A trend toward price transparency in healthcare is sweeping the country and ambulatory surgery centers are in a prime position to benefit. However, they must take advantage of this opportunity to truly compete with other providers in the healthcare market.
"Price transparency is going to put ASCs in a great position and make a difference for them across the nation," says Bud Brooks, vice president of development of Surgery Center Network. "They are unable to depend upon surgeons nearly as much to bring case volume because hospitals are purchasing physician practices. ASCs have to do something to market directly to their customers, which are now payors, employers and patients."
Healthcare works differently from other industries because of the veiled pricing, but with incentives to lower the cost of care, increasing premiums and trends toward self-funding, people want to know what their healthcare will cost before they purchase it.
"It's a national issue because the healthcare system is so broken and messed up that there's nothing that could bring prices down any better than for people to be honest and upfront about their prices," says Keith Smith, MD, administrator of Surgery Center of Oklahoma. "I see it as an issue that could actually be good for business — it has been good for our surgery center. There will be an improvement in quality and plummeting in prices; it happens in every other industry and healthcare is no different."
Here are 10 things to know about the trend toward pricing transparency and how to position your ASC as a leader going forward.
1. ASCs can be more competitive in the consumer-driven market. As people take more control over their healthcare dollars, consumerism will drive more patients to low-cost outpatient settings. They will pay more attention to price and look for better quality.
"Price transparency will be better for healthcare overall. It's going to create an open market and competitive environment where just because you are the most expensive doesn't mean you have the best quality," says Jeff Blankinship, president and CEO of Surgical Notes. "That's a real concept that will be more prevalent in healthcare. You are going to find out that in the future, surgery prices will be more competitive on both the consumer and provider side."
Surgery centers owned by physicians will likely have a huge advantage over big hospitals because by owning their own facility, the physicians eliminate higher facility fees.
"That makes them difficult to compete with because most physicians are satisfied with the healthy professional fee; they don't need to hit a grand slam on the facility fee," says Dr. Smith. "If you have transparent pricing, you can actually have meaningful competition where consumers can determine some meaning of value. My price may have to change when I have more competitors, which I hope will be soon. We look for a healthy price war; I think that's what this country needs and is long overdue."
2. Transparent pricing could eliminate managed care all together. While ASCs could drive additional volume by publishing their prices, it could spell trouble for their traditional managed care contracts. If the insurance companies know what you charge for self-pay, they may not want to pay higher rates.
"ASCs that post their prices will have to make decisions about how they want to deal with managed care," says Mr. Brooks. "If they are also contracted with private payors, the insurance companies will want the self-pay rates as well. Some facilities might decide to opt out."
The same principle applies for out-of-network cases at the ASC. Traditionally, ASCs billed OON at similar rates to hospital procedures, eliminating their price advantage.
"When ASCs bill for OON, they anger the patient and the payors, which will ultimately be the employers," says Mr. Blankinship. "The employers' attitude will be if the ASC is billing like the hospital, they might as well keep surgeries in the hospital."
3. High deductibles drive patients to low-cost settings. The insurance market is changing. High premiums have become standard and fewer companies are satisfied with PPO plans
"Employers have had enough with rising premiums and healthcare costs, and they can only shift so much of that to the employee contributions," says Mr. Brooks. "The deductibles are so large that they need to rethink the whole model."
Many Americans don't realize their healthcare policies have limitations on insurance payment; they think as long as they've met their deductible, everything else will be covered.
"They aren't aware of the threshold and that they will be responsible for more," says Mr. Blankinship. "With price transparency, insurance companies will have to be more transparent with their own agreements and policies. This will help the general public become more aware of the options they have and choose where they want to receive their care."
4. Patients will become the ASC's primary customers. Surgery center administrators and managers have traditionally considered the surgeons or referring physicians their primary customers because they drove cases to the center; however, when patients, in conjunction with their employers' benefit plan designs, become primary decision-makers about their care, they will become the customer.
"Patient loyalty has never been a strong point for ASCs because there isn't a strong relationship between the patient and the facility," says Mr. Blankinship. "ASCs need to start acting like other business verticals and expect that if someone has surgery, it's pretty likely that someone in their family might have another surgery in the future."
Providing the best patient experience possible and directing marketing efforts toward patients will increase the opportunity for repeat visits and positive word-of-mouth promotion.
5. More employers are self-funding insurance. As employee satisfaction with insurance plans diminishes, more companies have developed self-funded healthcare plans. These companies are looking for partnerships with high-quality, low-cost options for care, and some of the bigger corporations will even send patients thousands of miles to seek cheaper healthcare options.
"Companies are thinking the managed care contract," says Mr. Brooks. "Employers are either doing away with PPOs entirely because they are relatively meaningless or they are putting the PPOs on a second tier of benefit design, with a specialty carve-out network occupying the first tier – tied together with drastically richer benefit incentives for the employees. Every network says their discounts are best, when in fact they are just arbitrary savings below an arbitrary price. People really want to know what things cost."
When employers have control of the healthcare dollars, they do their research and direct employees to low-cost providers. Make employers in your area aware of your price structure so they can take advantage of the lower cost.
"In the group health self-funded world, employers are going to be the ones who will access the ASCs and utilize the transparent pricing," says Mr. Brooks. "This would also apply to workers compensation, but Texas is the only state that currently allows employers to opt out of the state-mandated program for self-funded workers' comp instead. There are many large employers in Texas that have become non-subscribers for their workers' comp."
Around 60 percent of all employers are self-funded as of 2013 and they have more flexibility to direct employees and their families for care. "There has always been an imbalance in cost between the hospital and ASC for surgical procedures, which has become even more important for self-funders because they are not depending on the PPO networks and locked-down network rates," says Mr. Blankinship.
6. People want control over their healthcare spending. One of the biggest reasons for personal bankruptcy is healthcare-related expenses; people don't realize they have a huge medical bill until after services are rendered, and they can't make their payments.
"You hear different stories about someone having a little repair and then getting billed charges that are inflated," says Mr. Blankinship. "Healthcare is the only place where you have the service performed before you know ballpark costs of what the bill will be. Price transparency will help drive down those costs, as will consumers becoming more educated about the financial implications of their decisions."
Since 2003, insurance has risen 67 percent while the consumer index pay scale has only grown 31 percent, which Mr. Blankinship says is unsustainable. "Healthcare is rising much more quickly than the reimbursement level and it's causing more middle class families not to be able to afford care," he says. "When they need surgery, it's important for them to understand what their financial responsibility will be, and they will need to know how to find alternative options to afford their care."
7. Online pricing attracts medical tourism. If you can price out episodes of care and publish those prices online, you can attract domestic and international medical tourism.
"Many ASCs have started to adopt the concept of posting their prices online and we expect that trend to continue," says Mr. Brooks. "They are going to see a tremendous uptick in business because once the payor, employer and patients realize the significant cost differential between the hospital and the ASC — plus the better quality of care and patient experience at the ASC — they will want to take advantage of outpatient centers."
The Surgery Center of Oklahoma published its prices online four years ago and has seen increased case volume since then. "It's brought us a lot of business that we would not have seen otherwise," says Dr. Smith. "I think it will catch on and more ASCs will begin publishing prices because people will see it as a way to get business and compete with others."
Once the procedures are priced out, you can periodically update prices or decide to publish an adjustable price range so patients aren't surprised with the bill.
"As long as you have a range of costs, patients can adjust or plan for their bill," says Mr. Blankinship. "Even if it's a cap price saying you won't exceed a certain amount, patients will be more satisfied."
8. State legislators are demanding price transparency. Legislators at the state level are writing legislation that requires healthcare providers to publish their prices. "More state legislators are starting to address price transparency and introduce new legislation," says Mr. Blankinship. "The time is now for the ASC industry to be the first movers in transparency for surgeries."
A bill requiring hospitals to make their bills more transparent and comprehensible to patients is making its way through North Carolina, requiring hospitals to post prices for their 50 most common procedures. They would also have to delineate charges for uninsured patients, Medicare, Medicaid and private payors.
"I'm afraid that hospitals will start being more transparent and they will get more credit over the ASCs for their transparency even though ASCs are less expensive for the same procedures," says Mr. Blankinship. "The problem is that ASCs have always been the follower to the hospitals, but now they must lead with price transparency."
9. Surgeons must value their time. Most surgeons haven't considered exactly what their time is worth; they have taken salaries from hospitals or accepted insurance company rate offerings without determining their own rates.
"Physicians are so brainwashed into letting other people tell them what they should be paid instead of determining their own rates and letting the consumer render a verdict for whether that judgment was sound," says Dr. Smith. "Surgeons need to determine what they are worth. Medicare might pay $78 for a total knee replacement, which was the rate for the last total knee I did for Medicare. The bureaucrats didn't value my time as much as I did, and I decided I wasn't going to do that anymore."
Price signals to buyers and sellers the value of services or products rendered, based on abundance or scarcity as well as a variety of other complex issues.
"When I ask surgeons how much they want to be paid, a lot of them don't know," says Dr. Smith. "They have to switch philosophical gears to determine how much their service is worth, and that's a big obstacle."
10. Be ready for government and hospital pushback. As more surgery centers begin publishing their prices and benefiting from price transparency, there will likely be pushback from hospitals and regulatory bodies because competition is increased.
"Some of the big hospitals are going to fight this because this is going to hurt their business and embarrass them if they claim to be non-profit," says Dr. Smith. "People will wonder why hospitals charge 10 times more than ASCs down the street. There will be pushback, and I don't think it's completely out of the question to think the federal government will raise issues as well."
The Office of Inspector General has recently released more guidance on physician-owned entities, specifically physician-owned distributorships, which could have an impact on other investments, such as the surgery center.
"I fully expect there to be a ruling by OIG saying people can't post prices as long as they are receiving federal money in an attempt to help the hospitals," says Dr. Smith. "Transparency is the most gigantic thing to come along in healthcare because it's going to expose the cartelization of healthcare for what it really is. I think it will cause a massive deflation in the healthcare industry, which is really good news for the consumer and really horrible news for people making money off of price secrecy."
More Articles on Surgery Centers:
5 Coding & Billing Errors for ASCs to Avoid
5 Ideas for Better Workflow at ASCs
8 ASC Administrators on Efficiency at Their Centers
"Price transparency is going to put ASCs in a great position and make a difference for them across the nation," says Bud Brooks, vice president of development of Surgery Center Network. "They are unable to depend upon surgeons nearly as much to bring case volume because hospitals are purchasing physician practices. ASCs have to do something to market directly to their customers, which are now payors, employers and patients."
Healthcare works differently from other industries because of the veiled pricing, but with incentives to lower the cost of care, increasing premiums and trends toward self-funding, people want to know what their healthcare will cost before they purchase it.
"It's a national issue because the healthcare system is so broken and messed up that there's nothing that could bring prices down any better than for people to be honest and upfront about their prices," says Keith Smith, MD, administrator of Surgery Center of Oklahoma. "I see it as an issue that could actually be good for business — it has been good for our surgery center. There will be an improvement in quality and plummeting in prices; it happens in every other industry and healthcare is no different."Here are 10 things to know about the trend toward pricing transparency and how to position your ASC as a leader going forward.
1. ASCs can be more competitive in the consumer-driven market. As people take more control over their healthcare dollars, consumerism will drive more patients to low-cost outpatient settings. They will pay more attention to price and look for better quality.
"Price transparency will be better for healthcare overall. It's going to create an open market and competitive environment where just because you are the most expensive doesn't mean you have the best quality," says Jeff Blankinship, president and CEO of Surgical Notes. "That's a real concept that will be more prevalent in healthcare. You are going to find out that in the future, surgery prices will be more competitive on both the consumer and provider side."
Surgery centers owned by physicians will likely have a huge advantage over big hospitals because by owning their own facility, the physicians eliminate higher facility fees.
"That makes them difficult to compete with because most physicians are satisfied with the healthy professional fee; they don't need to hit a grand slam on the facility fee," says Dr. Smith. "If you have transparent pricing, you can actually have meaningful competition where consumers can determine some meaning of value. My price may have to change when I have more competitors, which I hope will be soon. We look for a healthy price war; I think that's what this country needs and is long overdue."
2. Transparent pricing could eliminate managed care all together. While ASCs could drive additional volume by publishing their prices, it could spell trouble for their traditional managed care contracts. If the insurance companies know what you charge for self-pay, they may not want to pay higher rates.
"ASCs that post their prices will have to make decisions about how they want to deal with managed care," says Mr. Brooks. "If they are also contracted with private payors, the insurance companies will want the self-pay rates as well. Some facilities might decide to opt out."
The same principle applies for out-of-network cases at the ASC. Traditionally, ASCs billed OON at similar rates to hospital procedures, eliminating their price advantage.
"When ASCs bill for OON, they anger the patient and the payors, which will ultimately be the employers," says Mr. Blankinship. "The employers' attitude will be if the ASC is billing like the hospital, they might as well keep surgeries in the hospital."
3. High deductibles drive patients to low-cost settings. The insurance market is changing. High premiums have become standard and fewer companies are satisfied with PPO plans
"Employers have had enough with rising premiums and healthcare costs, and they can only shift so much of that to the employee contributions," says Mr. Brooks. "The deductibles are so large that they need to rethink the whole model."
Many Americans don't realize their healthcare policies have limitations on insurance payment; they think as long as they've met their deductible, everything else will be covered.
"They aren't aware of the threshold and that they will be responsible for more," says Mr. Blankinship. "With price transparency, insurance companies will have to be more transparent with their own agreements and policies. This will help the general public become more aware of the options they have and choose where they want to receive their care."
4. Patients will become the ASC's primary customers. Surgery center administrators and managers have traditionally considered the surgeons or referring physicians their primary customers because they drove cases to the center; however, when patients, in conjunction with their employers' benefit plan designs, become primary decision-makers about their care, they will become the customer.
"Patient loyalty has never been a strong point for ASCs because there isn't a strong relationship between the patient and the facility," says Mr. Blankinship. "ASCs need to start acting like other business verticals and expect that if someone has surgery, it's pretty likely that someone in their family might have another surgery in the future."
Providing the best patient experience possible and directing marketing efforts toward patients will increase the opportunity for repeat visits and positive word-of-mouth promotion.
5. More employers are self-funding insurance. As employee satisfaction with insurance plans diminishes, more companies have developed self-funded healthcare plans. These companies are looking for partnerships with high-quality, low-cost options for care, and some of the bigger corporations will even send patients thousands of miles to seek cheaper healthcare options.
"Companies are thinking the managed care contract," says Mr. Brooks. "Employers are either doing away with PPOs entirely because they are relatively meaningless or they are putting the PPOs on a second tier of benefit design, with a specialty carve-out network occupying the first tier – tied together with drastically richer benefit incentives for the employees. Every network says their discounts are best, when in fact they are just arbitrary savings below an arbitrary price. People really want to know what things cost."
When employers have control of the healthcare dollars, they do their research and direct employees to low-cost providers. Make employers in your area aware of your price structure so they can take advantage of the lower cost.
"In the group health self-funded world, employers are going to be the ones who will access the ASCs and utilize the transparent pricing," says Mr. Brooks. "This would also apply to workers compensation, but Texas is the only state that currently allows employers to opt out of the state-mandated program for self-funded workers' comp instead. There are many large employers in Texas that have become non-subscribers for their workers' comp."
Around 60 percent of all employers are self-funded as of 2013 and they have more flexibility to direct employees and their families for care. "There has always been an imbalance in cost between the hospital and ASC for surgical procedures, which has become even more important for self-funders because they are not depending on the PPO networks and locked-down network rates," says Mr. Blankinship.
6. People want control over their healthcare spending. One of the biggest reasons for personal bankruptcy is healthcare-related expenses; people don't realize they have a huge medical bill until after services are rendered, and they can't make their payments.
"You hear different stories about someone having a little repair and then getting billed charges that are inflated," says Mr. Blankinship. "Healthcare is the only place where you have the service performed before you know ballpark costs of what the bill will be. Price transparency will help drive down those costs, as will consumers becoming more educated about the financial implications of their decisions."
Since 2003, insurance has risen 67 percent while the consumer index pay scale has only grown 31 percent, which Mr. Blankinship says is unsustainable. "Healthcare is rising much more quickly than the reimbursement level and it's causing more middle class families not to be able to afford care," he says. "When they need surgery, it's important for them to understand what their financial responsibility will be, and they will need to know how to find alternative options to afford their care."
7. Online pricing attracts medical tourism. If you can price out episodes of care and publish those prices online, you can attract domestic and international medical tourism.
"Many ASCs have started to adopt the concept of posting their prices online and we expect that trend to continue," says Mr. Brooks. "They are going to see a tremendous uptick in business because once the payor, employer and patients realize the significant cost differential between the hospital and the ASC — plus the better quality of care and patient experience at the ASC — they will want to take advantage of outpatient centers."
The Surgery Center of Oklahoma published its prices online four years ago and has seen increased case volume since then. "It's brought us a lot of business that we would not have seen otherwise," says Dr. Smith. "I think it will catch on and more ASCs will begin publishing prices because people will see it as a way to get business and compete with others."
Once the procedures are priced out, you can periodically update prices or decide to publish an adjustable price range so patients aren't surprised with the bill.
"As long as you have a range of costs, patients can adjust or plan for their bill," says Mr. Blankinship. "Even if it's a cap price saying you won't exceed a certain amount, patients will be more satisfied."
8. State legislators are demanding price transparency. Legislators at the state level are writing legislation that requires healthcare providers to publish their prices. "More state legislators are starting to address price transparency and introduce new legislation," says Mr. Blankinship. "The time is now for the ASC industry to be the first movers in transparency for surgeries."
A bill requiring hospitals to make their bills more transparent and comprehensible to patients is making its way through North Carolina, requiring hospitals to post prices for their 50 most common procedures. They would also have to delineate charges for uninsured patients, Medicare, Medicaid and private payors.
"I'm afraid that hospitals will start being more transparent and they will get more credit over the ASCs for their transparency even though ASCs are less expensive for the same procedures," says Mr. Blankinship. "The problem is that ASCs have always been the follower to the hospitals, but now they must lead with price transparency."
9. Surgeons must value their time. Most surgeons haven't considered exactly what their time is worth; they have taken salaries from hospitals or accepted insurance company rate offerings without determining their own rates.
"Physicians are so brainwashed into letting other people tell them what they should be paid instead of determining their own rates and letting the consumer render a verdict for whether that judgment was sound," says Dr. Smith. "Surgeons need to determine what they are worth. Medicare might pay $78 for a total knee replacement, which was the rate for the last total knee I did for Medicare. The bureaucrats didn't value my time as much as I did, and I decided I wasn't going to do that anymore."
Price signals to buyers and sellers the value of services or products rendered, based on abundance or scarcity as well as a variety of other complex issues.
"When I ask surgeons how much they want to be paid, a lot of them don't know," says Dr. Smith. "They have to switch philosophical gears to determine how much their service is worth, and that's a big obstacle."
10. Be ready for government and hospital pushback. As more surgery centers begin publishing their prices and benefiting from price transparency, there will likely be pushback from hospitals and regulatory bodies because competition is increased.
"Some of the big hospitals are going to fight this because this is going to hurt their business and embarrass them if they claim to be non-profit," says Dr. Smith. "People will wonder why hospitals charge 10 times more than ASCs down the street. There will be pushback, and I don't think it's completely out of the question to think the federal government will raise issues as well."
The Office of Inspector General has recently released more guidance on physician-owned entities, specifically physician-owned distributorships, which could have an impact on other investments, such as the surgery center.
"I fully expect there to be a ruling by OIG saying people can't post prices as long as they are receiving federal money in an attempt to help the hospitals," says Dr. Smith. "Transparency is the most gigantic thing to come along in healthcare because it's going to expose the cartelization of healthcare for what it really is. I think it will cause a massive deflation in the healthcare industry, which is really good news for the consumer and really horrible news for people making money off of price secrecy."
More Articles on Surgery Centers:
5 Coding & Billing Errors for ASCs to Avoid
5 Ideas for Better Workflow at ASCs
8 ASC Administrators on Efficiency at Their Centers