Strengthening Your Consumer-Based Platform: Affordability

With more than 15.5 million people in the U.S. signed up for high-deductible health plans, growing patient financial responsibility is leading to higher consumer sensitivity relating to healthcare costs.  In an article from earlier this year, “How Strong Is Your Consumer-Based Platform?  5 Principles for Success,” we noted the changing patterns in healthcare consumer behavior related to evaluation of services and price sensitivity.  Once largely confined to conceptual discussion, this shift now has become an urgent competitive reality for healthcare providers.  In this article—the third in a five-part series—we take a closer look at the importance of patient and consumer affordability, one of five key principles of a strong consumer-based platform:

  • Accessibility
  • Convenience
  • Affordability
  • Transparency
  • Tailored care

Historically, hospitals and health systems have benefited from hospital provider-based rates.  However, the prevalence of high-deductible plans and managed care’s emphasis on lower-cost care settings have aligned to steer consumers away from hospital-based emergency, imaging, surgery, and oncology centers to less expensive clinic-based and freestanding models.  Furthermore, the Centers for Medicare & Medicaid Services is pursuing a site-neutral agenda targeted at identifying, and ultimately eliminating, these price differentials.  To successfully adapt, health systems must create lower-cost platforms to meet patient needs.

As discussed in Parts 1 and 2 of our series, consumers now expect to be able to compare services and prices and will make choices based on those comparisons.  A 2015 study by the Robert Wood Johnson Foundation and Manatt Health[1] found that 38.7% of consumers who used a retail clinic cited lower costs as one of their reasons.

As consumers continue to demand convenient and affordable services, health systems may consider the following:

Increasing the number, and diversifying the mix, of care settings with low-cost access points.

The need for affordability ties back to accessibility.  When an organization can manage care settings—primary care clinics, retail clinics, urgent care centers, freestanding emergency departments, etc.—across the continuum, it can offer services at different price points; but many health systems do not have the resources to do so.  Seeking partnerships with other convenient care providers can be an effective way to grow networks and diversify access points without significant upfront capital.

Partnerships, through collaboration with competitors, can also provide the opportunity to lower prices for certain services.  To avoid destructive price wars, health systems have the opportunity to partner with other providers to open low-cost services sites.  One health system found success in its partnership with a freestanding imaging provider.  The joint venture offers the reputation and referral opportunities of the health system and the cost reductions associated with the freestanding imaging provider model.

Investigating potential telehealth and virtual visit opportunities.

Telehealth offers an alternative, low-cost, convenient platform for certain services.  For consumers, telehealth fees are lower than typical in-person visits, and telehealth services reduce the costs of, or need to, travel, offering flexible hours with no in-person wait times.  Participation in telehealth services allows providers to administer care without the costs associated with additional labor, supplies, and facilities.  Virtual visits can even serve as a “gatekeeping” mechanism to prevent patients from utilizing unnecessary or inappropriate services.  The use of telehealth technologies has the potential to reduce costs for healthcare providers by providing cost-effective alternatives to physician employment and the use of locum tenens in critical specialties.

While telehealth programs offer benefits, they require some expertise to implement.  Health systems lacking the resources necessary to develop their own telehealth services may be interested in telehealth partnerships.  These partnerships typically involve payment to a third-party vendor for the technology and provider services.   Health systems then benefit from exclusive referrals and complimentary branding.

While reimbursement for telehealth is still inconsistent, certain payers such as Cigna have embraced this option.  PYA recently published a white paper, which serves as a helpful introduction to many of the reimbursement, regulatory, and contracting issues that providers may wish to consider in offering telemedicine services.

Creating discount programs tailored to price-sensitive patients.

Some consumers have become highly price-sensitive – primarily those with high-deductible health plans or no insurance.  Health systems will need to examine pricing strategies and find ways to attract those price-sensitive consumers.  Some providers are utilizing services such as CarePilot to offer discounts.  CarePilot is a scheduling service that allows consumers to choose appointment times based on price.  Appointments during peak hours have a higher price than those during off-peak hours.  This allows price-sensitive consumers to sacrifice a convenient appointment time for a lower-cost visit if necessary.  Discount programs for price-sensitive consumers are also on the rise.  MedStar recently implemented StarPass, an urgent care service discount program.  This program allows self-pay patients, as well as those with high-deductible health plans, to pay an annual fee in exchange for reduced urgent care visit prices.

Consumer price sensitivity, high-deductible plans, and continued commercial and regulatory emphasis on cost transparency will likely further accelerate trends that make patient and consumer affordability an important element of provider planning and strategy.

In part four of our series on healthcare consumerism, we will build upon our discussion of patient and consumer affordability to take a closer look at the principle of transparency as it relates to evolving healthcare consumer trends and preferences.

Read other articles in this series:

Strengthening Your Consumer-Based Platform: Access

Strengthening Your Consumer-Based Platform: Convenience

For more information about developing effective consumer-based platforms, contact one of our executives below at PYA, (800) 270-9629.

 

[1] Building a Value Culture of Health: The Value Proposition of Retail Clinics, 2015.


David McMillan

David McMillan

Principal

Scott Clay

Scott Clay

Principal

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