The tough terrain of transparent pricing

Scott Powder, Advocate Health Care's chief strategy officer, had a frustrating experience trying to price shop for an MRI for his daughter. That's part of what led him to embark on a two-year effort to make his system's pricing simpler and more transparent for consumers.

“We've made a lot of progress, but every time you take two steps forward, you often have to take a half-step back,” Powder said.

Last year, Advocate 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 $60 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 of 30 common illnesses and injuries such as earaches, respiratory infections and urinary tract infections. 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, combining the facility and professional charges into one unified price.

A small but growing number of health systems 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 report from the PwC Health Research Institute.

“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.”

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 about the option to pay the fixed price 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 taken advantage of it. “I don't know why they're still defaulting to insurance,” Powder said. “It may be that's what they're used to.”

Another leader on price transparency is Toledo, Ohio-based ProMedica, which recently launched an online tool that estimates patients' out-of-pocket cost for the hospital part of lab, radiology and surgery services. It was driven at least partly by a new state law that was scheduled to take effect this month but has been delayed.

It will require providers 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.

Using ProMedica's 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.

ProMedica has been working on its price transparency and strategic pricing initiative in partnership with the Advisory Board 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 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.

Another issue is that ProMedica's estimate reflects only facility fees and not 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.

The system hopes to expand the number of services for which patients can receive online estimates, looking first at other “shoppable” services such as physical therapy.

While Advocate's and ProMedica's initiatives are encouraging, the HFMA's Fifer voiced frustration at the sluggish movement on price transparency. “We've demonstrated as an industry that we're not moving as fast as the consumer side of things, with higher deductibles and copays,” he said.

“I wish I knew the silver bullet.”