Maricopa Integrated Health System reports that price transparency pays off by reducing uncompensated care and increasing business
Arizona has a new law that requires hospitals, medical laboratories, diagnostic imaging facilities, ambulatory surgery centers, and urgent-care centers to publish the prices they charge self-pay and uninsured patients for the 50 most common inpatient and outpatient services. The law took effect on January 1, 2014.
News accounts report that just one hospital took steps to publish its prices earlier this year. Pathologists and clinical laboratory managers will find the experience of Maricopa Integrated Health System to be instructive, as hospital administrators there publicly state that this was the right thing to do for patients in their community.
Public Hospital Slashed Chargemaster Prices by 50%
Maricopa Integrated Health System (MIHS) is a 578-bed, public, not-for-profit, safety-net hospital in Phoenix. It acted in a dramatic fashion, cutting its chargemaster prices by about 50%. That brought its fees down to just 1% to 2% above Medicare’s fee schedule, noted a report published by Modern Healthcare.
Recalling the initial response of hospitals to Arizona state’s mandate, Mary Lee DeCoster, Vice President of Revenue Cycle at Maricopa, said, “Everyone was reluctant, and there were lots of excuses.”
Publishing Discount Prices Increases Business and Reduces Bad Debt
MIHS is among just a minority of hospitals nationwide that has cut prices for self-pay patients—no questions asked and no qualifying required. As the region’s public safety-net hospital, MIHS has a disproportionately higher number of self-pay patients compared to other Phoenix-area hospitals. In fact, about 35% are self-pay patients and many qualify for financial assistance.
It was in March 2013, when MIHS first published discounted prices for the 10 most common inpatient and outpatient services on its website. The outcome was surprising. Since rolling out a self-pay discount program and publishing its prices, MIHS has experienced a “meaningful reduction” in uncompensated care, according to DeCoster. The discounted pricing is expected to reduce gross income by $30 million in 2014, but net income will only fall by about $5 million.
DeCoster pointed out that discounted pricing and transparency programs allow self-pay patients to estimate their out-of-pocket expenses. This move has made MIHS more competitive with other hospitals in the Phoenix metro area.
Discounted and Bundled Prices Attracted More Maternity Patients
The hospital also offers bundled prices for specific episodes of care for common services. One example is the hospital’s bundled price for maternity care, which includes obstetrician fees. This pricing strategy has increased the number of babies delivered at MIHS by 50 to 60 per month. Prepay patients also receive a $1,000 discount.
Commenting in the Modern Healthcare story, HFMA CEO Joseph Fifer noted that MIHS’ discount pricing and transparency programs are timely. That’s because the increase in high-deductible health plans has made consumers more cost-conscious when shopping for healthcare.
He acknowledged that price transparency programs offer little in the way of return on investment, adding that, while some providers do it because it’s the right thing to do, like MIHS, other hospitals only do it if forced by political and market pressures.
“I welcome pricing transparency,” declared DeCoster. “I’m thrilled the groundswell is starting to move in this direction.” The biggest problem now, she said, is consumers’ lack of financial literacy and understanding of medical economics. “Consumers need to grab hold of us and start asking ‘How much will this cost?’”
MIHS Experience Offers Heads Up for Medical Laboratory Managers
Medical laboratory managers could also benefit from the experience of MIHS. Competitive pricing that can be easily found and viewed by self-pay patients and those with high-deductible health plans, helps these patients calculate their out-of-pocket expenses in advance and shop for the best quality and value. This can be a source of additional specimens for those clinical laboratories willing to take these steps.