High deductibles: why physicians must adjust how they practice

Accelerated by the Affordable Care Act, high-deductible health plans have emerged as a major trend in healthcare. Placing more financial responsibility on patients for medical services has a direct impact on physician practices. Operating successfully within this framework requires greater awareness of differences among insurance policies and discussions of treatment options that are sensitive to patients’ out-of-pocket expenses.

"Doctors need to understand the landscape has changed. A doctor’s primary concern used to be whether a patient had insurance. Now, it’s the type of insurance,” says Devon M. Herrick, PhD, a senior fellow at the National Center for Policy Analysis in Dallas, a nonprofit organization that promotes private alternatives to government regulation.

“Patients are more cost-conscious now. That means patients will question their physicians about costs for procedures,” he adds. “Patients will also ask uncomfortable questions like: ‘Doctor, do I really need that MRI?’ ‘What’s that going to cost?’ ‘Can that test wait?’"

Related: ACA enrollees opt for high-deductible plans on healthcare exchanges

The best way to approach billing issues in a physician office is to be proactive with patients by clearly detailing costs and options. “Otherwise, a disgruntled patient who believes they were treated unfairly-and gouged by a rich physician-may be less likely to pay their bill,” Herrick says.

How costs affect patient choices

Studies have shown that consumers exercise greater caution in spending when health plans require them to share more of the costs, according to The Rand Corporation, a research organization that has conducted the largest independent study of high-deductible health plans.

High-deductible coverage “really does reduce people’s healthcare costs and use. About two-thirds of the reduction is in number of episodes of care, and about one-third of the reduction is in the cost per episode,” says Amelia M. Haviland, PhD, an adjunct senior statistician with Rand and an associate professor of statistics and health policy at Carnegie Mellon University in Pittsburgh.

“There may be some good news in terms of bending the cost curve, but there are also some concerns-that it might have a detrimental impact on patients’ health over time,” Haviland adds, citing an already apparent decline in cancer screenings, child immunizations and recommended tests for diabetics. “The concern on a physician’s side is that patients will be less compliant, or in particular, that they will not come for appointments; they’ll reduce their interactions with their doctors.”

MORE COVERAGE: Could high-deductible plans today mean higher healthcare costs in the future?

For many patients, the decision to avoid appointments stems from not knowing that their deductible doesn’t apply to annual wellness visits, certain cancer screenings and other preventive services. Physician offices may consider countering this misunderstanding by sending explanatory postcards, e-mails or letters, Haviland says.

High-deductible health plans “certainly are continuing to gain traction in the employer-sponsored insurance world and are the dominant plan type on the individual and small group markets on the exchanges. On the employer-sponsored market, they’ve overtaken HMOs,” she adds. “It’s more and more likely that doctors will have patients who are in these plans.”

NEXT: "A new scenario" for HSAs and HRAs

‘A new scenario’

In many cases, high-deductible health plans are paired with tax-free individual health savings accounts (HSAs) or employer-sponsored health reimbursement arrangements (HRAs). When a high-deductible plan accompanies one of these options or some other type of tax-free savings account, the result is described as a “consumer-directed health plan.”

In 2014, 48% of companies offered a consumer-directed health plan, up from 39% in 2013, according to Mercer benefits consulting firm’s national survey of employers. Enrollment in these plans increased to 23% of covered employees in 2014 from 18% the previous year. Average in-network deductibles were $2,500 for an individual worker or $5,000 for a family plan.

“It’s a new scenario for a lot of patients and physicians,” says Katherine Hempstead, PhD, director of health insurance coverage at The Robert Wood Johnson Foundation. The change has created “a little bit of a learning situation for everyone.”

At first, many consumers didn’t fully grasp their financial responsibilities under the high-deductible plans they had selected. Consumers who tend to be lured to lower monthly premiums often are the ones who will encounter the most difficulties paying their deductibles, Hempstead says.

Low-income enrollees in high-deductible plans were more likely to forgo emergency care due to unaffordable out-of-pocket expenses, according to a study of small employers in Massachusetts. Researchers reviewed emergency department visits and hospitalizations over two years among high-deductible plan members. Those of low socioeconomic status incurred 25% to 30% declines in high-severity visits over both years. Hospitalizations decreased by 23% in the first year but increased in the second year.

“Initial reductions in high-severity ED visits might have increased the need for subsequent hospitalizations,” the authors wrote in the August 2013 issue of Health Affairs. “Policy makers and employers should consider proactive strategies to educate high-deductible plan members about their benefit structures or identify members at higher risk of avoiding needed care. They should also consider implementing means-based deductibles.”

When insurance policies come up for renewal, it will be interesting to see if consumers who initially opted for high-deductible plans make different decisions for the future, Hempstead says. Meanwhile, providers will find it necessary to become more efficient in their practices and transparent about their pricing, as consumers demand more value for their healthcare dollars.

NEXT: Advancing price transparency

Advancing price transparency

In particular, the trend toward high deductibles “will certainly push price transparency for services or tests that physicians may order.

“A patient may ask, ‘Where is the least expensive place to get an MRI?’” says Mark S. Williams, MD, MBA, president of the Southern Medical Association and chief physician executive for Tenet Healthcare and Brookwood Medical Center in Birmingham, Alabama. Practices that have compared rates and quality among local imaging and laboratory facilities would be more prepared to answer such questions.

Some physicians may experience a decline in the use of their services, while others gain a competitive advantage.

“Physician offices may be further challenged in collecting reimbursement for their services, as the patient will be paying more out of pocket, ” Williams says. One way to continue serving patients while reducing their out-of-pocket costs would be to delegate less-complex visits to a nurse practitioner or a physician assistant.

Related:The challenges of healthcare price transparency

“Physicians who are best informed about these trends and changes will do very well,” says Williams. Conversely, “those physicians who may not take the time or make the effort to learn about these things are at risk. That high-deductible concept is not going to go away.”

Among employer-sponsored health plans, deductibles for employees have edged steadily upward. In 2014, 80% of all covered employees had a general annual deductible averaging $1,217, according to the annual Kaiser Family Foundation /HRET survey of more than 2,000 small and large employers. The average deductible has increased 47% from $826 in 2009.

Also in 2014, 41% of covered employees had a minimum annual deductible of $1,000, and 18% had deductibles of at least $2,000. Those at small companies (three to 199 employees) were even more likely to encounter large deductibles.

Wanda D. Filer, MD, MBA, FAAFP, president-elect of the American Academy of Family Physicians (AAFP), says pricing information isn’t readily available in all healthcare markets, especially in competitive areas. She manages about 90% of patients’ health concerns in her primary care practice in York, Pennsylvania, without referrals to specialists. “My role is to offer them the best services that I can,” Filer says, while acknowledging that she tries “not to incur any more costs than I need to.”

However, there are times when patients require procedures that fall outside the scope of her expertise. For example, she says, a male patient recently presented with problems that required consulting with a urologist but the patient couldn’t afford the out-of-pockets fees.

While Filer’s clinic-Family First Health-is a federally-qualified health center, she also sees numerous patients with private insurance. “They’re a little more attuned to what time of year it is and where they are with their deductibles,” she observes. Many patients are unaware that preventive office visits and services would be covered regardless of whether they have met the annual deductible.

There are also alternatives to traditional fee-for-service insurance billing. In a direct primary care (DPC) model, physicians typically charge patients a monthly, quarterly or annual fee that covers all or most primary care services, including laboratory tests, care coordination and comprehensive care management. This fee doesn’t cover some services, so practices often advise patients to acquire a high-deductible plan for emergencies, according to the AAFP.

Direct primary care is not the same as concierge medicine. “I hear this confusion a lot,” Filer says. “DPC practices operate at a lower monthly fee in order to open more services and access to those who have previously been excluded financially.”

NEXT: Setting the right expectations

Setting the right expectations

Physician practices walk a fine line between providing good clinical care that meets patients’ needs and limiting the burden associated with spiraling costs.

It’s important for staff members to know what a plan covers as well as a patient’s financial limitations, says Laura Palmer, FACMPE, director of professional development at the Medical Group Management Association in Englewood, Colorado.

At the outset, it helps to “set the right expectations with patients and staff.” Palmer recommends having open and honest conversations about costs well before a collections problem arises and the financial aspect compounds the stress for a patient undergoing treatment.

A provider may ask, for example, if a patient on a high-deductible plan would encounter a financial hardship in paying for prescription medications. Sometimes a provider may be able to offer free samples and help a patient apply for a low-cost or subsidized prescription drug program, Palmer says.

In another example, if a patient experiencing back pain doesn’t have insurance coverage for physical therapy, the physician could suggest less-costly options such as home exercise or yoga classes at a community center, she says. Other possibilities include offering prompt-pay discounts at the time of service, payment plans, and third-party credit applications.

‘Constant evaluation’

However, some experts discourage physicians from engaging in financial conversations directly with patients. Nonmedical office personnel should convey this type of information to patients, says Evan Grossman, vice president of consulting services at Athenahealth Inc. in Watertown, Massachusetts.

Practice managers and front-desk and billing staff members should be knowledgeable about various fees, insurance policies, and how to broach financial issues with patients, Grossman says. Staff members should check patients’ eligibility for services and ensure that a patient knows the costs that likely will be incurred during an office visit.

Related story:5 tips to improve your practice's financial management

If a physician determines a non-routine test is necessary, he or she should recommend that the patient discuss the cost with the front desk staff upon checkout.

Physician practices also can avoid losing revenue by learning how to collect payments from patients at the time of service, says Robert M. Wah, MD, president of the American Medical Association (AMA) and a reproductive endocrinologist in McLean, Virginia.

They can turn to the AMA’s website for point-of-care pricing resources that encourage increased electronic transactions and payment transparency. Webinars and toolkits explain how to use practice management software to provide point-of-care pricing, and how to measure a practice’s success at collecting payments at the time of service. There is also a sample template letter with contract language.

“The AMA is a strong advocate for bringing transparency, simplicity and consistency to the medical claims system. We are urging a streamlined approach that allows medical claims to be submitted and settled in real time at the patient’s point of care,” Wah says. “This will cut unnecessary administrative costs in the medical office, while helping patients to know their total out-of-pocket costs prior to treatment and help give them more control over their healthcare dollars.”

It is not uncommon for physician practices to face shortfalls in cash flow at the beginning of the year unless the practice has established a methodical approach to collecting deductible payments at appointments, says James Smith, MBA, FACHE, a senior vice president in the New York office of The Camden Group, a healthcare consulting firm.

“Given the rapid increase in share and the impacts on cash flow, practices must constantly be evaluating receivables and committing resources to their collection, as well as assuring adequate lines of credit and other financial instruments are available to help mitigate short-term cash shortfalls,” Smith says.

4 tips for addressing healthcare costs with patients

• Start with their name. Money and health are personal subjects. Addressing patients by name, and letting them know they are valuable to the practice is the first step in showing patients that you are looking for solutions rather than blame.

• Ask for payments the right way. Don’t ask patients if they will pay-ask them how they are going to pay. Don’t make delaying payment an option right away, but be sure to mention payment plans if immediate payment is an issue.

• All staff members should be prepared. Every member of the staff should be familiar with the  practice’s payment options and procedure costs. Patients may be more comfortable talking about finances with a nurse or physician.

• Reminders are important. When contacting patients for appointments, remind them that a copay will be due upon arrival,and have an estimate of costs available. Be sure to remind patients about payment plans, other options, and online portals if available.

Source: Nate David, ZirMed