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More hospitals today are competing for patients using retail strategies, such as offering flat-rate, easy-to-compare bundled pricing, finds a new PwC report. As a result, physicians with high fees may find themselves shut out of hospital contracts. And that means less patient volume and less revenue.
More hospitals today are competing for patients using retail strategies, such as offering flat-rate, easy-to-compare bundled pricing, finds a new PwC report.
As a result, physicians with high fees may find themselves shut out of hospital contracts. And that means less patient volume and less revenue.
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It's a scenario that drew some big 'a-ha's' from doctors at last year’s Medical Group Management Association national conference, says Cheri Kane, managing director at PwC's Health Research Institute, and one of the lead authors of a 2016 report on health systems' shift toward more price transparency: Price check in the MRI aisle: Hospitals adopt a retail approach to win customers.
Doctors were surprised to find out that even if they were employed by the health system, they wouldn’t be chosen as part of a bundled pricing partnership, says Kane. Hospitals are picking partners based not only on their good outcomes but also how competitively they are priced.
Doctors may not be used to having to think in competitive price terms, but as the PwC report points out, the landscape is evolving. Hospitals and health systems are increasingly making prices more transparent and accessible to consumers. Other strategies include offering money-back guarantees, price quotes, and easier-to-understand billing.
One big driver for these changes: the rising use of high-deductible insurance policies, which have left consumers paying larger percentages of their health costs than ever before. The Kaiser Family Foundation reports that average annual deductibles have jumped almost 50 percent since 2011, to about $1,500.
Insurers also are "actively directing their members to lower-cost providers," the PwC report notes, and providing provider price guides for consumers. Most states today are mandating that price information for procedures and services be made available for consumers, usually via data collected from payers and hospitals.
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So far, only a handful of states-including Florida, Massachusetts, South Dakota and Minnesota-require physicians to provide timely estimates upon request. But more states are considering proposals for this, says the Health Care Incentives Improvement Institute in its 2016 price transparency report card.
"Physicians are not thinking about the price transparency regulations that are coming into play, and they're not thinking how it's going to directly affect their practice," warns Kane.
Next: “As physicians, we really struggle with this"
But doctors say that trying to come up with a price for services when patients ask for it can often be difficult.
“As physicians, we really struggle with this,” says John Meigs, Jr., MD, president of the American Academy of Family Physicians. “It’s so complicated if we’re trying to list our price for XYZ procedure or whatever-it’s very difficult.” Price ranges are easier than coming up with a set list of prices, Meigs says.
That’s because many factors go into estimating what patients will owe, he says. Chief is the complexity of the patient-what level of service they may require, which can change the length of time a doctor spends with them as well as ancillary tests and procedures that might be needed. This can be tough to estimate before a patient is actually seen.
Another complication: Doctors have patients with many different kinds of insurance and varying negotiated rates.
"We must have 30 different health plan contracts-even within a health plan, there might be different payment rates,” says Patrick Carter, MD, director of family practice at Kelsey-Seybold Clinic in Houston, Texas, a 400-plus physician group. About half of the practice's patients are covered by capitation plans; most of the rest are covered by insurance.
When patients ask for pre-service estimates, they typically want to know what their out-of-pocket cost will be, not the billed rate, Carter says. This means having staff that can help determine what a patient’s plan will cover.
Carter says to date, requests by patients for such estimates have been rare. Only about 20 patients asked about prices out of more than one million office visits last year, he says.
However, an HRI survey finds that consumer demand for price information is going up. In 2015, 30% of consumers said they had contacted doctors and health systems about prices (up from 26% in 2014), and 40% sought estimates for prescriptions or procedures.
PwC reports that hospitals are becoming more aware of competing prices in their local markets. Physicians need to know this information, too, says Kane, but have to be careful, since calling other doctors to see what they charge could open them to charges of price-fixing.
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Instead, she advises, physicians should consider employing consultants or using software to find competitors’ prices. Carter, for example, says his office buys databases of billed charges to help determine the price.
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However, notes Meigs, small practices may not be able to afford this. Doctors can also access free sources of information, such as state-mandated websites that list average prices for services, or insurance provider rate schedules.
Physicians also may use Medicare reimbursement rates as a benchmark, says Carter. “Most doctors’ charges are going to be somewhere in a multiple of Medicare, anywhere from about 2.5 to 5 times what the Medicare rate is.”
What’s important is that doctors pay heed to their pricing strategies, says Kane.
“Physicians need to think about within their marketplace the services they are providing-that mix of business, and are their prices competitive? And are their outcomes competitive?
“So often, physicians just rely on their bedside manner to drive their patient volume, and I think that’s going to change significantly as we move forward.”