Redefining the Price Transparency Debate in Healthcare
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Why You Should Set Payment Expectations for Consumers
By Bill Marvin
Up for Debate: Price Transparency in Healthcare
The prices of healthcare services and how they are displayed are hot topics of debate in healthcare, especially as consumer responsibility increases due to the shift to high-deductible health plans – leading to a demand for transparency in healthcare prices.
Point: Display a Menu of Healthcare Prices for Consumers
Countless articles have been published in support of the "restaurant model" for price transparency. Put simply, price transparency in healthcare enables consumers to view the total price for a healthcare service in advance, just as the restaurant industry displays prices on a menu before the customer orders.
Counterpoint: Set Payment Expectations for Consumers
Using the restaurant model to display prices does not fit the healthcare industry. If it were as easy as just displaying prices, the debate would have been over long ago. The real issue is the ability to set payment expectations for consumers. The "hotel checkout model" is more appropriate for healthcare, especially in regard to the variability of consumer payment responsibility. In healthcare, the payment amount depends on negotiated discounts associated with a consumer's health benefits, while in the hotel industry, the payment amount depends on factors such as room type, length of stay, and amenities used. To further explain this comparison, let's examine a recent hotel stay I had last winter.
The Hotel Checkout Model
Before a business trip last winter, I called the hotel with my travel arrangements, including my travel dates and room type, and I received a quote based on these details. Then, I gave my payment card information to reserve a room.
My trip was impacted by a major snowstorm, extending my stay and making the total cost of my hotel room much higher than the original quote. Additionally, I rented a few movies on demand, and had some snacks and drinks from the mini bar. When I checked out, my card charges were a lot more than the original fee quoted, which is understandable. This payment experience closely mirrors the healthcare payment process – in that the exact payment amount cannot be known upfront. But unlike the healthcare industry, to start the payment process, the hotel required a payment card on file before I could check in to my room.
The Real Problem: Patient Confusion
As my example above shows, pricing in certain industries, including the healthcare industry, depends on a variety of factors. For healthcare in particular, the variations in pricing depend on a health plan's negotiated discount for the provider's services. Furthermore, the exact amount owed by the consumer is based on the consumer's specific benefits and payment responsibility, including deductible and coinsurance. Because of negotiated discounts and complex benefit structures, the ability to give consumers their exact payment responsibility before a visit is practically impossible for the majority of healthcare services. Accordingly, it is not completely effective to publish healthcare prices to communicate a consumer's payment responsibility.
Final Decision: Set Payment Expectations Upfront
If publishing healthcare prices is not effective or useful to consumers, then the industry needs to take a step back and redefine the problem. The real problem is not that healthcare providers do not post prices on a "menu," it is that consumers are unaware of and often confused about their expected payment responsibility. Too often in the healthcare industry, consumers have no idea what they will owe or how to pay until a statement arrives weeks or months after a visit. This often results in a negative experience for consumers and delayed payments or bad debt for providers.
By setting payment expectations upfront, consumers are aware of what they may owe and are more likely to pay their responsibility. The healthcare industry can use integrated technology to estimate payment responsibility, clearly communicate the estimate and secure a payment method upfront, then automatically collect payments after the claim is processed by the health plan.
When payment responsibility is discussed with consumers upfront, there are opportunities to offer convenient, automated payment options. Automated payments enable billing services to simplify the entire payment process to increase collections and create a positive experience for consumers and their provider clients.
By leveraging technology and best practices to deliver payment assurance, just as the hotel industry achieves, healthcare can solve the problem of consumer confusion and provider bad debt.
Bill Marvin has been in the healthcare revenue cycle and payment industry since 1993 and is the president and CEO of InstaMed, the leading Healthcare Payments Network. Prior to InstaMed, Bill was an executive in Accenture's Health and Life Sciences practice, focused on payor to provider connectivity. Prior to Accenture, Bill founded CareWide (now a part of AllScripts after three acquisitions), a practice management system for provider offices.