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Price transparency helps Arizona health system achieve financial turnaround

February 21, 2019

February 21, 2018 - Efforts to understand costs and openly share information on healthcare prices played a key role in a major Arizona health system's successful turnaround from a financial crisis, according to a feature article in the Spring issue of Frontiers of Health Services Management, an official publication of the American College of Healthcare Executives (ACHE). This journal is published in the Lippincott portfolio by Wolters Kluwer.

"Price transparency and demonstration of cost-effective, high-quality service to patients have become strategic imperatives at Maricopa Integrated Health System (MIHS)," writes Stephen A. Purves, FACHE, President & CEO of MIHS. The theme for the Spring issue of Frontiers is "Healthcare Conundrum: Achieving Cost of Care With Price Transparency."

Focus on Price Transparency - Health Systems Challenged to Calculate 'True Costs of Care'

In 2014, MIHS was on an "unsustainable financial trajectory," with an operating deficit of more than $74 million. Arizona's largest public healthcare system and a major training center, MIHS is a safety-net system, predominantly serving patients on Medicaid and other public insurance.

To meet the crisis, MIHS leadership implemented a financial turnaround process, focused on improving productivity, efficiency, and revenue while reducing costs and waste. A critical starting point was understanding total costs, so as to calculate the contribution margin and total margin for each service provided by the system. "This process, although painful, was necessary to understand resource consumption so that decisions could be made after factoring in community benefit," Mr. Purves writes.

Margin improvement efforts began in earnest at the start of 2015, highlighting leadership development, readiness for change, collaboration, speed to implementation, and idea generation. The approach emphasized value and patient experience, with swift implementation of tools supporting these priorities. By the end of 2018, the system had achieved a financial turnaround of more than $150 million - "without eliminating community services and with a reduction in workforce of less than 1 percent," the author adds.

Price transparency efforts included a highly successful initiative to promote community enrollment in Medicaid or Affordable Care Act plans. Several programs targeted the unique needs of MIHS's patient population, including:
  • A robust financial counseling program to help patients determine out-of-pocket costs.
  • A sliding-fee discount program for uninsured patients who didn't qualify for state or federal programs.t
  • A centralized patient assistance center, integrating financial clearance with appointment scheduling and other processes.
  • Comparative modeling to ensure that rates were competitive with those of similar hospitals in the market.
  • Steps to help patients activate their secure online accounts, facilitating communication and online bill payment.
With increasing enrollment in high-deductible health plans, out-of-pocket spending by patients is expected to increase. This trend toward increased "consumerism" will drive further changes in price transparency. "Moving forward, MIHS is committed...to becoming a more patient-centered, consumer-friendly organization," Mr. Purves writes. "This commitment includes providing better tools for patients - and their insurers and employers - to understand their out-of-pocket costs for services."

The Spring issue of Frontiers presents feature articles and commentaries that illustrate the challenges of and solutions for responding to the demand for price transparency in healthcare. "True costs - identified with the right data and analytics - must be calculated before price transparency can be achieved," according to the editorial by Frontiers Editor Trudy Land, FACHE.

She adds: "[T]o function effectively in a value-based risk payment environment, hospitals and health systems must be able to provide accurate information to consumers, engage them in their care, negotiate favorable contracts with payers, and clearly identify resource utilization in caring for a defined population."
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Click here to read "How Transparency Efforts Helped One System's Financial Turnaround"

DOI: 10.1097/HAP.0000000000000051

About Frontiers of Health Services Management

Frontiers of Health Services Management, the quarterly journal of the American College of Healthcare Executives, can bring you up to speed on the latest trends quickly. Each issue focuses on one healthcare management topic, providing you with the knowledge you need to understand and react to evolving trends. Frontiers is written by experts on the topic and includes commentary from the field.

About the American College of Healthcare Executives

The American College of Healthcare Executives is an international professional society of 48,000 healthcare executives who lead hospitals, healthcare systems and other healthcare organizations. ACHE's mission is to advance its members and healthcare management excellence. ACHE offers its prestigious FACHE® credential, signifying board certification in healthcare management. ACHE's established network of 78 chapters provides access to networking, education and career development at the local level. In addition, ACHE is known for its magazine, Healthcare Executive, and its career development and public policy programs. Through such efforts, ACHE works toward its vision of being the preeminent professional society for leaders dedicated to improving health.

The Foundation of the American College of Healthcare Executives was established to further advance healthcare management excellence through education and research. The Foundation of ACHE is known for its educational programs--including the annual Congress on Healthcare Leadership, which draws more than 4,000 participants--and groundbreaking research. Its publishing division, Health Administration Press, is one of the largest publishers of books and journals on health services management, including textbooks for college and university courses. For more information, visit http://www.ache.org.

About Wolters Kluwer

Wolters Kluwer is a global leader in professional information, software solutions, and services for the health, tax & accounting, finance, risk & compliance, and legal sectors. We help our customers make critical decisions every day by providing expert solutions that combine deep domain knowledge with specialized technology and services.

Wolters Kluwer, headquartered in the Netherlands, reported 2017 annual revenues of €4.4 billion. The company serves customers in over 180 countries, maintains operations in over 40 countries, and employs approximately 19,000 people worldwide.

Wolters Kluwer Health is a leading global provider of trusted clinical technology and evidence-based solutions that engage clinicians, patients, researchers and students with advanced clinical decision support, learning and research and clinical intelligence. For more information about our solutions, visit http://healthclarity.wolterskluwer.com and follow us on LinkedIn and Twitter @WKHealth.

Wolters Kluwer Health

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