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Getting to Price Transparency: A Learning Curve for Physicians and Patients

Alicia Gallegos , special to AAMCNews
September 27, 2016

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Without price transparency, an unexpected bill from a consult, simple procedure, or lab test can leave patients confused and irritated. Frustration with out-of-pocket costs can lead to headaches, distrust, and ultimately, misdirected irritation toward physicians.

To address these issues, the AAMC created an online resource to help hospital physicians, staff, and residents better communicate information about prices, charges, and value to patients. “Patients and their families are taking on a greater burden of co-payments, and so there’s a need for them to understand what their potential financial risk is,” said Janis M. Orlowski, MD, AAMC chief health care officer. “Many therapeutics have become very expensive, and it’s important for physicians, residents, and medical students to have a relative idea of the cost of treatment that they are suggesting.”

The price transparency resource was developed under the direction of the 2014–2015 AAMC Advisory Panel on Health Care to raise the level of financial literacy at academic medical centers. “One of the key goals was to seek ways to expand and enhance the understanding of the definitions of ‘cost,’ ‘variable,’ ‘fixed,’ ‘indirect,’ and ‘marginal’; appreciate the difference between charges and prices; and the like,” said Paul A. Taheri, MD, MBA, panel chair, deputy dean for clinical affairs at the Yale School of Medicine, and CEO for Yale Medical Group. “The second main goal was to better understand how best to deliver this information and to engage patients in a conversation regarding cost and price.”

The resource provides a data dictionary of terms and case studies from medical schools and teaching hospitals at the forefront of price transparency. “We wanted to take a look at best practices at schools that we think are doing an exceptional job at providing price transparency information and cost information to their medical students and to their residents,” Orlowski said.

Teaching residents about cost

The AAMC advisory panel found that greater than 90 percent of medical schools have some curriculum on the cost of care, said Orlowski.

Residents in their final year of training at Tufts Health Care Institute (THCI) received an in-depth view of health care financing through a mini-rotation focused on health quality, cost, and reform. The four-day intensive course covered content on the organization and financing of the health care system, quality assessment and improvement, health care cost and access, care management and new models of care, and health care reform. Faculty members were from diverse health care backgrounds, including medical directors and health plan leaders.

“We want [residents] to understand the health care system … what are the forces at play, what’s the rationale for utilization management in an HMO,” said former THCI executive director Rosalie Phillips, MPH. “Then you can practice more comfortably in that system and, maybe over time, lead change within that system.”

In one small-group exercise, residents had to choose benefits for a small population with limited funds, said Phillips, who is director of the office of continuing education for Tufts University School of Medicine (TUSM). “We challenged the small group with the exercise of having 83 health care benefits that they could cover for a small town, but they only have 50 pegs worth of money to cover benefits for their population. They all had to decide how to distribute their limited dollars to cover what they need to.”

Pre- and post-testing showed the rotation deepened residents’ understanding and knowledge of health care system costs, the roles health plans play, and delivery systems in care management. Although THCI ceased day-to-day operations this spring, the mini-residency rotation on the health care system will continue to be offered through departments at TUSM. In addition, staff members are compiling an educational resource that includes “lessons learned” from the mini rotation that will soon be available to other teaching institutions.

Price transparency in practice

Initiatives at Yale–New Haven Hospital are addressing price transparency through two unique committees: the Billing and Transparency Group of the Patient and Family Advisory Council and the Pricing Alignment Committee.

The council, consisting of volunteers from standing patient advisory groups, was formed to improve the hospital’s service and the patient billing experience, said Patrick McCabe, senior vice president for corporate finance at Yale–New Haven Hospital. The council “brings the patient and family perspective to our work,” said McCabe, and provides feedback to hospital leaders about efforts to increase price transparency and program effectiveness.

“I think we have to get more transparent than where we are today...[Health care] is still too fragmented and not easy enough for patients to understand.”

Mary Kay Boudewyns, Dartmouth-Hitchcock Medical Center

The Pricing Alignment Committee is a forum in which institutional leaders review matters that may raise transparency issues. This includes vetting business plans that could cause a shift in revenue and determining the impact new business plans could have on payers and patients. The committee is comprised of hospital executives, the medical group, and people from Yale’s medical school, among others.

Early in the process, organizers faced the difficult task of developing a collective understanding of the complex insurance world, employer pressures, and policy regulations. Fulfilling all committee requests was another challenge. For example, how can institutions create a single bill that combines all care received within one hospital facility with separately provided professional services? How can that information be reconciled with the patient’s plan benefits communicated on the insurer’s Explanation of Benefits?

Such a single, combined bill has not yet been developed, but the hospital continues to pursue opportunities that improve the billing experience for patients, said McCabe. “The suggestions gathered from the council led us to revise our current bill format in the fall of 2015.” A new Patient and Family Council commenced in April that will continue efforts to improve the patient billing experience, he added.

Using tools to promote clarity

Leaders at Dartmouth-Hitchcock Medical Center have gone one step further to ensure patients understand the cost and value of health care services.

The web-based Out-of-Pocket Estimator was added to the hospital’s website in 2006 to help patients determine anticipated costs associated with various services. Patients select a service and enter basic insurance information, and the tool provides the estimated total costs of the procedure and associated out-of-pocket expenses.

Through the Dartmouth-Hitchcock’s financial aid calculator, patients can also determine their financial aid eligibility by entering their annual income and the number of people in their household. In many cases, patients are reluctant to speak with health providers about the cost of services so the estimator helps alleviate that problem, said Mary Kay Boudewyns, administrative director of revenue management at Dartmouth-Hitchcock.

With this tool, patients can gain a greater perspective about what the cost will be when making a health care decision in addition to the clinical information, said Boudewyns. “The more we can put the information out there and have [patients] better informed, the better the overall experience will be.”

Not every procedure is included in the resource. Estimator developers focused on the most frequently requested services and the most common procedures, said Sarah Morrison, director for patient access at Conifer Health Solutions, which provides revenue cycle management services for the Dartmouth-Hitchcock health system.

“Patients and their families are taking on a greater burden of co-payments, and so there’s a need for them to understand what their potential financial risk is.”

Janis M. Orlowski, MD, AAMC chief health care officer

Pricing data must be updated for the estimator several times a year when pricing information changes, Morrison added. “That takes a little bit more effort than I would hope [it will take] somewhere down the road,” she said. “My dream is for it to be more interactive.”

The Out-of-Pocket Estimator gets about 400 visits per month. Dartmouth-Hitchcock staff also reported an increase in conversations about payments, as well as in the number of patients calling to request price estimates.

Boudewyns believes price transparency within the health care industry is only beginning and will continue to grow with time. “I think we have to get more transparent than where we are today,” she said. “What we see so far, are only the initial steps of where we need to get to. It’s still too fragmented and not easy enough for patients to understand. There has to be [a process] of simplifying this.”

To download the new AAMC resource on price transparency, visit www.aamc.org/initiatives/pricetransparency/.

This article originally appeared in print in the April 2016 issue of the AAMC Reporter.

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