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April 02, 2016 01:00 AM

Building bundles for self-pay patients

Beth Kutscher
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    “We looked at the pieces that were impeding the healthcare system. We made healthcare bundles scalable," said Paul Ketchel.

    The proliferation of high-deductible plans is making consumers more price sensitive. Paying $1,000 or more out of pocket encourages people to shop for healthcare services, whether it's an elective procedure or routine care.

    Hospitals are still figuring out how to compete for this self-pay business. Posting prices is a start. But today's tech-savvy patients also want to shop online—whether it's to compare prices and quality or to make the purchase.

    One problem for healthcare providers is that they send multiple bills for a single episode of self-pay care. MDSave, which has its roots in Nashville but hires its developers in Silicon Valley, offers providers a way to package their services into a single bundle for purchase online. The company's clients include Catholic Health Initiatives, Ascension Health and Community Health Systems.

    The company's technology draws from Medicare billing codes and procedural codes to create an appropriate rate to charge for a single episode of care or bundled service. The bundle combines the fees for the specialist performing the procedure, the facility and all related services such as anesthesiology and radiology.

    Health systems can list procedures on MDSave's public website, which provides an online healthcare marketplace for patients to compare prices as well as execute the purchase. MDSave collects payments before the procedure and disburses the revenue to the individual providers involved in the patient's care.

    “They had no way to bundle those episodes of care,” said Paul Ketchel, the company's CEO and co-founder. “We looked at the pieces that were impeding the healthcare system. We made healthcare bundles scalable.”

    Patients can shop on MDSave for hundreds of procedures, including appendectomies, mammograms and even sleep studies. About 24% of the patient volume comes from surgical procedures, its fastest-growing segment, Ketchel said. “The user of MDSave is anyone with an out-of-pocket medical expense,” he said.

    Dr. Timothy Huggins, a gastroenterologist in Weatherford, Texas, has been working with MDSave to offer colonoscopies and endoscopies to uninsured patients, more than 20% of his practice. Patients with worrisome symptoms such as rectal bleeding were waiting six or even 12 months before undergoing the procedure because they were worried about how to pay, said Charita Garner, practice administrator.

    MDSave

    CEO AND CO-FOUNDER

    Paul Ketchel

    HEADQUARTERS

    Brentwood, Tenn.

    INNOVATION

    The company's technology uses billing codes pulled from providers to establish a bundled price for an entire episode of care that can be purchased online.

    STATUS

    MDSave has raised more than $14 million and projects more than $15 million in revenue this year.

    Now Huggins treats at least three patients a month who have prepaid for an episode of care. They pay a discounted bundled price of $2,100 for a colonoscopy that used to cost $8,000 for self-pay patients at Weatherford Regional Medical Center after including separate fees for pathology, anesthesiology, the physician and the facility.

    The upfront payments have allowed the practice to save on billing and collection costs, Garner said. Moreover, patients who pay upfront are more likely to schedule follow-up visits because they don't have an unpaid bill hanging over their heads.

    MDSave works mostly with large hospital groups and ambulatory surgical centers. It already has a presence in 24 states and 120 markets, Ketchel said. It is growing at a rate of 20% month over month.

    MDSave has discovered that patients aren't necessarily looking for the lowest-cost providers. “I don't think it's really a race to the bottom,” Ketchel said. “It's more a race to the middle. People will choose providers if they're within 20% to 25% of each other. What matters most is seeing a well-known system.”

    Although providers can set their own rates, MDSave's data suggest consumers are willing to pay about 120% to 145% of what Medicare pays, Ketchel said. For consumers, buying a bundle of services can mean savings of about 40% to 60% in out-of-pocket costs. The benefit for providers is an increase in collections. “We're guaranteeing zero bad debt because those claims are filed upfront,” he said.

    MDSave also has rolled out a healthcare marketplace called MDSave Plus, which is geared toward employers. MDSave negotiates prices with providers and then passes the savings along to employees, who can save up to 60% on their medical costs.

    The Brentwood, Tenn.-based company, which has an office in San Francisco, has raised more than $14 million from investors, including MTS Health Partners. Its board of directors includes former Senate Majority Leader Dr. Bill Frist. It is projecting more than $15 million in revenue this year, after earning $5 million last year.

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