMS has bigger plans that might require significantly more from hospital IT departments.
Last summer, CMS Administrator Seema Verma noted, “This [proposal to require the posting of chargemasters] is a small step towards providing our beneficiaries with price transparency, but our work in this area is only just beginning.” After CMS’s proposal was finalized and implemented this year, she reiterated her stance. She added that hospitals could go beyond chargemasters, citing some facilities’ adoption of patient cost estimators.
Price lists have limited value
Hospital executives know that chargemasters offer little value to patients. Nobody pays chargemaster prices; even the uninsured get a discount. Insurance companies negotiate much bigger discounts that are reflected in their members’ bills.
“A chargemaster could help the average consumer understand the order of magnitude of cost for a hospital service or procedure,” notes Suzanne Delbanco, executive director of Catalyst for Payment Reform, a nonprofit consultancy firm that works with large employers. “It could help consumers see differences across hospitals. But it won’t resemble what the patient’s insurer ends up paying or the portion of the cost he or she has to pay.”
That’s where cost estimators come in. By combining information about a patient’s insurance coverage with the costs of a procedure or test and the contract between a healthcare provider and the patient’s insurance company, these applications can quickly generate an estimate of how much the person will owe for a particular service or an episode of care.
In most cases, patient cost estimators are being applied only to hospital charges. However, they could also be used to calculate a patient’s estimated costs for physician services, rehabilitation or home health care after an operation, notes Niall Brennan, director of the Health Care Cost Institute, a nonprofit research firm.
Hospital IT departments usually don’t have the resources to build cost estimators themselves, says Laura Marston, a principal with ECG Management Consulting. But they can buy this capability from outside vendors like Experian Health, Recondo, or Simplee. In addition, Epic, the largest EHR company, offers a built-in cost estimator from Recondo. Epic and other major EHRs can also be integrated with standalone estimators.
Jeff Leibach, director of the healthcare consulting practice at Navigant, says he hasn’t seen any hospitals build their own estimators. “It’s a significant technology challenge,” he notes.
Most large healthcare systems have some kind of cost estimator that they use to apprise patients of their financial responsibility ahead of an elective procedure, says Robin Brand, senior director of research at The Advisory Board Company, a healthcare consulting firm. But in many cases, these tools are not patient-facing, she says; they’re used internally to counsel patients and encourage them to make prepayments.
Leibach agrees that many healthcare systems have cost estimators but may not have offered them on patient portals. This is changing, however, he says. “The [CMS] chargemaster requirement challenged leadership teams to think about what information they want to strategically share, how they want to share it, and do they want to be proactive about consumerism or reactive to regulations.”
Meeting patient demand
Pittsburgh’s St. Clair Hospital, which has had a patient cost estimator for three years, links to it on the same web page that leads to its chargemaster. After explaining that payments by Medicare and private insurers are not based on charges, the web page suggests that viewers check out its cost estimator to find out what their out-of-pocket cost for a procedure or test will be, depending on their insurance plan or their lack of coverage.
Anyone can use this tool, whether or not they are registered as a St. Clair patient. The estimates take into account a consumer’s copayments and deductibles under their insurance plan and how much of their deductible has been met. Currently, the estimator covers 114 procedures and other services.
Before the estimator was implemented, CIO Richard Schaeffer notes, the hospital was receiving about 16 calls a week concerning questions about cost. In the week after the estimator tool was introduced, the combined number of phone and website estimates jumped to 106. “So, there were 90 patients per week who had pent-up demand that we could satisfy,” he says.
Most of this usage is online. “Once we activated the patient estimate tool, the use of the financial portion of our patient-facing website went way up,” Shaeffer notes. Concurrently, the number of phone requests for cost estimates fell.
An outside vendor provides St. Clair’s patient cost estimator, using information from the hospital and health insurers. Schaeffer points out that the IT department didn’t have to write any interfaces to the hospital’s financial software—the vendor handled that. Nevertheless, Rick Chesnos, St. Clair’s chief financial officer, notes, “We needed a significant amount of financial information to populate the system, and we did a significant amount of testing to make sure the data was accurate when a patient asked for an estimate.”
The cost estimator is not linked to St. Clair’s electronic health record (EHR). The hospital considered putting it on the patient portal connected to the EHR, but that would have required a logon and would have restricted it to current patients. “We wanted to make the estimator accessible to everyone [who visits the hospital site]” Chesnos notes. At the same time, he adds, doctors and staff can look up estimates for patients who ask for them during office visits.
Using EHR capabilities
UCHealth, a 10-hospital system based in suburban Denver, has taken a different approach to providing patient cost estimates. While UCHealth uses an outside vendor, it integrates that firm’s cost estimator with its EHR and supplies patients with out-of-pocket cost estimates through website and mobile apps linked to the EHR. Patients can also call the system’s call center to get cost estimates as well as financial counseling.
The cost estimator was launched last August. So far, CIO Steve Hess says, about 90 percent of the 400 weekly requests for cost estimates are coming into the call center. However, the health system is pushing the use of its mobile application to increase the uptake of the online option.
The healthcare system has created cost-estimate templates for about 150 procedures and tests in its EHR and is adding dozens more each month, Hess says. Each template pulls in historical cost information for patients with different insurance plans. To calculate an estimate, UCHealth mates that data with the vendor-supplied information on each person’s health plan.
UCHealth’s IT department had to do a fair amount of work to integrate the two systems, Hess notes. First, his staff had to make sure that the insurance eligibility data populated the correct fields in the EHR. And second, they had to build templates for each service “and test the heck out of it,” he says. But no more than half an FTE of staff time has been devoted to the project.
Price transparency advice for CIOs
Based on discussions with CIOs, consultants and other observers, here are five pieces of advice for CIOs to consider as hospitals move into the era of healthcare price transparency:
1. Make your chargemaster consumer friendly: Since you have to post the chargemaster, you should do your best to make sure that consumers can get some value out of it. The descriptions of services should be as simple as possible, and you should include a search function so that consumers don’t have to scroll through long lists of services.
Steve Hess of UCHealth suggests that CIOs reshape their online chargemasters to offer a granular, personalized patient experience. “And when you do anything in the EHR, position it so it can be a fairly easy lift to move toward a more personalized estimator tool eventually.”
2. Consider a patient cost estimator.“A cost estimator that gives the patient’s true financial responsibility is where the industry is going and would be a wise investment,” says Marston.
As St. Clair’s hospital discovered, a cost estimator can reduce the volume of phone calls if patients use the tool online. It can also help your hospital improve the patient experience and stand out among your competitors. And it’s what patients want: In a recent survey, Brand notes, the Advisory Board Co. found consumers desired pre-service estimates more than any other patient-facing financial tool.
3. EHR integration can be beneficial:As St. Clair’s experience shows, it’s not necessary to integrate a cost estimator with your EHR. But EHR integration enables clinicians or staff members to pull up cost estimates for patients without leaving their workflow. In addition, Leibach points out, facilities can benefit from economies of scale by loading all of their contracted rates directly into an EHR. Moreover, EHR integration enables IT staff to interface the estimator with the prepayment module of the hospital’s financial system. “So you can give that price quote and have people make partial payments right away or collect upfront,” he says.
4. Make it simple for consumers: When St. Clair Hospital convened focus groups of former patients, they told the hospital administrators that they wanted the cost estimator to be simple and easy to use. So St. Clair organized its services by category and provided easy-to-understand drop-down lists for patients and other visitors to choose from. Marston says that the best way to organize these lists is to bundle all of the procedures and tests a patient may have in a particular episode of care, such as delivery and maternity care. “That takes some billing expertise and translation to get it right,” she says.
5. Start small but aim to be comprehensive: St. Clair used the experience of its call center and the results of its patient focus groups to decide which services to start with. Then it gradually added more and more procedures and tests to the cost estimator. “You could probably do an analysis of service volume to figure out what makes the most sense to start with and expand from there,” suggests Marston. “And then over time, you can look at what patients are actually searching for.”
Eventually, to satisfy patients and eliminate phone calls, the online cost estimator should be fairly comprehensive, she adds. Hospitals should also consider providing quality data, such as the patient experience scores that many facilities already post online.
Cost estimators are just the beginning of the transparency hospitals need to provide, Hess observes. “What we’ve done is still rudimentary. The day when we give patients better choice and more transparency is the day when the patient can go somewhere to compare hospitals and doctors against each other on cost and quality. So this is just a step into the future.”