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This presentation provides insight into the future of revenue cycle issues as healthcare services and products become more commoditized - a good thing if you're a patient - not so great if you're a provider unless you're prepared to respond to the challenge.
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Revenue Cycle in The World of Commoditized Healthcare
May 1, 2014
Sheldon [email protected]
(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