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What Health Care Leaders Need to Know about Consumerism

Published on 5/24/2018

This article originally appeared in Perspectives, Cerner's thought leadership publication. Download your digital copy of Perspectives here

Health care leaders’ attention is focused on national health policy debates about the future of the Affordable Care Act and the prospects for passing the American Health Care Act or some other version of repeal-and-replace. In this environment, it’s easy to put health care consumerism on the back burner. But consumer concerns about health care prices, surprise medical bills, and medical debt are still front and center for them. Nothing that’s in play on the federal legislative front is going to mitigate those concerns. Here is what health care leaders need to know about consumerism and how it impacts organizational success.

Consumerism is here to stay

Consumerism — the notion that patients make purchasing decisions based on information about health care cost and quality — is still relatively new in health care. Maybe that’s why some health care leaders are skeptical of its staying power. But consumerism is no fad. The trends that drive consumerism, including generational, societal and technology changes, are here to stay. The pre-Internet days when the greatest generation accepted their physicians’ recommendations without question are gone, along with the comprehensive indemnity insurance coverage that sheltered them from out-of-pocket expenses in decades’ past.

Patients are paying more out of their own pockets for health care today. They will find a way to manage those expenses. A joint survey from the Kaiser Family Foundation and the New York Times published in 2016 found that 20 percent of working-age Americans with health insurance reported having problems paying medical bills that cause them serious financial challenges and changes in employment and lifestyle. Those challenges include spending less on food and clothing, using up most or all of their savings, and taking an extra job to pay medical bills. It’s easy to see that people’s motivation to find ways to manage expenses with that kind of impact on their lives is very strong.

Consumers won’t continue to tolerate the lack of transparency in health care

Imagine shopping for a refrigerator or a car with the understanding that you will know the price only after the goods are delivered. And by the way, there are no returns, even if the item you purchased doesn’t work. Consumers would never accept in any other market the limited-to-nonexistent price and quality information that is still the norm in health care. Yes, health care is different, but that argument is wearing thin. What consumers are asking for is reasonable—and it’s time for health care leaders to realize that.
Because hospitals, health systems, and physician practices have been slow to step up with price and quality information, third party companies like Healthcare Bluebook are stepping in, seeking to cure what they call “price blindness” in health care. In March 2017, the Nashville, Tenn.-based company made its online price comparison tool, which is otherwise available only through employers as an employee benefit, available for free to Nashville-area residents. Healthcare Bluebook bypasses the lack of individualized insurance information (a key determinant of out-of-pocket price) by ranking hospitals and outpatient facilities based on how much more or less than the “fair price” a service is expected to cost there.
It remains to be seen whether these forays into direct-to-consumer price information will be effective for either consumers or the companies. But providers need to ask themselves: do they want a third-party intermediary complicating the relationship between them and their customers? Or will they choose to view the price transparency challenge as an opportunity to build strong and lasting customer relationships?

It’s too soon to draw conclusions about low levels of consumer engagement

Recent years have seen a flurry of activity in the price transparency arena, as health care stakeholders realized how much work needs to be done. But use of price transparency tools has remained stubbornly low, leading some to give up on price transparency as a lever for reducing health care costs or facilitating better decisions. However, it’s simply too soon to make any meaningful assessment of consumers’ health shopping behavior. Price transparency tools are currently a spotty patchwork of incomplete information, many with interfaces that are unfamiliar and difficult to use. Compare shopping for childbirth services to shopping for an airline ticket, for example. The former is likely to require hours of work, including web research and multiple phone calls, and the results will likely come with all kinds of caveats. The latter can be accomplished in minutes with 100 percent certainty.
How can we expect large numbers of consumers to price-shop for health care when the process is still more complicated and time-consuming than it is for any other consumer service, and the outcome of the effort is far from assured? Only the most motivated and sophisticated consumers are likely to have both the ability and the tenacity to navigate their way through this process. Low levels of health insurance literacy contribute to the challenge. For example, research conducted in 2015 by the Kaiser Family Foundation found that only about half of those surveyed could calculate what their out-of-pocket costs would be for a hospital stay, given specific deductible and copayment information. And only 29 percent were aware that an insured person might receive care from an out-of-network physician at an in-network hospital.
Nonetheless, research on consumer behavior is being done and conclusions are being drawn. If decision-makers conclude that people will not or cannot act more like consumers when it comes to health care, consumer-directed health plans and other solutions that put consumers in charge of their own health care may fall out of favor, opening the door for less market-based or more paternalistic approaches.

Consumerism is more than transparency

Price transparency is just one piece of the consumerism puzzle. That’s why HFMA worked with other industry stakeholders to develop best practices that govern financial interactions with patients at every touchpoint. The best practices encompass not only price estimates but also the appropriate time and place for financial conversations, eligibility for financial assistance or discounts, policies for serving patients who have unresolved accounts, topics that should be covered during routine financial discussions, and more. To date, more than 200 hospitals and health systems have adopted these best practices.
An unnecessarily stressful financial experience can leave a patient significantly dissatisfied. It can influence a patient’s attitude toward health care long after the encounter is over. The financial experience deserves the same attention from health care leaders as the clinical experience.

Commitment must come from the top

Telling consumers what they can expect to pay out-of-pocket for health care isn’t easy. Technology, logistics, and training are among the obstacles. But the biggest obstacle to embracing consumerism may not be operational at all — it may be leadership ambivalence. Some leaders are concerned about what the public will see when the veil is pulled back on prices. Others worry about the impact of transparency on prices that have been negotiated with health plans.

When we asked a group of finance leaders at a recent HFMA Revenue Cycle Conference how well their organizations are addressing price transparency (defined as giving patients information about their out-of-pocket financial responsibility), only 25 percent said that they were addressing it well. 
Yet if we phrased the question differently — if we asked them if they have a patient-centric approach to revenue cycle — most would say they do. In my experience, the term “patient-centric” has been overused to the point where it’s losing its meaning. What will it take to put some substance behind that claim? For starters, top leadership must realize what is at stake with consumerism. As the health care market becomes more like retail markets in terms of ease of shopping for price or value, hospitals and health systems will face increasing competitive pressures, not only in relation to their peers but also with retail competitors. Some retail competitors are already providing consumers with access to price information on smartphones and via mobile apps.

The acute care sector often defends the cost structure that justifies higher pricing. These arguments, while valid to some extent, only go so far. Ultimately, the market will determine the pricing that is acceptable and sustainable for various services, especially those that are commoditized, such as clinical laboratory and diagnostic imaging, or those that are readily available elsewhere, such as ambulatory care. Making price information hard to find will not change that reality. 

Three ways to get started with price transparency

Prioritize high-volume, shoppable services. Don’t try to tackle the whole charge master. Start with services like imaging, childbirth, or elective outpatient procedures that lend themselves to price shopping by consumers.

Get input from consumers. Health care is local. Get input from consumers in your area about their frustrations with the financial experience and what would be helpful to them. Start a Patient and Family Advisory Council or tap into the expertise of your existing group.

Collaborate with health plans. Health plans are the primary source of price information for patients with health insurance. Work with your contracted health plans with to ensure they know about your transparency efforts and the information patients are receiving from both sources is consistent.

Going forward, the choice hospitals face is whether to be transparent and to re-evaluate pricing strategy by considering options like bundled payments, flat rates, and self-pay rates—even “loss leaders” and price guarantees—or to watch as volume shifts to competitors that are willing to provide up-front pricing and that can demonstrate better value. In a time of transformational change, there is little room for ambivalence. The choice of whether to shape your organization’s future or watch from the sidelines is yours to make.

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