Revenue cycle in the world of commoditized healthcare

Revenue Cycle in The World of Commoditized Healthcare

May 1, 2014

Sheldon Hamburgershamburger@thearistonegroup.com

(248) 613-7166

If you remember just one thing…..

Your next CFO isn’t coming from the health industry.

Your next CFO is coming from industrial USA.

Great news!

•Everything’s getting better •And cheaper•And more accessible

Bad News….

Our healthcare “insurance” timeline

1940s

1950s

1970s

1990s

2000s1960s

1980s

Expansion of healthcare “industry"

The Good

• Development of new “stuff”• Procedures• Drugs • Cures• (1974 – 2010) # patents for drugs &

surgical innovations increased by a factor of 6 per NEJM

The Bad

• “Too much” spending?

• Not “too much”, just unpredictable

$14B

$6B$2B $8B

The Ugly

• Efforts to control exploding healthcare spend • Copays ($1→$5→$10, $10→$20→$40)• Deductibles ($500→$1,000→$5,000)• Squeezing providers• HMO, PPO, ACO, ABC, 123

• Result: exploding healthcare spend

A funny thing happened along the way

Cost reduction over time

Attributes of a “commodity”

Quality predictable even if variable

Availability – it’s everywhere

Convenience – it’s easy to get

Replicable – “anyone” can do it

We see this every day

We see this every day

“Commodity” services

• Podiatry• Dermatology • Obstetrics • Orthopedics• Oncology• Gastroenterology ………

It’s hard to make a wrong decision

2013 Study – How patients choose Drs

Medical Retail

Acceptance of insurance plan

Cost

Bedside manner/empathy Customer service

Proximity of office to home, work, or school

Location

Convenient office hours Store hours

Effects on revenue cycle

• Charges/pricing• Your customers• Pricing models• Retail-like offers

• Payment trends• Payer views• Patient views• Unexpected pluses

• Customer service • Patient expectations

New contracting models

• Payers shifting risk to providers• ACOs, bundled payments, reference pricing• Allows providers to make their own rules• Driving simplification to improve profitability• Telehealth • (All this could eliminate the need for what we just built)• Effects on revenue cycle driven mostly by these models

– but not exclusively

Effects on revenue cycle

• Charges/pricing• Your customers• Pricing models• Retail-like offers

• Payment trends• Payer views• Patient views• Unexpected pluses

• Customer service • Patient expectations

Who’s your customer?

• Financial responsibility• Payer – contracts, big bills• Patient – copays/deductibles

• Increasing for decades• HSA/HRA/FSA/Cash

• Buying decision • Payer – defines benefits(network)• Patient – decides where to buy

Charges/pricing models

• Simplification• Easier for customers (payer & patient)• Easier for provider to manage

• Fixed priced models open doors• Ability to offer discounts/coupons/packages

• Capture costs in addition/instead of fees

Customer pricing

→

Simplified Pricing Models - Payer

• Shifting risk downstream thru packaged pricing• ACOs – longitudinal care• Bundled payments – episodic care• Reference pricing

• What does the provider get in return for taking risk?• Better payment terms (in advance!)• Administrative simplification (no claims)• Preferred patient referrals

Simplified Pricing Models - Payer

• Reference pricing• Payer limits its payments (e.g., $10,000)• Patient may opt to pay difference (e.g., $2,000)• How will you bill the patient for the $2,000?• What extras will you offer?

• Telehealth• Charging a patient you never “see”

Simplified Pricing Models - Patient

• Patient paying 1st dollar makes packages easier • High deductible policies• Packaged pricing

• Creative care packages• Ex: “routine” visit & diagnostic tests• Ex: ortho follow up – exam & PT test• Think lifetime free rotation & alignment

• Concierge care• Selling access/priority/off-hours care

Simplified Pricing Models - Patient

• Discounts/specials• $25 screenings this week only• Cardiac panel for an extra $10

• “Frequent fliers”• Promotion for meeting a goal• Weight loss, cholesterol level

• Referral fees/gifts• Gym memberships/personal trainer• Weight loss program fee• Spa/massage

Simplified Pricing Models - Patient

•Your own drug program• Limited formulary• $0 copay

•Regulatory/contract challenges• Waiving copays

Cost Capture

• Capture costs in addition/instead of fees• Current model is charge capture in

order to generate claims• Now we need to capture costs in

order to measure margin

Other Issues

• No-charge visits• Software/workflow changes?• Affects on analytics

Effects on revenue cycle

• Charges/pricing• Your customers• Pricing models• Retail-like offers

• Payment trends• Payer views• Patient views• Unexpected pluses

• Customer service • Patient expectations

Payments - Payer

• Global/bundled payments• PMPM, single episodic payment • Allocations• Effects on analytics

Payments - Payer

• Progress payments• Typically for episodes• Ex: ½ at onset, ½ at completion

Payments - Payer

• Advances• Estimated fees at beginning of each quarter• Billing against a pool of money• Periodic reconciliation

Payments - Payer

• Gainsharing/withholding• Typically part of bundled payments• Fee-for-service along the way• Periodic review/reconciliation

• Result: payment or claw back

Payments - Payer

• “Realtime” transaction processing• Payment authorization• Deductible utilization (non-itemized?)

• Perhaps via the HSA/HRA/FSA

Payments - Patient

• Retail-like experience• Complete transaction at POS• Realtime payer transaction processing

• Authorizes payment “now”• Think credit cards

Payments - Patient

• Retail-lite experience• Internet/PayPal®/Mobile• Storing credit cards• Online payment plans - BillMeLater®

• Also used at POS

Other Issues

• Collection• Need is reduced as more collected at POS• Realtime financing further offloads the issue

Other Issues

• Rejections/pends are reduced/eliminated• Regulatory/contract issues with “discounting/factoring” copays/deductibles

Effects on revenue cycle

• Charges/pricing• Your customers• Pricing models• Retail-like offers

• Payment trends• Payer views• Patient views• Unexpected pluses

• Customer service • Patient expectations

Customer service expectations

Customer service expectations

• Independent of “commoditization”• High availability = 24x7

• Internet availability for questions• Clear view of bills/payments• Including insurance transactions

• Ability to show transactions in various ways• Sort by date, procedure, episode, payment• Filter out non-financial items: rejections, etc.

Customer service expectations

• Responsiveness• Phone: hold times, call-back delays• Email: responsiveness, HIPAA• Online chat: responsiveness, HIPAA• Skype, Facetime, etc: HIPAA

Brief notes on cost management

• This is new to healthcare• Key to profitability

Questions?

Sheldon Hamburgershamburger@thearistonegroup.com

(248) 613-7166