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Global Healthcare Perspectives

Why a Revenue Cycle Company Cares about Consumerism in Health Care

Daniel Zismer, Ph.D.

In June of 2014 Michael Halberda, CEO of

Cymetrix

, hosted a small group of advisors (including myself) to discuss the growing consumerism movement in U.S. healthcare.  

C-Suite Resources

organized and facilitated the session.

My question going in was, “Why does a healthcare revenue cycle company care about consumerism?”

As the day unfolded, the value of the discussion became apparent and, perhaps, useful to blog readers.

Questions and Observations

Observations from the discussion and debate distilled to points and questions of interest today, as well as for future discussion and debate.

1) If healthcare reform spawns insurance coverages and products requiring increasing levels of out-of-pocket payments by consumers, will consumers actually become more active price shoppers or will they simply resign to paying more for healthcare with little or no change in behaviors relating to provider choice decision-making?

On a related note, questions regarding provider pricing strategies were raised.

 “Will providers simply charge retail (i.e., full, gross charges) prices for services sold to out-of-pocket buyers or will new retail pricing strategies emerge?”

Providers in the room seemed to agree that the jury is out on pricing strategies for a new consumer who may pay more out-of-pocket for services. Most agreed the risk of increasing bad debt is a concern.

Regarding the more global question of increasing out-of-pockets leading to a more activated consumer, most leaned toward “yes”. 

2) If out-of-pocket payments increase, will primary care visit volumes suffer as patients attempt to manage costs by saving for the more serious health needs and events?  

Correspondingly, will demand for urgent and emergency services rise?

3) 

Are the health consumer behaviors and attitudes of Millennials, who apparently demonstrate less inclination toward physician loyalty, important in consumer strategies?

This question leads to the important issue of brand loyalty and health systems.  Brand promise and brand strategy are becoming terms used more frequently in C-Suites. The goal is to create brand loyalty, an enhancement of the likelihood of “sticking with” a health system for all care.

This goal is especially important for larger, more fully integrated health systems that invest heavily in primary care networks as patient acquisition and referral strategies. 

4) Larger, more fully integrated health systems with sizable reach in markets and strong balance sheets may move aggressively toward the ownership of health plans in hopes of better controlling an expanded proportion of the value chain (i.e., ownership of the premium dollar as well as the health services)

5) Manufacturing payments (reimbursements).

The theory of the strategy is to control as much of the universe of healthcare consumerism as possible. This strategy is a big bet for all health systems entering the “payer fray” at this stage of the game. 

6) While much has been said about public insurance exchanges, the effect of private exchanges is the object of much speculation by experts on all sides of the debate.

If personal ownership of health insurance becomes ubiquitous, as some speculate, the challenges for health systems are effective, efficient and understandable translations of their value proposition to attract and retain valuable markets (i.e., individual patients).

The conversation among the advisors turned quickly to health systems’ need to make quality, safety, access and total costs of care front runners in their brand promise strategies.

7) Health systems will need to fully appreciate a market-driven perspective on size and scale.

Another key discussion point was how some health care financial experts are willing to assert top-line performance as a principal predictor of success in future markets; e.g., a health system needs to generate in excess of $2 billion in annual operating revenues to succeed.

The topic of discussion here was, “Is this perspective over-simplified?” The argument against this assertion was, “$2 billion in annual operating revenues earned across assets positioned in multiple geographically dispersed markets is very different from $2 billion in operating revenues earned within one, unified market.

The point of interest here is market leverage; a health system’s ability to leverage market position to its full advantage within contained and diverse geographies. 

Conclusion

With this session, advisors to Cymetrix wrestled with a range of issues related to consumerism and health system behaviors in the U.S. under the dynamics of legislated health reform.

Irrespective of partisan debate in Washington, the Cymetrix advisory board agreed that healthcare consumerism is on the rise. The full effects are yet to be realized. Consensus was reached on several likely outcomes:

1) If consumers assume more responsibility for health costs, out-of-pocket payments and health insurances become disconnected from the employer. Under such conditions, the marketplace can expect more “free ranging” in purchasing behaviors; meaning, the behaviors of the insured will be less fettered by corporate health plan designs and related rules.

2) Health systems and other providers will need to invest in brand strategies that enhance consumer loyalties.

3) Health systems will become more transparent regarding their quality, safety, customer service and total costs of care. Consumers will likely view total costs of care from perspectives that differ from those held by providers; i.e., what it will cost to manage a full care event or a chronic condition over time, versus price charged per a unit of service provided.

4) Consumers will become less tole

rant of fragmented

systems of care that cause the user (the patient) to interact inefficiently and, perhaps, ineffectively among and between multiple, disconnected provider systems and individual providers—each operating from their own preferred business models and related incentive schemes.

5) Health systems will/should attempt to concentrate assets and capabilities within markets to provide a responsive, coordinated and broad range of services including, for some, the ownership of health insurance plans and products. 

So in returning to the beginning, why does Cymetrix—a revenue cycle company—care about healthcare consumerism? It may be because as populations become activated by the dynamics of a reforming healthcare market, attitudes toward health and healthcare change.

With Baby Boomers and generations coming behind, consumers and their discretionary spending power could disrupt the traditions and conventions of health use patterns, dollar flows, and the strategy and management of the provider-side of healthcare in the U.S.