A Revenue Cycle Revamp: Why New Price Transparency Mandates Will Drive Change

Jan. 23, 2020
The battle over price transparency has begun, and some health system revenue cycle departments have already taken the lead on pushing price estimator tools to their patients

In November, the Trump administration released a pair of regulations—one in the form of a final rule and the other a companion proposal—designed to put the onus on hospitals and health plans to be far more transparent about their pricing information and out-of-pocket costs for patients than ever before.

The goal, according to the government, is “to empower patients and increase competition among all hospitals, group health plans and health insurance issuers in the individual and group markets.” What’s more, federal officials believe greater transparency will ultimately lower the costs of healthcare—projected to increase by 5.5 percent annually until 2027, according to Medicare actuaries—while bringing value to consumers.

The final rule impacting hospitals, slated to go into effect in January 2021, will require providers to make public how big a discount they offer cash-paying patients, as well as rates negotiated with insurers. As expected, both regulations were met with immediate pushback from each stakeholder segment, as hospital groups even went as far as suing the Department of Health and Human Services (HHS) and the Centers for Medicare & Medicaid Services (CMS) over the final rule affecting hospitals.

Prominent hospital associations, led by the American Hospital Association (AHA), argued that the rule will “introduce widespread confusion,” and could actually have the opposite effect on pricing as is intended, as the now transparent negotiated rates between hospitals and payers could hamper future talks between the two sides. Essentially, stakeholders believe, each side would have much more clarity on the contracted rates that the other side brokers with its competitors, leading to the possibility of bidding up prices, which will eventually increase costs.

“Much of this rule is designed to put enough sunshine on provider pricing disparities between payers in order to make them lower their prices over time,” says Christopher Kerns, vice president of executive research and insights at the Washington, D.C.-based Advisory Board. “So this sunshine is designed to force organizations that are largely not-for-profit to push down their prices over time, or at least to normalize them relative to other payers in the marketplace to essentially ‘embarrass’ those [entities] that have huge discrepancies in payments for similar services. There’s a strategic angle [on the part of the government] designed to help force providers to justify the prices they charge today,” Kerns says.

Kerns, who has already spoken to many different organizations about these rules, says health system leaders have told him if the rules do come to pass, the impact they’ll have on pricing strategy will be enormous. In the meantime, the logistical challenges of being able to respond to the changes “are especially unearthed on revenue cycle staff today, as most simply do not have the capability to devote a ton of resources on this particular issue without taking them away from other critical areas,” he says.

Undoubtedly, the rules leave a lot to unpack for healthcare stakeholders—much of that will inevitably be fought in court—but in the short term, hospital leaders across the U.S. see the regulations as yet another sign of what’s become the new normal: price transparency will need to be taken to the next level, ultimately resulting in a revamp of front-end revenue cycle processes.

The price is right

One way hospitals have been proactive in this area is by deploying patient-facing price estimators on their websites that give consumers a means to pull accurate estimates for “shoppable” procedures and services. The estimates are based on the patient’s unique insurance coverage, as well—or, if they don’t have insurance, an estimate can be pulled based on whatever the charges are for self-pay patients.

A few months ago, leaders at the Augusta, Ga.-based University Health Care System deployed a price transparency product from revenue cycle automation company Recondo Technology on its website that enables patients to shop for services online and get pricing information prior to scheduling, notes George Ann Phillips, administrative director for revenue cycle at University Health Care System.

The user can enter his or her name, date-of-birth and social security number, and then a screen pops up with approximately 160 services to shop for—mostly diagnostic procedures such as X-rays, MRIs, CT scans, and colonoscopies. Users then enter their insurance information, giving the system insight into the patient’s insurance provider, specific benefits, and the contracts the health system has with that health plan. Finally, based on all that data, the tool will give the out-of-pocket cost for the patient, also depending on his or her deductible, copay and coinsurance, Phillips explains.

How accurate are the tool’s pricing estimates compared with the actual cost of the procedure, after it happens? Of course, there will be times when the physician needs to do something different than what was originally ordered, or the request was altered a bit, but Phillips attests the product’s accuracy rate is plus or minus 5 percent. “So once we are able to give that estimate to the patient, he or she might owe us a little at the end of the day, or we owe him or her a little bit, but we have found that the accuracy rate is what our patients respond to,” she says.

A similar process has gotten underway recently at Mosaic Life Care, headquartered in St. Joseph, Mo., where the revenue cycle team there has implemented a tool from software company AccuReg. The idea, says, Deborah Vancleave, vice president of revenue cycle at Mosaic Life Care, was to tie the out-of-pocket estimation tool with quality. “We want the patient to make the most informed decision for their care. Mosaic is a sole community provider in our community, so we have a little bit of a different relationship with our patients as the next facility is about an hour away, north or south. Our moto is that our community can receive quality and expert care, close to home. We want patients to stay local knowing they will be receiving quality care for the best price.”

The tool at Mosaic doesn’t require that patients enter their insurance information in order to get the out-of-pocket cost estimate as Vancleave says the team was a bit apprehensive that this would be a cumbersome process for patients. Plus, Vancleave points out that it’s specifically laid out in the price transparency rule that patients don’t have to log into any kind of portal or enter any specific information to get the price estimate; the regulation just mandates hospitals make the procedure or service cost publicly available.

“So they can just go on the site and look up the costs based on a simple procedure name. That was always our goal, so it won’t be as difficult as we had originally anticipated since we have been working on this for the last six months anyway.” At the same time, she acknowledges, having access to that information “is the only way for us to understand a patient’s insurance, at which point we can do a real-time patient eligibility check with the payer, which will then return more accurate results.”

Impact on revenue cycle

A few years back, Vancleave’s revenue cycle team established a goal to move one-third of all patient payments further upstream to either pre-service or point of service. The broader impact of those upfront payments is that the cost to collect outstanding payments gets reduced, while also improving the patient financial experience and helping the organization measure the number of patients who need financing, Vancleave says.

While that goal has not been hit yet, as the process has just gotten started, the burden taken off the revenue cycle department, and patients, is expected to be significant. Phillips at University Health Care recalls that before deploying its price estimator tool, patients could call into any number of telephone numbers at the hospital, though there was no guarantee they would be connected with the right department. And even if they did get through to the right area, the only pricing information that staff had was a list of common procedures that did not take into account any individual information.

“So the patient was then left to figure out everything else having to do with his or her copay, coinsurance, and deductible. This new process is really individualized for the patient with his or her information, and offers a much cleaner idea of what to expect out-of-pocket,” Phillips attests. She adds, “Prior to having this tool, we didn’t have all the pieces of information we could share with the patient, and we have found out that patients are very willing to pay for their services upfront as long as they understood what they’re paying for.”

While price estimator tools do represent a step forward for hospitals looking to get out in front of transparency mandates, there is a key difference between making information available via a tool on the website and proactively pushing the information to patients, says Robin Brand, senior director at Advisory Board. “Half of vice presidents of revenue cycles will say that price estimator tools are never used and the other half will say they’re somewhat used. What we found is that the most effective [strategy] is to push it to the patient to enhance engagement. Being able to make the calculations, figure out what the patient is going to owe, and then send that out prior to the patient coming in, is much more effective than hoping people stumble up on your price estimation tool,” says Brand, who particularly focuses on revenue cycle and finance at Advisory Board.

What role the regulations will play

Unsurprisingly, hospital and health plan leaders are disappointed, frustrated, and in some cases, angry, that the government is forcing actions which many believe will have a harmful impact rather than a helpful one—all while costing stakeholders time, energy, and resources.

“Whoever said that [these regulations] will open up competition and drive down costs doesn’t understand how the healthcare system works,” says Vancleave. “[Even if you] publish your standard charges or the reimbursement amount you receive from an insurance company, I’m not sure how that drives down cost by competition, because there is no margin for hospitals. That thought process would be fine if you’re dealing with a 25 percent margin, but when hospitals, if they’re lucky, are making 2 percent margin between cost and reimbursement, where’s the wiggle room there to reduce prices?” she asks.

Vancleave compares the situation to when a government receives a bid from a construction company on a project, for example. “Do they ask for every quote to identify how much they will pay for drywall, where they’re getting it, and what their contract is with the drywall company? I don’t think so, and I don’t know any other business that must disclose their contracts with their suppliers,” she contends.

Meanwhile, Brand notes that claim denials continue to skyrocket across the board— both commercial and public payers are now denying about one in every 10 submitted claims, costing health systems up to 2 percent of net patient revenue, according to a March 2019 Advisory Board analysis—and revenue cycle departments have focused a lot of resources in trying to straighten things out. “There has been a lot of fighting and the [increase in denials] hasn’t necessarily helped the relationship between payers and providers. Add in the price transparency tension, and from the revenue cycle perspective there has been palpable frustration that departments have experienced with payers,” Brand says.

As such, Brand expresses concern that as a result of the new regulations, revenue cycle directors will deploy resources toward the negotiated charges, which of course do not meet the immediate needs of patients. “So we will again waste time, energy and resources, providing something that’s not necessary and not something that will actually bolster patient collections and allow them to prepare for these high-cost bills,” says Brand. 

Sponsored Recommendations

2024's Healthcare Buyer Journey: New Research and Insights

Join us on April 30th for a webinar unveiling insights from the latest study on the Healthcare IT Buying Journey! Discover evolving challenges, effective health data management...

Improving care with AI-powered solutions

Don't miss our April 23rd webinar delving into the transformative impact of AI-powered solutions on healthcare. Join industry leaders Reid Conant and Dr. Patrick McGill as they...

Shield your health system against cyber threats

You won't want to miss out on this imperative April 4th webinar about how you can protect your healthcare organization. Join us to learn how to fortify your health system against...

Healthcare Trends 2024: Trends & Strategies for Future Success

Explore the future of healthcare in 2024 with insights from the Healthcare Industry Trends Report. Stay ahead of the curve as we delve into the latest industry developments and...

Revenue cycle management solutions company CodaMetrix has closed a $40 million Series B funding round to create AI solutions that improve medical coding quality. Founded in 2019, CodaMetrix’s CMX platform was built in partnership with Mass General Brigham to provide real-time audit capabilities and seamless EHR integration, which are used as a feedback loop to continuously improve AI learning. The software-as-a-service platform uses machine learning, deep learning, and natural language processing to continuously learn from, and act upon, the clinical evidence stored in electronic health records (EHRs). As a multi-specialty platform that classifies codes across radiology, pathology, surgery, gastroenterology, and inpatient professional coding, Boston-based CodaMetrix said it is the first platform to have an impact across departments by alleviating administrative burdens from billing staff. On average, CodaMetrix said, providers using the CodaMetrix platform experience a 60 percent reduction in coding costs, 70 percent reduction in claims denials, a 5-week acceleration in time to cash, and improvements in provider satisfaction, quality and compliance. The company has partnered with several health systems – including Mass General Brigham, University of Colorado Medicine, Mount Sinai Health System, Yale Medicine, Henry Ford Health and the University of Miami Health System. “Medical coding is one of the most time-consuming, understaffed and inherently error-prone parts of the health system revenue cycle. Hospitals face a high demand on human and financial resources and clinicians must often work through tedious, administrative processes away from patient care,” said Hamid Tabatabaie, CodaMetrix president and CEO, in a statement. “Our game-changing AI platform delivers vital automation which not only addresses these pain points but, more significantly, changes claims data from notoriously unreliable to clinically valuable. We are proud to serve leading provider organizations with a comprehensive and transformative automation solution, setting the standard for coding quality as part of our vision to change healthcare through the use of AI.” The company’s Series A funding was led by SignalFire. Frist Cressey Ventures (FCV), Martin Ventures, Yale Medicine, University of Colorado Healthcare Innovation Fund, and Mass General Brigham physician organizations also participated in the round. The Series B was led by Transformation Capital with continued support from existing investors SignalFire, Series A lead, and Frist Cressey Ventures.