In an unusual move, Advocate Health Care recently unveiled flat prices on certain services for self-pay patients at its 56 urgent-care clinics located at Walgreens stores and at its Advocate Medical Group outpatient centers in the Chicago area.
The Downers Grove, Ill.-based system is charging a set $60 price for children's physicals for sports teams or camp, and $70 for adult physicals for employment or life insurance. It's charging $89 for treatment by a nurse practitioner for a variety of common illnesses and injuries such as earaches, respiratory infections, and urinary tract infections, and joint pain. The system previously based charges on the services delivered in each case and the site of service.
Now Advocate is working on extending the fixed-price policy to diagnostic imaging procedures such as MRIs and CT scans, combining the facility and professional charges into one unified price.
Observers outside healthcare might see these as simple, straightforward moves to bring pricing practices in line with other industries. They would expect that many other health systems are pursuing the same strategy. Those observers would be wrong.
“That's what retail organizations have been doing forever, offering a constant price that's attractive in the marketplace,” said Joe Fifer, CEO of the Healthcare Financial Management Association. “We haven't had to do that in healthcare because we haven't been a consumer-facing industry. That has to change.”
There are a small but growing number of health systems around the country that are thinking “more like retailers” and establishing clear pricing strategies to compete for consumers who face rising out-of-pocket costs under high-deductible health plans, according to a new report from the PwC Health Research Institute.
Besides Advocate, another leader in this effort is Toledo, Ohio-based ProMedica, which recently launched an online tool to give patients a close estimate of their out-of-pocket cost for the hospital part of lab, radiology and surgery services.
Advocate is “on the cutting edge” in adopting a bundled-payment model for commodity-type services,” said Joe Sabatina, who heads strategic pricing services for PwC. “I wouldn't say we're seeing a lot of that activity. That would put them on the frontier.”
Advocate's new pricing policies grew out of nearly two years of planning work, which is continuing. Scott Powder, Advocate's chief strategy officer, said the initiative -- which he calls “simplification” -- is incredibly complicated. “We've made a lot of progress, but every time you take two steps forward, you often have to take a half step back,” he said. “There's still a lot of work to do.”
I found out about Advocate's pricing reform initiative after contacting officials there following a frustrating consumer experience I had earlier this year at one of the system's urgent-care centers. I complained that I was not able to get price information ahead of time for a routine, minor medical service, while competing urgent-care centers listed a fixed price for that service. I was put in touch with Powder, who told me he had had a similar frustrating experience trying to get a price from Advocate for an MRI for his daughter. At that time, he told me he was hard at work on the problem.
Adoption of the new fixed-price strategy coincided with Advocate's taking over operation of the urgent-care centers at 56 Walgreens stores in May. It's offering the $89 price for treatment of 30 conditions, and Powder hopes to expand that to a broader set of services. The strategy is to provide both transparency and simplification for patients, particularly for those who need to price-shop because they face stiff out-of-pocket costs under high-deductible health plans.
In contrast, CVS' Minutes Clinics, Advocate's main competitor in Chicago's retail clinic market, varies its published prices based on the number of symptoms and conditions that patients present with, and whether providers deliver more than one service. Most visits fall within the published ranges, but charges can exceed these ranges in more complex cases, said a CVS spokeswoman.
Powder calls that the “Jiffy Lube” model of posting standard prices with add-on charges for extra services. “Our strategy is not prompted by competition but rather by what the future will be, and we need to catch up to that curve,” he said.
Advocate analyzed 35 different reasons people would come in for sick care and what the system would bill insurance or what people would pay out of pocket. The ballpark figure it came up with was $89. “We might lose a few dollars on a strep test, but it should have a neutral effect,” Powder said.
Advocate has received positive feedback from patients who like the fixed-price option if they pay out of pocket rather than billing insurance. But so far only about 10% of patients in the Walgreens clinics and Advocate Medical Group centers have chosen the $89 option, with most still billing insurance. “We have a long ways to go to fully understand how consumers make these decisions,” Powder said. “I don't know why they're still defaulting to insurance. It may be that's what they're used to.”
ProMedica has taken a different approach to price transparency, driven at least partly by a new state law taking effect in January. Using its new online price estimator, consumers enter their name, the procedure they seek, their insurance company, and their policy ID number. The tool considers ProMedica's contracted rate with that insurer, along with the patient's coinsurance and current deductible status, and provides an out-of-pocket cost estimate.
Since late last year, ProMedica has been working on its price transparency and strategic pricing initiative in partnership with the Advisory Board Co. and other health systems including BJC Healthcare, Carolinas Healthcare System and Baylor Scott & White Health. The collaboration has helped the systems more quickly figure out what works and what doesn't.
One big challenge faced by ProMedica, Advocate and other providers in giving consumers accurate out-of-pocket cost information is obtaining real-time information from health plans. “We're in the position of not having perfect information about whether the patient has met out-of-pocket maximums,” said Jered Wilson, ProMedica's vice president for reimbursement. “But anecdotally, we're seeing the tool is very reliable.”
Still, under fee-for-service payment, predicting costs can be an inexact science due to unexpected needs. “The patient may say they're going to have a scope down their throat, but they end up having that and biopsies as well, and that's an added expense,” said Cyndi Kreiner, ProMedica's administrative director of reimbursement. “We'd like to give an exact number every time, but it's predicting what they're really going to have.”
Another shortcoming from the consumer perspective is that ProMedica offers an estimate of patient costs only for facility fees, not for professional fees, which are billed separately by physicians. “It could be a disaster if the patient doesn't know the professional fee, but this is a work in progress,” said Doug Bush, ProMedica's associate vice president for strategic planning. “In time we'll be closer to solving that portion.”
While ProMedica's online estimator currently covers only lab, radiology and surgery services, the system hopes to expand the number of services for which patients can receive online estimates. It's looking first at other “shoppable” services such as physical therapy. For other services, patients currently can submit an online form and receive a callback with an estimate within 48 hours.
Starting in January, all Ohio providers, for most medical services, will be required to offer consumers a good-faith estimate of the amount the provider will charge the patient's health plan, the amount the plan intends to pay, and the difference, if any, that the patient must pay, under a law passed last year. Hospitals and physician practices are worried about whether they'll be ready to offer accurate estimates for a wide range of services.
Some policymakers believe new laws and regulations are needed to prod healthcare providers to move more rapidly on price transparency. If more consumers were demanding upfront price information to facilitate comparison shopping, that might do the trick. But so far, to the bewilderment of many experts, they are not.
“We've demonstrated as an industry that we're not moving as fast as the consumer side of things, with higher deductibles and copays,” said the HFMA's Fifer. “Could that be nudged along with legislation? There's a lot of people who believe that. I wish I knew the silver bullet.”