Phoenix hospital offers price transparency and discounts for self-pay patients

Arizona hospitals were flummoxed when the state Legislature passed a law last year requiring hospitals, effective Jan. 1, 2014, to publish the prices self-paying patients pay for the 50 most common inpatient and outpatient services.

Early in the legislative debate, the Arizona Hospital Association convened a price transparency task force of about 10 member hospitals. After much discussion, only one hospital—Maricopa Integrated Health System, a 578-bed public safety net hospital in Phoenix—chose to start posting prices on its website before the law went into effect.

“Everyone else was reluctant, and there were lots of excuses,” said Mary Lee DeCoster, vice president of revenue cycle at Maricopa. “Looking back a year and a half later, that seems so old school now.”

Many states have considered or enacted legislation requiring hospitals to provide patients with more information on the prices of common procedures. Last year, the CMS released data on hospital charges for the 100 most common inpatient and outpatient services, revealing wide variations even in the same market.

This month, a multistakeholder price transparency task force organized by the Healthcare Financial Management Association recommended hospitals and health plans take the lead in providing price information. That would be a big change because hospitals historically have kept prices close to the vest.

Maricopa has led the way. In March 2013, Maricopa began publishing its prices on its website for the 10 most common inpatient and outpatient elective procedures. About 35% of its patients are self-pay, a disproportionately high share. The hospital started giving cost estimates to patients who requested them. It also introduced a single, bundled price for groups of services, including maternity care.

In addition, Maricopa Chief Financial Officer Michael Ayres ordered a 50% rate decrease in chargemaster prices, bringing rates just 1%-2% above the Medicare fee schedule. That meant that self-pay patients could potentially pay lower prices than before since self-pay rates had been based on the chargemaster. Low-income Maricopa County residents also can qualify for additional financial aide.

Through its financial assistance program, Maricopa generates about 250 patient cost estimates a month.

Since the transparency and self-pay discount programs were rolled out, DeCoster said Maricopa has seen a “meaningful reduction” in uncompensated care, though exact figures are not available before its financial results are reported. But she acknowledged that it's difficult to tease out how much of that is due to the new transparency and pricing programs. The transparency initiative coincided with open enrollment for the Obamacare insurance exchange, which may have reduced uncompensated care.

Despite that uncertainty, allowing self-pay patients to estimate their out-of-pocket costs has made Maricopa more competitive with other hospitals in metro Phoenix, DeCoster said.

The hospital found that its new discounts for self-pay patients did not affect its total collections, mainly because it already had a high rate of bad patient debt, DeCoster said. The effect of reducing rates is expected to be $30 million on gross revenue in fiscal 2014, but only $5 million on net revenue. For the year ended June 30, 2013, Maricopa reported $313.3 million in net patient service revenue and $64.7 million in bad-debt expense.

As a result of its bundled price for maternity care, Maricopa officials estimate the hospital is delivering 50 to 60 more babies a month.

Joseph Fifer, CEO of the HFMA, said Maricopa's program is timely because consumers are beginning to pay attention to prices, and that trend will grow as more people move into high-deductible health plans and become more cost-conscious healthcare shoppers.

For providers, he acknowledged, the return on investment for starting a transparency program like Maricopa's is “either very, very low or nonexistent. But that's not the motivation for this.” Some providers are starting to do it because it's the right thing to do, he said, while others are doing it because they face political or market pressure.

DeCoster said the problem now is consumers' lack of financial literacy and understanding of medical economics. “I welcome pricing transparency,” she said. “I'm thrilled the groundswell is starting to move in this direction. Consumers need to need to grab hold of us and start asking, 'How much will this cost?' ”

Follow Beth Kutscher on Twitter: @MHbkutscher