Bringing The Retail Edge To Healthcare: How Hospitals Can Better Retain Business
By Christine Kern, contributing writer
PwC report: as consumers shop around for healthcare, providers need to respond like retailers.
As consumers increasingly shop around before committing to a healthcare provider, hospitals need to think like retailers to retain their business according to a PWC Health Research Institute (HRI) report. The report, Price check in the MRI aisle: Hospitals adopt a retail approach to win customers, found hospitals are losing customers to retail clinics, standalone surgical centers, and walk-up medical facilities where their out-of-pocket costs may be lower. In order to better compete, PwC concludes hospitals need to increase price transparency and accessibility, while making also making fees defensible.
The report authors write, “A short time ago, it would have been unthinkable for American health systems to publicize how much they charge for medications and medical services. But now, most Americans are facing higher deductibles and other cost-sharing measures; as a result, some consumers are beginning to shop around, diverting business away from health systems and toward standalone operations that advertise their prices and services.“
The result has been a major adjustment in how some health systems are approaching the attraction and retention of consumers, with a new emphasis on innovation and communication.
A 2015 HRI survey found nearly 40 percent of American adults had contacted healthcare providers ahead of time to verify the price of a prescription or procedure. And while 26 percent contacted different doctors and health systems about prices in 2014, in 2015 that number climbed to 30 percent. Price points are important since more than one-third of consumers say they would go to a retail clinic for procedures based on costs.
Insurers are also actively encouraging their members to utilize lower-cost providers and providing incentives for using alternative venues for care, meaning hospitals need to launch an intelligent counter-attack.
One example of how some health systems are working towards greater price transparency is Orlando-based Adventist Health System, which examined ways to adjust prices and reduce the charge-to-cost ration in its chargemaster.
“Our marketplace was starting to tell us that the tolerance for what was going on, both from a rate perspective and a charge perspective, was no longer going to be acceptable,” explained James English, vice president of revenue cycle finance at Adventist Health System. “So our executive team saw the horizon and said we now have to look internally and see what we can do to start marching down on rate and charges, decrease complexity, before our payers came and did it to us.”
Reducing key components of its chargemaster between 30 percent and 40 percent would mean reduced annual revenues between $50 and $75 million, but the hospital persisted in order to retain patients.
Some of the future strategies hospitals can adopt to help attract and retain consumers include:
- Assessing technology to facilitate market rate comparisons, payment options, and price transparency related questions.
- Providing multiple service options for patients.
- Streamlining patient billing.
- Coordinating efforts with physicians and patients.
- Partnering with payers and employers around population health.
- Developing contracting and pricing strategies to compliment long-term institutional strategies.
Ultimately, the PwC report has three recommendations for hospitals:
- Use pricing strategies to consider offering bundled services.
- Compare charges against the competition in order to reduce or rationalize gross charges.
- Assess the total reimbursement impact, including implications for Medicare and other reporting.