"Recasting Your Practice for Consumer-Driven Health Care"
What you need to do to stay successful in this changing healthcare environment.
Gil Weber, M.B.A.
Reprinted with permission of the publisher.
Skin & Aging, Volume 14 - Issue 11
November 2006 - Pages: 34-39
In growing numbers, payers and employers are taking a position that the most effective way to get a grip on runaway healthcare costs is to involve patients directly in the financial management of their care -- in deciding exactly how, when and where the healthcare dollars will be spent. Years of wringing out costs at the provider level have reached a point where there is nothing left to wring. And so those who have paid the bills for so many years now seek a fundamental change -- a redefinition of who is the purchaser of health care, and who must assume responsibility for managing the spending.
In a nation where nearly everyone agrees that medical costs have spun out of control, consumer-directed health care (CDHC) is the latest attempt to save the healthcare system by reining in costs while, at the same time, increasing overall quality of care. This newest version of the insurance game makes consumerism the primary focus of the spending equation, as patients assume responsibility to manage a pool of healthcare dollars funded by employers and their own contributions.
No longer will patients be responsible only for nominal co-payments on office visits and drugs, plus relatively small amounts for coinsurance or deductibles. Now they will have to dig more deeply into their own wallets to cover a significantly larger share of healthcare costs. The fundamental thought is that until patients feel financial "pain" in the wallet as a result of their own healthcare spending, no significant changes in addressing runaway costs will occur.
Complicating Patient Care and Profitability
If patients are in control of where and how healthcare dollars are spent, and if they are given sufficient, understandable information on quality and costs, they will apply all the powerful elements of consumerism and become more conscientious patients. And the natural consequence will be lowered healthcare costs, or so say those backing CDHC.
But many don't see CDHC as such a simple solution -- they see complicating factors that could create many new and troubling problems for those who deliver the care. For example, putting so much more financial responsibility onto a patients' shoulders will inevitably lead to some amount of delayed or deferred care, creating situations where patients conserve spending to their detriment.
It's easy to see how this concern could manifest itself with patient compliance. For example, a patient might stockpile some of a prescription so as not to incur another, possibly significant, out-of-pocket cost if the condition reoccurs. Or, a patient referred for tests, or to a specialist, might not follow through. These actions certainly would save on a patient's out-of-pocket costs and save overall costs to the healthcare system but could put the patient at increased risk.
And CDHC raises significant financial worry for some physicians who are used to a managed care system in which patients are seen regularly for both preventive and condition-specific care. If patients in CDHC programs suddenly stop coming in as often simply because they have to cover more of the costs, then the financial ramifications for medical practices are ominous. And if patients start to select their caregivers based not on any legitimate understanding of clinical qualifications but, rather, simply on who is "cheapest," then the financial fallout could be profound.
Let's look at some of these new and complicating issues, and also at some ways to position your practice to best address this growing trend of CDHC.
CDHC: A Growing Trend
No matter how you might feel about CDHC, it's here and it's likely to grow in the short term. We don't know yet if CDHC will be widely embraced long-term by a large percentage of patients, and if it will become the 800-pound gorilla of health benefit plans. But some, or many, of your current patients will switch to these high-deductible programs.
A Patient-Focused Response
Ignoring this emerging trend in healthcare delivery will risk putting your practice at a great competitive disadvantage. Consumerism in health care will require adjusting to a new set of requirements and making changes in some key operational policies. Now is the time to think through these changes so that your practice has a well-structured, patient-focused response to consumer-driven, price-sensitive change.
Your patients will be asking you (and themselves) some questions not typically raised as part of doctor-patient discussions under traditional health-benefit plans. For example:
- Do I really need the recommended care?
- Can I afford the care, and are there less expensive alternatives?
- Do I need the care immediately, or can I defer it for some period of time?
- Is the potential outcome worth the cost, or will my quality of life be pretty much the same whether or not I get the recommended care?
- What difference will it make in my life after the expense?
Perhaps the first issue to consider is how to attract patients to your practice. When patients are no longer limited to traditional closed panels, suddenly your practice will be but one choice in a much larger competitive pool. Patients will want to know why they should visit Dr. "X" rather than Dr. "Y."
Patients paying much more out of pocket will be more selective, so differentiating the practice will be essential for success. This will be true for all dermatology services but, particularly, for cosmetic/elective procedures. Do you offer something newer or better? If yes, make that known.
One of the first operational changes you should implement is a concerted effort to retrain staff to rethink appointment scheduling. I suggest rescheduling all follow-up appointments before the patients leave your office. In the past it might have been okay for staff to say to the departing patient something along the lines of "The doctor would like to see you back in 6 months. Do you want to call us back to schedule?"
Unfortunately this "old-school" way gives patients an easy excuse for not calling, and to "slip off the hook," which will result in more patients than ever not calling back to schedule follow-up appointments.
Instead, staff should make a concerted effort to schedule all follow-up appointments with the patient standing at the check-out desk. It takes only a minute or two to offer a selection of days and times, and patients with an appointment scheduled for them are more likely to show up.
It's also going to be essential that staff confirm appointments not less than 2 days in advance for all patients. While that may require additional staff resources, the payback resulting from fewer no-shows and late cancellations can be considerable.
And practices on the cutting edge will start using their electronic medical records (EMR) systems to build lists of patients with specific conditions. Those practices will start proactive outreach programs seeking to bring those patients in for monitoring and follow-up of specific, potentially problematic conditions.
Preparing Your Staff
Patients with lots of choices will expect to be treated royally. One obvious way to win or lose a choosy patient is in how staff interacts on the telephone.
Phone protocols must be reviewed and modified to make them more patient-friendly. Phones must be answered by a live person, and answered in the first couple of rings. Patient calls should not automatically rollover into a voice mailbox. That's a sure way to turn off established or prospective patients, and cause them to look elsewhere for care.
Increasingly, patients with high-deductible plans may start calling the office (perhaps often) in the hope of securing free advice, and of avoiding the cost of an office visit. This can be viewed as an incredible annoyance, or it can be used as an opportunity to "sell" the practice to an undecided patient.
To that end you'll want to pay particular attention to how the phone is answered, how patients are transferred and, particularly, to whom they are transferred. The first transfer must be to someone who has the knowledge to provide correct, useful answers, which will instill confidence in the patient that the practice is the one he or she should select. This means that those who answer the phone must be trained to correctly triage calls, and there must be a policy in place to determine when calls should go directly to a physician (or to the physician's voice mail), of if they can appropriately be directed to staff.
Setting a Fee Schedule
You're sure to hear the term "transparency" in discussions of CDHC. When patients in CDHC plans face significant out-of-pocket expenses for your services, they're going to be asking a lot of questions about the costs. In the past, patients really didn't care what your U&C charges might be, or what HMO "Z" or PPO "Q" might have paid you. Now pricing is going to be a huge issue.
Carefully review your fee schedule(s) and get them in logical order if they are not already. Whether you structure those fees on some multiple of Medicare allowable or, in the case of skincare products, a percentage mark-up over cost, it will be important to have a fee schedule that is consistently applied across all services you provide.
Once you have a fee schedule that makes sense, the next step will be to train key staff in how to present that pricing information to patients. It will be important to put tight controls on which staffers are authorized to discuss pricing with patients -- this is not something that should be done capriciously or without regard for potential consequences. (Think: "Loose lips sink ships.")
It is possible that you might encounter some regulations or requirements in certain managed care contracts that specify how or what information needs to be made available to patients, so be sure that staff responsible for discussing fees with patients understand what they can and should and should not reveal.
And remember this important point: With increased pricing transparency, a "shopping" environment will be created where some patients will be making physician and care selections with little or no regard for quality but, rather, based on the bottom line.
Under the "old school" ways of third-party care, practices collected most of the reimbursement from the payers. Accounts receivables typically were manageable, and most payers did meet their obligations even if the payments did not always arrive as quickly as you might have wished.
Now, under the "new school" of CDHC, patient A/R accounts will take on exponentially larger significance. But unlike traditional arrangements with health plans, with CDHC you won't have the protection of prompt payment laws that don't apply to patient debts owed to physicians. You'll want to avoid the costs of billing and rebilling patients. So your practice must have a written policy on how much and when to collect from the patient. (See "Rethinking Your Accounts Receivable Policy" below.)
In some cases your policy will be influenced by plan protocols and claims processing requirements. Some plan requirements will be problematic -- those that would insist on adjudicating your claims before you can collect the patient's co-payment, co-insurance or deductible. This is surely going to increase the chance of problems collecting from some patients, particularly as a patient's financial responsibility increases.
You'll either want to negotiate the right to collect patient-owed amounts up-front or, perhaps, consider not participating in a plan whose protocols or benefit structure(s) would cause you to face possibly unacceptable A/R risk. And consider implementing a policy of collecting all, or at least a considerable part, of surgical co-payments/co-insurance prior to the date of service. A patient who has pre-paid is far less likely to no-show or become a collections problem case after the fact.
Patients Seeking Discounts: How to Respond
Are some of your patients going to try to negotiate for your services? Count on it.
Many consumer groups have started advising the public to ask for discounts from physicians. People who would not think of asking their plumber or car mechanic for a special deal are being told to ask the doctor for a deal. Insulted?
That's understandable, but let the immediate sense of indignation lessen and then consider that there might be a benefit to offering some sort of nominal discount when requested.
Remember that you should not waive co-payments since collecting those is almost certainly a contractual obligation. But, for example, a modest discount offered in exchange for full payment of charges up-front will likely result in good word of mouth to other patients.
If you do choose to offer a discount, be certain that the amount of the discount makes sense in the grand scheme of your fee schedules for all of your plans. In no case should you offer a discount that would drop the amount collected below your lowest paying third-party plan.
Protect Patient Privacy
For most patients it's not an issue to be asked for a $10 co-payment at the check-out window, even if another patient is standing nearby and can overhear. But what if that patient is being asked for $500 or $1,000, and he doesn't have it with him? Surely having that lack of funds aired publicly will put the patient into a very uncomfortable situation.
Set up a quiet, private area where more significant financial matters can be discussed in private with a staff member well versed in such matters as setting up a patient payment plan.
The Bottom Line: Collect, Collect, Collect
More than 2 years ago, I made the following recommendations in Skin & Aging (March 2004). The financial sense of those recommendations rings truer now as the number of patients enrolled in CDHC plans continues to grow.
"Practices that do not do a superior job collecting at the front end could find that they are saddled with all sorts of bad debt, something the practice was not faced with when insurance companies paid most of the bill and patients only had to come up with a nominal co-payment.
Two points will be key to maximizing your collections under these new CDHC plans:
1. First, there must be no surprises at checkout for your patients or for the staff. Each patient's potential financial responsibility should be discussed prior to the day of service, and each patient should be told that payment is expected on the day of service before they leave. Of course, you can't know the exact amount owed until after the patient has been seen, but at a minimum staff needs to know the broad specifics of each patient's coverage (by calling the plan, if necessary), and then must convey that responsibility to the patient.
2. Second, staff responsible for collecting at the time of service must be told in no uncertain terms that this is a critical part of their job responsibilities. You may find that it's worthwhile to do performance evaluations measuring collection success, and make those performance results part of annual reviews. Or, you might find it worthwhile to bonus the staff if they achieve certain collection targets over designated time periods. Whatever, the case, the staff must get on board with collections if you're to profit from participation in these plans."
Changing With the Times
To succeed, your practice must formulate strategies that recognize and appropriately respond to where this new healthcare consumerism is likely to be going. Those strategies must reflect your practice's core values and capabilities to deliver patient-oriented, patient-friendly care.
Effectively planned and executed strategies can make your practice stronger and more competitive vis-a-vis other dermatology practices in the community.
Effects of Consumer-Directed Health Care
Early studies on consumer-directed health care show that there is evidence of modest favorable health selection and lower costs and lower cost increases, according to a recent article published online in Health Affairs on Oct. 24. The studies reviewed for the report show that the early effects of consumer-directed health care on quality are mixed, with evidence of both appropriate and inappropriate changes in care use.
According to the report, consumers sharing more of the costs for health care cut both unneeded and needed care. Another study cited found that consumer-directed plans might attract healthier-than-average people.
The report found that if everyone moved from a traditional plan to a consumer-drive plan, there could be a one-time reduction in healthcare use of 4% to 15%, though coupling these plans with tax-free health savings accounts would cut the reduction in half.
Researchers concluded that more research was needed to determine the long-term effects of consumer-directed health care.
Rethinking Your Accounts Receivable Policy
With patients responsible for a greater slice of the financial pie it will become essential that every practice examine and refine its A/R policy. To that end you might consider creating a patient promissory (patient financing) system. If you do this then a concise written policy must be put into place, and it must be applied consistently if staff is to implement it effectively.
A patient promissory system should require the patient (or financially responsible party) to sign some sort of promissory note that would include at a minimum:
1. name of the patient and the financially responsible party (if different)
2. the total amount of the patient's debt and a payment schedule.
Other data elements will need to be included, and you're advised to seek the guidance of a qualified financial (loan) advisor to create an appropriate and binding legal agreement establishing both the debt and consequences of failure to service that debt.
And, of course, the practice must have a policy in place for addressing the needs of patients who return for additional care but who have fallen behind on their outstanding debt service obligations.
The materials are not intended as legal advice, nor is the author engaged in rendering legal services. The materials are not intended as a replacement for individual legal or professional advice.
Information contained herein is presented only for illustrative purposes, and it should not be used to establish any fees or fee schedules, nor is it intended and it should not be construed as encouraging any user of the materials to take any actions that would violate any state or federal antitrust laws, tax laws, or Medicare or Medicaid laws.
Gil Weber is a nationally recognized author, lecturer and practice management/managed care consultant to physicians and industry. He has served as Director of Managed Care for the American Academy of Ophthalmology.