How Real is Healthcare Consumerism?

It's real enough to drive changes in how the healthcare industry communicates costs and quality, but still a long way from true consumer shopping.

This article first appeared in the April 2016 issue of HealthLeaders magazine.

Consumerism has been making inroads into the healthcare industry for at least a decade, with patients increasingly acting like consumers who have a choice in their healthcare options, trying to make the best decisions for quality and cost just as they do with any other commodity. The trend has been accelerated by the Patient Protection and Affordable Care Act, which left many consumers with large deductibles that put more pressure on them to find the most cost-effective care for the dollars coming out of their own pockets.

Just a few years ago, patients seeking information about a doctor or hospital were able to find only the most basic data, leaving them to base their treatment decisions on the few factors they could mostly understand—their insurance coverage and the availability of the care they needed. Now many of those patients are able to access much more detailed information about important factors such as a physician's experience with a particular procedure or a hospital's complication and readmission rates.

Patients are finding, however, that there are limits to how much they can play the savvy consumer. Despite growing access to quality metrics and hospital rankings, there still are holes in that data that can make it difficult to discern meaningful differences among providers; and even if patients have adequate information, they may be unable to choose freely because of health plan restrictions and other limitations.

However, the trend toward consumerism has advanced far beyond where it was just a few years ago, and the healthcare industry is responding with outreach and initiatives intended to help patients in their quest for value.

At the same time, consumers and healthcare leaders are both realizing that making healthcare choices is not the same as finding the best deal on a television set—and it never will be. Other concerns and motivations are in play when it comes to healthcare, starting with the fact that the patient often is making the decision in a time of stress and urgent need. Also, choosing one physician or hospital usually is not enough; the patient has to make choices based in part on which physicians, specialists, and hospitals work together and how they will work with the patient's insurance coverage. And unlike most consumer choices, the human connection between the patient and the provider can hold great sway over a patient's decision.

The search for cost and quality information
Research by Healthgrades, a Denver-based online resource for consumers seeking information about physicians and hospitals, indicates significant overlap between what consumers say is most valuable when selecting a physician and what physicians want to know when referring a patient to a specialist. Both consumers and physicians say experience-related information is most important, especially for complex conditions and unique cases.

When choosing a hospital, quality measures such as complications and mortality rates are most important in complex cases. Consumers take note of the "patient satisfaction" ratings of a physician or hospital more in basic, everyday situations such as selecting a primary care provider than they do in more complex scenarios such as finding the best surgeon for the procedure they need.

Consumers are twice as likely to select a specialist, such as an OB-GYN or an orthopedic surgeon, when they have access to three objective metrics about that specialist—experience, hospital quality, and patient satisfaction, according to the Healthgrades research. In primary care, however, consumers are just 1.26 times more likely to choose a doctor when they can access that data. Additionally, when presented with information about physician experience and related hospital quality, 85% would select a different doctor than the one they chose before getting that information.

That may be because consumers see so little transparency that when they do, the very fact that they have access to information works to the benefit of that healthcare provider. Patients at times struggle to understand their healthcare choices because the healthcare industry is still mostly opaque, says Roger C. Holstein, who spoke to HealthLeaders for this article as CEO of Healthgrades. He has since become vice chairman of Healthgrades' board of directors and has returned to Vestar Capital Partners as managing director.

Some large health systems are responding rapidly to the need for more transparency and recognizing that embracing transparency as a core principle can differentiate them from competitors, he says. "The health systems rapidly adopting transparency are reaping the benefits because consumers are more likely to trust those who expose more content than those who don't."

Trust is the touchstone of consumerism and the way healthcare organizations respond to it, says Mark P. Herzog, FACHE, president and CEO of Holy Family Memorial in Manitowoc, Wisconsin. With high deductibles putting more of their own money on the line, patients are looking for data and healthcare professionals they can trust to provide the most cost-effective care. The 62-staffed-bed general medical and surgical hospital, along with its network of clinics, pharmacies, and other facilities, has more experience than most in dealing with high deductibles, Herzog says, in part because the Manitowoc community has many family-owned businesses and they have been more innovative in designing their health plans than larger employers.

How Real is Healthcare Consumerism?

"We've been in a high-deductible market since 2008, so we are much further along in learning what that means for us and for patients," he says. "Ninety percent or more of our insured population has a high-deductible plan. The typical family deductible in our market is about $8,000, and we have more than a handful of $14,000 deductibles in our community."

Those figures prompted Holy Family Memorial to address consumerism earlier than most hospitals. One of the first signs of the high-deductible impact was suppressed utilization of healthcare—some appropriate, but much of it may be inappropriate, Herzog says.

Not only were patients avoiding high-cost care, but they were also avoiding inexpensive or fully reimbursed care because they didn't want to risk having to pay for follow-up treatment. For instance, a false positive mammogram, which happens about 15% of the time, would necessitate an office visit that the patient would pay for, so some women elected to forgo the mammogram, he says.

High deductibles force more dialogue with patients, and cost is almost always part of dialogue. That discussion changes the course of treatment about a quarter of the time, he notes.

"Providers have had to become more aware of what the cost of services are," Herzog says. "For the services that they commonly order, our providers are pretty aware of the costs and can discuss treatment options with the patient. Patients will ask directly about the cost and whether this test or therapy is really necessary, so our providers have to be able to discuss that instead of passing them on to someone else."

The right setting for a patient's care
Responding to that consumer move by the patient, Holy Family Memorial adopted a corporate philosophy called Right Care, striving to provide each patient the right care in the right setting, with the right outcome. The right setting is the one that presents the patient with the lowest financial risk and the lowest physical risk, Herzog explains.

The hospital also has worked to provide more cost information directly to the consumer. For 10 years, the hospital has offered price estimates that outline the patient's out-of-pocket expense for almost all procedures. When Herzog recently underwent knee surgery, he didn't specifically ask for the cost estimate but found one in his mailbox a week before the procedure, detailing all the costs and the out-of-pocket expense from his health plan.

"A strict focus on cutting costs and suppressing utilization purely driven by insurers can be seen as bad, mostly because of the way it is being forced on consumers and providers, but I think it can start a healthy dialogue," Herzog says. "We've been trying to help those we serve by intentionally lowering utilization of expensive hospital services for over a decade now, and it's been not good for hospital finances. But because our mission statement is to serve communities and not our own corporation, we decided to do this because it's the right thing for the community."

The efforts to lower utilization costs at Holy Family Memorial has resulted in lowering inpatient admissions by 45% in the past decade.

"We saw a 20% increase in clinic visits during the same time frame, which, when correlated with the decrease in admissions, provides some indication that our efforts to shift patients from hospital to clinic is working," Herzog says.

"There is one other competing hospital which has not embraced a community-focused value philosophy like Holy Family Memorial has. In fact, if Holy Family Memorial had been the only provider in the county, the increase in hospital bills individuals, government, businesses, and insurers received would have increased only 22%," Herzog says. "If all hospital services in our county used our Right Care approach, it would have avoided more than $90 million in hospital charges over the past decade."

Herzog notes that the hospital's Right Care value focus directly caused group health insurance premiums in his county over the same time period to increase 38% less than neighboring Green Bay, reflecting how hospitals and doctors can improve the economic environment.

Also, Holy Family Memorial's bad debt (as a percent of gross revenue for the hospital—not consolidated), decreased from 1.47% in 2004 to 1.13% in 2014.

Herzog notes that the commitment to serving the community has forced Holy Family Memorial to transform its delivery system and cost structure considerably faster than if it had stayed in the traditional volume-driven mindset.

Herzog's hospital also formed the Consumer Transparency Theme Team in January 2015, responsible for making Holy Family Memorial as transparent as possible so that the patient knows what to expect from the entire experience. That means providing information on not just the cost, but also issues such as how the patient can expect to feel during and after a procedure or test, and who will be calling to follow up after discharge. The transparency team also works to provide quality information to patients in a form they can understand.

"Very few people can make use of the quality data that is out there because it is written from a provider or regulator point of view. It just doesn't resonate with the average citizen," Herzog says. "This team works to translate all the healthcare gobbledygook about healthcare costs, quality, and outcomes into the way two women at the hairdresser would talk about it, or two guys over a beer and a football game."

Holy Family Memorial also empowers the consumer by providing direct access to scheduling lab tests, therapy, and other care. The hospital's direct-access lab testing, for instance, allows the patient to schedule a lab test online without a physician referral, with results mailed the next day. The website lists the cost of 73 available lab tests.

The hospital also is working to accommodate patients' schedules, rather than the traditional approach that puts the convenience of the hospital first. Clinic hours were extended, e-visits were made available online, and Holy Family Memorial also implemented same-day appointments at its clinics.

The overall impact of consumerism is a positive one for the healthcare industry, Herzog says. "My greatest concern is that while the healthcare system is changing, albeit at a glacial pace, employers are struggling to make sense of this shift to consumerism," he says. "Employers rushing to high deductibles often give little or no help to the employee about how to appropriately access healthcare in this new environment."

More impact on outpatient services than inpatient

Consumerism appears to have more impact on outpatient services than inpatient care, says Mark Bogen, senior vice president of finance and chief financial officer at South Nassau Communities Hospital, a 400-staffed-bed acute care facility in Oceanside, New York. Patients still rely on their physicians to refer them to the appropriate hospital and generally don't question that choice unless the facility is out of network. It's only at that point that most patients will speak up and ask about an in-network alternative, he says.

"People are becoming much more savvy about the ultimate financial responsibility and the high deductibles, and it's the outpatient choices where they put that information to use," Bogen says. "We are certainly seeing the impact of that here on Long Island, with patients moving away from hospital-based outpatient ambulatory services to our freestanding counterparts."

South Nassau's efforts to follow patient trends in the past few years actually have backfired because of the move to consumerism, he says. With all the experts predicting that hospital admissions would decrease as patients gravitated more toward ambulatory care, South Nassau negotiated managed care contracts that would take advantage of that move with high-margin ambulatory care fees.

"What has happened is that we have substantially outpriced ourselves in the market, in relation to freestanding, primarily physician-owned and -operated providers of ambulatory care," Bogen explains. "And now insurance carriers have put in benefit designs that penalize recipients who prefer to use hospital-based ambulatory services. So the quandary we have in terms of redoing our managed care rate structure is that we could bring down our rates, but if the benefit design remains to penalize those using our facilities, we aren't accomplishing anything."

The insurers have to give a little if the hospital lowers its rates, so South Nassau is working with insurance companies to develop shared savings relationships that would soften the impact of patients continuing to move to freestanding ambulatory care. The hospital would share in the savings generated by the managed care plan patients choosing more cost-effective care in freestanding facilities, helping to compensate for the hospital's loss in revenue. Talks also are underway to establish a "skinny network" in which the insurer agrees to exempt South Nassau from the high deductibles that patients otherwise would pay when choosing the hospital over a freestanding facility.

Threats from urgent care, drugstore clinics
The damage from lost patients may be mitigated by the glut of urgent care centers on Long Island, which was spurred by the constant search for more cost-effective care outside the hospital. With a new one popping up in seemingly any vacant space, South Nassau leaders initially saw them as formidable competition that promised to save managed care providers money over patients going to a hospital emergency department, so the insurers were willing to pay physicians more than the standard private practice fee schedule. That led many local physicians to sign on with the urgent care centers, which left the community with fewer primary care physicians.

"So when they couldn't find a primary care doctor, people ended up using the urgent care as their primary care," Bogen explains. "The insurers end up paying more for the patient to see the doctor in an urgent care setting than if that doctor was available for a regular primary care visit. Now we're seeing the insurers go back to paying the primary care practice rate, and many of the urgent care operations can't sustain themselves on that."

As that threat recedes, another serious challenge for South Nassau is the CVS pharmacy directly across the street. CVS Health—which reported 2014 net revenues of $139 billion, and net operating profit of $8.8 billion—can undercut the hospital on prices for basic services at the chain's Minute Clinics because it is willing to lose money on a flu shot if it means getting a customer in the door to buy retail goods and use the pharmacy, Bogen says. The idea of setting up a similar clinic has crossed his mind, but Bogen notes that larger healthcare systems have tried that and ended up closing or subleasing the clinics because they were not profitable.

South Nassau also has gone to social media to slow the loss of patients seeking a better price. Realizing that, although it had a good Web presence, it wasn't very active on social media, hospital leaders brought in a new hire at the senior vice president level to focus on improving the hospital's exposure on Facebook, Twitter, and other social media.

During 2015, the hospital made a relatively small investment in a Facebook advertising campaign that paid big dividends in its ability to reach a significantly greater core audience. By the end of 2014, the hospital had collected about 970 "likes" for its page, and through 2015, that number swelled to 10,000 likes. This dramatically increased its engagement and reach, Bogen says, with weekly total reach skyrocketing from 26,000 to more than 70,000. The campaign was instrumental in developing awareness as the hospital launched a new branding campaign in 2015 with newspaper, cable, and spot TV. Of particular focus was generating original and organic content on an almost-daily basis, which has been key to effectively engaging the audience.

"We increased the number of social media administrators from within the hospital who could post content directly to our social media sites to aid in content generation and also be additional sets of eyes and ears," Bogen explains.

Using similar means, the hospital also grew a specialty Facebook site for its urgent care and freestanding emergency department, located in Long Beach, New York, about 5 miles from the hospital's home campus. Participation grew from just under 500 likes to more than 6,500 in that same year. When the hospital changed the service platform at that location from urgent care to emergency care, that growth gave the hospital an easy and inexpensive way to reach and notify interested parties in the market.

Using an integrated campaign of social media, website promotion, newspaper, radio, postcard mailing, beach flyover banners, and press conferences, the center doubled its patient volume in the first month and has continued to grow steadily.

South Nassau also increased its marketing budget, almost doubling in two years how much it spends on quality- and outcomes-based advertising. The hospital also is revamping its website to include more patient interactivity and to make more quality and cost information available. Previously the website was managed by a single administrator who could not keep up with constant updates, so now department managers have access to the site and are responsible for updating their information.

Different levels of consumerism across country
Regional differences can affect how much patients are moving toward consumerism, and how healthcare entities are responding. In areas where people have not been hit as hard with high deductibles and restrictive health plans, costs probably won't be the paramount issue for most patients, says Kimberly Boynton, president and CEO of Crouse Hospital, a 400-staffed-bed general medical and surgical hospital in Syracuse, New York.

Patients are asking more questions and seeing more information online about providers and suggested treatment, but their actual decisions usually are not based on price, she says. That may be due in part to the fact that the Syracuse market is behind the curve regarding health plans and high deductibles, with many employers maintaining their traditional plans. But even the most motivated consumer will find it difficult to obtain the information needed to truly price shop among healthcare options.

"With all that New York State regulates, I can't believe they haven't made us post our prices yet," she says. "I think the state would like to, but some hospitals are driving the conversation by saying 'No way.' It's because they are higher-priced and they know it, so they're going to oppose making it easier for patients to compare."

Crouse Hospital posts prices online, but Boynton says making costs and quality metrics transparent is more difficult than it might seem. The information that can be made available publicly is limited by the hospital's ability to calculate the many variables that go into determining a patient's actual costs, she explains.

For most procedures and treatment options, the Crouse Hospital website provides data such as the number of surgeries performed at the hospital, the typical age, approximate payer mix, the average price to the hospital, and the average amount reimbursed by the payer. The commercial health plans have to be combined for the average price and reimbursement figures because their contracts do not allow the hospital to disclose detailed information on their agreements.

Boynton pushed for making cost information available to the public two years ago when she was chief financial officer, contending that other hospitals across the country (although none in the hospital's market) were leading the way and that posting prices just made sense. No other industry could get away with not disclosing prices, she says.

"If your car dealer calls and says the car needs more work, he tells you how much it's going to cost," Boynton says. "But you go to the doctor and they order a long list of tests and office visits, and nobody even talks about how much this is going to cost you."

Patient Skepticism Slows Healthcare Consumerism

The price listing received a lot of favorable attention when Crouse Hospital launched it July of 2014, and Boynton expected other hospitals in the area to follow suit. That hasn't happened yet, and she says the reason is that the level of consumerism in upstate New York is not high enough to make hospitals feel obligated to make the move.

While Crouse has not seen changes directly attributable to its price transparency initiative, the feedback from patients and families who have accessed the information has been very positive, Boynton says, adding that the online page receives between 40 and 60 hits a week.

A similar situation is found in North Carolina, where the healthcare industry is seeing a "rising but moderate amount of consumerism," says Doug Luckett, president and CEO at CaroMont Health, a 435-licensed-bed nonprofit hospital in Gastonia. Consumerism is still in the early stages, where people are learning more about their healthcare options and the related costs but not necessarily acting in a proactive manner. It's only been in the past two or three years that CaroMont has seen a rise in consumer behavior, first noted when CaroMont's financial counselors spent more time on the phone helping patients understand their options and their out-of-pocket expenses.

CaroMont is responding by increasing the educational opportunities for patients.

"We try to set expectations so that there are no surprises in the end, and that seems to be what they want most at this point. They don't expect a firm dollar figure, but they want to understand what range they can expect," Luckett says.

Luckett says the hospital encourages patients to call a financial counselor to talk through the financial questions. With so many managed care plans and the offshoots of those plans, it can be difficult for a patient to do his or her own calculations. Speaking to a financial counselor is still the best way to go because the counselor can ask the right questions to find out that, for instance, a patient has a certain managed health plan and not the plan's general coverage.

"This approach, combined with an increase in our commercial payer mix, which could be attributable to a number of things like ACA and an improving economy, has led to a decrease in bad debt for our system," Luckett says.

Hospitals respond to cost anxiety
Offering cost estimates to patients can be a tricky business, because a wrong estimate can either drive patients away if it is too high or upset patients if the estimate was too low.

OhioHealth in Columbus, with 11 nonprofit, faith-based hospitals, has tried offering out-of-pocket estimates in the past but found that the accuracy was reduced by insurers' reluctance to release the necessary details about their contracts. The insurers have loosened their grip on that data in the past two or three years, however, and now OhioHealth offers a price estimator hotline. The hospital is not quite able to do real-time adjudication the way pharmacies can do with prescription drug coverage, but it is getting closer, says Jane Berkebile, system vice president of revenue cycle.

"We also are promoting consistency and standardization in our messaging to patients, so they're not told in one department that an estimate is not available and then going to another department and getting an estimate for their cost," she says. "At the same time, we are changing the culture and what the patient expects. We explain that almost everyone will pay something out of pocket, and once we have that estimate, we do ask for a payment against that estimation."

Marketing to the financial concerns of patients can be a competitive differentiator, says Sarah E. Ginnetti, director of revenue cycle at Day Kimball Healthcare, a nonprofit, integrated medical services provider that includes Day Kimball Hospital in Putnam, Connecticut; Day Kimball Medical Group; and four medical centers. Successfully engaging patients as consumers can create an ongoing relationship, especially if you help remove financial barriers by offering financing options and payment plans, she says.

Offering payment plans with its patient financial engagement partner CarePayment, has reduced Day Kimball's bad debt expense, she says. Patients are now paying their bill sooner rather than later, which Ginnetti says has allowed the health system to keep resources focused on helping the patient rather than trying to collect.

Ten percent of all patient payments received are a result of patients enrolling in the CarePayment program, Ginnetti notes. Patient payments increased by 27% overall after Day Kimball implemented the CarePayment program four years ago, and bad debt numbers have held flat since then despite patient balances growing with the advent of high-deductible healthcare plans.

"Most things in American culture require financing now, for better or worse, and having that same option in healthcare is a huge advantage because it allows people to have a budgeted amount every month and stick to their overall budget as a family or individual," she says. "It's predictable and that makes a huge difference even if the total amount you're paying is substantial. We're trying to offer that predictability with up-front education and these financial tools."

Day Kimball Healthcare recently launched a new tool intended to provide patients with a much more robust estimate of expenses so they can make informed choices. The group also developed an infographic titled "Health Insurance Math Simplified (kinda)" to walk patients through key steps in the process, from how insurers set rates and providers get paid to how patients pay for insurance and other medical costs.

Mixed reviews on consumerism
South Nassau's Bogen expects to see the consumerism movement grow in the outpatient sector but says he hopes it doesn't achieve any more presence in inpatient care than it already has.

"I still believe it's crass to call them consumers," he says. "On the outpatient side, it's more fitting that people will shop for price, and you could argue that much of the outpatient services are commodities, but I don't believe that to be true from an inpatient perspective, and I would hate to have people make what ultimately could be a life-and-death decision on the basis of cost."

Still, Herzog says he sees consumerism as a tide that won't be turned back, so he advises healthcare organizations to accept the change and respond accordingly.

"We have to look at this as a great opportunity to serve people better, and that's going to mean we have to be different," Herzog says. "Instead of fighting to maintain the status quo and get more market share, which is what most of us are doing, we need to sustain and preserve the best parts but make the changes that consumers need from us. While only a few organizations are pioneering this approach, the intellectual acceptance of the need for this transformation is an important first step."