Chief financial officers confront major challenges today, including managing healthcare systems' transition from fee-for-service to fee-for-value reimbursement and dealing with the rise of consumerism. Both will be hot topics June 26-29 during this year's Healthcare Financial Management Association's Annual National Institute in Las Vegas. Modern Healthcare editor Merrill Goozner asked HFMA CEO Joseph Fifer—who spent 11 years as vice president of hospital finance at Spectrum Health in Grand Rapids, Mich., before taking his current job in 2012—about the challenges facing his 40,000 members. The following is an edited transcript.
Modern Healthcare: How are your members reacting to the pace of change in healthcare?
Joseph Fifer: With all these changing economic models—risk-sharing and other things going on and entities coming together—it requires a different skill set and a different way of thinking to be successful on the financial side. A couple of years ago, there was a negative sense about these changes. There was a lot of uncertainty about where this industry is going, and it cast a pall over things. There is still a lot of uncertainty, but it feels like there is a more positive or constructive tone in the industry.
MH: What accounts for the changing mood?
Fifer: The problem is more identified than it was three or four years ago, when we had the Affordable Care Act, which was at its primary level insurance reform, and we had the Supreme Court case hanging out there. We hadn't even gotten into any of the other provisions of the ACA that pointed the industry to risk-sharing and different payment models. Now, even though we have a long way to go as an industry and the models are still changing rapidly, there's more direction on where the industry is going. For finance people, it means we may have a large problem, but we have identified it and that means we can work on it.
MH: Do you think the transition to risk-based and value-based payment models is permanent?
Fifer: I do think it's permanent. The payment reform is taking place with both Medicare and Medicaid and on the private side, and where those two overlap—with Medicare Advantage and Medicaid managed care. The shift away from volume-based fee for service is real. And the targets that HHS Secretary Sylvia Mathews Burwell put out there have put an exclamation point on that direction.
MH: How is the current operating environment—with falling volumes, mergers and acquisitions and falling investment income—affecting systems?
Fifer: When you have a strong balance sheet, you can weather the investment storm and the operations storm. That's why we're seeing systems growing in size and the number of independent organizations shrink. I don't see the investment portfolio having a material impact on operations. Hospitals take care of patients. That's what they do. Caregivers have no clue the investment portfolio has done weakly this year.
MH: Has there been success in integrating physician acquisitions into hospital systems? How is it playing out financially?
Fifer: It's not just hospitals and physicians coming together but health plans and providers collaborating. If you were to summarize the HFMA's strategy, we look at it three ways: You have hospitals and health systems in one circle; physician groups in one circle; and payers in one circle. These are overlapping like never before. I see evidence that these collaborations are becoming more prevalent; they're becoming less adversarial.
But there are regional differences. There are areas of the country where those circles are not even touching. We'll have a number of physician presenters at the Annual National Institute. We wanted to make sure our agenda didn't look like what the agenda looked like the past 10 years. We wanted to make sure it reflected what was going on in the industry.
MH: How has the rise of consumerism in healthcare affected the way hospital finance departments work?
Fifer: Consumers are more demanding than ever and that's not going to go away. Two things contribute: The total out-of-pocket costs for patients are getting bigger every year. Plus, you read more about healthcare pricing in the general media and social networking. Those are both raising awareness. We're seeing more and more health systems putting their prices out on the Web; providing patients with out-of-pocket estimates pre-service. We also have developed communications best practices for systems that they can adopt: What conversations should take place with patients in different settings? The one in the ER is different than the one for a scheduled procedure, for example. Folks can look at their own process and performance. If they comply with the criteria, they get a grade as a Patient Financial Communications adopter. We have over 130 organizations that are PFC adopters, 127 of which came in just the last year. So we're seeing more and more interest at systems and hospitals that want to say: We comply with the standards that are set by the HFMA.
MH: How is the industry progressing in billings and collection reform? Most people are still being hit with confusing bills.
Fifer: We have a long way to go, no doubt. We have a responsibility to make this understandable to our patients. The industry has finally gotten some serious traction on this issue. I have not been able to say that for years. I started on the issues of price transparency in the mid-2000s. I have been passionate about this issue for a long time. I have never been able to say until this year that we're making real progress. Does that play out in what's reported in newspapers and magazines and social media? In our industry, you can find an anecdote to prove anything you want. There are millions of transactions that take place every day. I'm looking at the overall attitude. I think we're finally making some serious progress.
MH: Congress and many states are starting to take up the issue.
Fifer: We didn't create guidelines to prevent legislation. We provide guidelines for the industry to use. If there's going to be legislation, that's a model that the legislation can be patterned after. If the legislative or regulatory community looks at our work, they'll see good material to base their legislation or regulation on. You see all kinds of legislation in the states moving forward. What I don't like to see in that legislation is the focus on charges—legislation that requires health systems to post their charges. That just doesn't help. Unfortunately, that's what you see in many situations when the legislatures get involved. In a way I don't blame them. This industry is hard to understand.
MH: Why is that a misunderstanding of the issue?
Fifer: People don't really pay charges. If you have insurance, the insurance company takes over with its prices. If you have no insurance, almost every system has an automatic discount from those gross charges. These charges are basically a tool to plug into some other calculation for some other reimbursement. It shouldn't be part of what is considered transparency.
MH: What is going on inside hospital billing and collection departments to become more patient-friendly?
Fifer: I'm seeing more and more health systems that have patient satisfaction as a stated organizational goal and sometimes it's tied to compensation for executives. We're seeing more and more systems realize that how we handle their whole financial part of the transaction has a significant role to play in overall satisfaction. It's not just driven by clinical care. As that becomes more prominent, you're going to see more organizations focusing on the kinds of conversations they need to have with patients on financial matters.
MH: So what are the main principles?
Fifer: It's, in the simplest terms, clear communications as soon as possible, including an estimate if it's possible. The sooner in the process that conversation takes place is the best practice. Obviously, it isn't always possible in the ER or places like that. Our guidelines don't say anything about EMTALA. But after the service, you need to provide clear communication.
MH: What is the current thinking on how to handle unpaid bills and bad debt from patients?
Fifer: We have a set of guidelines on medical debt for hospitals, health systems and physicians—what to do and what not to do. It's a delicate balancing act that revenue-cycle directors have to play between having processes that collect what is due to the health system based on insurance coverage or lack thereof. They have to have processes that allow them to collect what's rightfully due them, and stops them from going too far and being too aggressive. That's a tricky line. Healthcare systems are making those decisions much more consciously now than many years ago.
MH: Does it mean they're less likely to go into court or refer to collection agencies?
Fifer: You hear less about it now. What I'd like to think is that organizations are having more conversations upfront than they did before. I know there are a lot of health systems out there that will make a determination upfront about a patient's ability to pay, and if they satisfy certain criteria, they will not even attempt to make the collection. It used to be you ran everybody through the collection process. Now, if they figure they're not going to get paid, they won't even try to collect. That's the kind of thing that comes from getting better information from patients upfront.