In June, the Medical Group Management Association released the results of a questionnaire that ranked members' most pressing practice management challenges. In this edition of “Practice Makes Perfect,” we will tackle No. 10 on that list: understanding the total cost of an episode of care.
On one side of the coin, medical-practice administrators and executives are in the midst of navigating transformative and evolving payment models for their physicians and practices. On the other side, patients seem to be more aware of their personal financial responsibilities and may use this information to assess whether or not they will make an appointment with their physician.
By using the following steps, physician practices can communicate more effectively with patients about their financial responsibilities to help them evaluate and assess the cost of an episode of care.
1. Recognize that care costs will vary based on the services that have or will be provided, and whether the individual is a new or established patient. A medical practice will incur expenses that include staff, supplies, technology and provider costs when patients are seen in the office.
2. Factor in the office overhead associated with seeing patients. Overhead costs will include the obvious expenses for support staff, building and occupancy expenses, utilities and medical and drug supplies. These costs will also include (perhaps less obviously) expenses such as bank charges and credit card transaction fees; billing services; staff, provider and business insurance; medical malpractice liability coverage; marketing; payroll, benefits and taxes; and technology and training. All of these costs constitute practice expenses associated with a patient visit beyond clinical care.
3. Consider whether the care is episodic, comprehensive or surgical to understand and anticipate the total cost of care. For surgical procedures, the provider would typically be paid a global rate that covers the cost of pre- and post-surgery office visits and the surgeon or provider's professional charges for their services in the operating or procedure room. The facility may charge a separate fee for services including supplies such as IV fluids, drugs and wound dressings, a room charge, and nursing and surgical technician support. There might be separate charges for imaging, anesthesiology and lab services if the patient needs testing, monitoring or blood products. If a biopsy is performed, there will be a second lab or provider charge for specimen processing and pathology interpretation.
Episodic or comprehensive care includes pre-admission, hospitalization, post-acute care and any hospital readmission, if needed. A negotiated episode of care or global fee typically includes the primary-care, specialty and referring physician's services. Examples of single bundled payments include hip or knee replacements and pregnancy and delivery.
4. Communicate with patients about the cost of their care. If it is challenging for experienced medical staff to determine the estimated cost of an episode of care, imagine how much more difficult it could be for a patient. It is possible that a patient may be assuming a higher percentage of his or her medical expenses if that individual is newly insured or has changed insurance plans. That also is likely the case with high-deductible health plans. And the complexity of the healthcare system has made it even more challenging to understand the cost of care.
Without guidance from the medical practice and facility, patients may not know what their personal financial responsibility will be. Although patients are provided with insurance resources to explain their benefit plans, medical practice administrators and executives can also serve as resources for patients, conveying how much of their deductible has been met at midyear, what the out-of-pocket maximums are annually, or what portion of their co-insurance may be due before receiving medical services.
Helping patients understand the anticipated total cost of their care will help them prepare for the expense, give them payment options and allow them to plan ahead if the procedure or surgery is not urgent to schedule. Medical practice administrators and executives who understand and anticipate care costs help position their practices for long-term success and sustainability, as well as elevate their patients' experience beyond the time they spend with healthcare providers.