Value-Based Pricing Has a Patient Experience Problem

The No. 1 searched term using the University of Utah online pricing tool is, “cost of care for labor and delivery,” with separate searches to include the possibility of an epidural. People want to know how much their babies will cost them. Luckily for them, a federal rule that took effect Jan. 1 requires hospitals to post charges in a machine-readable format. The imminent visibility of the chargemaster — the list of base prices for each procedure at a given hospital, without insurance coverage — is part of a journey to value-based care transparency, spurred by U.S. Department of Health and Human Services Secretary Alex Azar.

But does this mean anything for patients? Probably not.

In the end, value-based pricing has improved care delivery, but it still has a long way to go.

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I spoke about pricing transparency with Shawn Beals, head of strategy for the Americas at Siemens Healthineers. The company is involved in many value-based healthcare contracts and works with healthcare systems to improve their care effectiveness and lower cost.

Although Beals considers pricing transparency a step in the right direction, it won't do the job unless it precedes visibility into care quality and effectiveness.

“Our hospitals need real time effectiveness, quality and cost analytics for us to get the needed improvements in our healthcare system,” he said. “Healthcare is one of the few industries where we still do not have good operational data.”

Tallying the Value-Based Care Tab

A few short weeks ago, my son Naveen was born. I was still unsure what would be covered by my health insurance and how much the delivery would cost. We had coverage with a company that has done extensive work with value-based care, and I knew that I had a specific cost of care. This was especially interesting to me, since Naveen’s dad was part of the value-based team that works with hospitals to figure out the actual cost of care. I was sort of impressed when the physician’s office sent me a contracted amount print-out.

But the document didn’t mean much. It was about what they would be paid, not what I was responsible to pay. It isn’t a standard part of billing in value-based contracts to show that amount. The actual patient billing from my physician was not clear, and patient understanding of their final financial responsibility remains nebulous.

What did I know? Every time I went to the doctor's office to pee in a cup — the test to make sure I didn’t have protein in my urine — it yielded a $12 line item. I also believed that the Epic patient portal was designed not to show me all of the appointments during my pregnancy, displaying only a “history” of the last three appointments. It was a frustrating design; the portal seemed to deliver health data but not billing information. I had heard that electronic health records were originally designed for the purpose of facilitating billing. But from what I could tell, the design did not translate well to patient transparency in value-based care — or any part of care, as far as I know

I want to be able to click on every single encounter and see how miserable I was at that point of the pregnancy, and then put a price on that.

I also want to be able to understand the cost of care as I go, not as a bundled resolution at the end of pregnancy that might end up costing what the initial projections indicated.

Part of the issue of pricing transparency in a healthcare system is the practice of “balance billing” where patients find out they are financially responsible for the difference between projected and actual costs. Healthcare has a lack of transparency in billing to the patient and even physicians and nurses.

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My son’s father, Mahek Shah, M.D., works with health systems to create bundled payment programs. I was excited to tell him our baby was part of a bundled payment plan and he made a difference for the care delivery of his own child. I expected him to be able to explain exactly what was happening with the billing. He told me that billing information from my appointments didn’t tell me a lot. A “projected” amount with line-item billing records leaves patients nostalgic for the days of fee for service; at least then, they knew what those fees were.. The changing nature of insurance and patient billing will get more confusing to the patient on the road to simplification.

The bundle didn’t make any sense from the patient experience perspective. I had no idea what each visit cost, in the end, because my non-helpful print-out only informed me that the entire pregnancy will cost a set amount — and that is what the practice will ultimately be paid. I think.

Billing for Bundled Care?

Is it realistic to allow patients to see their cost of care as they get it, or do they need to look at projected amounts for the entire experience (and pray those costs don’t exceed what they were quoted in the initial projection)? Does the chargemaster being visible have an impact on value-based care? I discussed the data problem with Bobbi Brown, an expert in value-based contracting who works in data improvement for Health Catalyst.

“Everything is still done the old way. Even if we say ‘bundles,’ we still bill the old way.”Bobbi Brown, Health Catalyst

According to Brown, the actual billing to patients is often still done with fees for each encounter.

“There are great programs, but we haven't changed the consumer side,” she told me. “This means that the charges that you see might not have anything to do with what is paid to providers.”

There are some quality measures that have tried to create more transparency. The transparency rule of Jan.1 falls into this category. But Brown’s explanation accounted for the differences between the billing in my patient portal and final bill.

Patients should have access to the line item costs of each service they receive within a given encounter with a physician. Lack of transparency is resulting in patients giving doctors worse scores due to receiving “bundled services,” so quality metrics are woven into the problem. Brown explained that, in bundles for medicare or other insurance providers, the reconciliation amount matters — and the hospital has to assume the risk. But the patient doesn’t know any of that. Value-based encounters and contracting are often based on the cost of care for many patients. The reimbursement to physicians and healthcare systems is the same for all patients, regardless of the line item billing for an individual.

Little Value in the Patient Experience

The patient experience problem comes from an accounting problem. When customized billing programs are developed, they aren’t documented very well in the electronic health record (EHR). At one point, I watched baby Naveen’s father make the process maps, and I asked him whether the cost of care from beginning to end was easily recorded in EHRs or data tools. He said it wasn’t recorded in either format. Each contract was set up individually, and each system had to look at their unique cost of care.

Finding the individual cost of care for procedures and patients is highly varied and specific. EHRs are digital records of a paper billing process, but they haven’t adjusted for the Post-It note process mapping and how it may be disconnected from patients’ understanding of their cost of care. Patients want to know the total cost of care, and that insight isn’t available in the EHR, nor is it well serviced by current records systems.

According to Brown, this creates a unique data challenge. We need systemic changes to have actual transparency in the chargemaster. Until the process for organizing billing is consistent, both across different organizations and different insurance contracts, what the patients see in the chargemaster has limited utility as far as improving their understanding. We need to both improve cost transparency and figure out how to translate that to patient billing.

Patients want to understand pricing, and the data infrastructure to allow for these insights will be key in ensuring that value-based contracting can succeed. Having custom contracted and priced amounts is only as good at the health record into which they are recorded. My health records didn’t have the technology needed for me to understand the cost of my pregnancy or whether I would still owe money once the baby arrived. That level of uncertainty and confusion is costing a massive patient satisfaction problem, which needs to be taken seriously and addressed robustly with well-developed data tools.

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