How price transparency helped an Arizona health system achieve financial turnaround

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.

At Maricopa Integrated Health System, price transparency and the demonstration of cost-effective, high-quality service to patients have become strategic imperatives, and essential components of the system's comeback story.

IMPACT

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.

It was a painful process, but necessary to understand resource consumption so that decisions could be made after factoring in the relevant community benefit.

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 wrote.

Price transparency efforts included a 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; and a centralized patient assistance center, integrating financial clearance with appointment scheduling and other processes.

Other initiatives included comparative modeling to ensure that rates were competitive with those of similar hospitals in the market; and steps to help patients activate their secure online accounts, facilitating communication and online bill payment.

THEIR TAKE

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," the author wrote. "This commitment includes providing better tools for patients -- and their insurers and employers -- to understand their out-of-pocket costs for services."

THE TREND

Many healthcare organizations aren't making significant strides in adapting to consumerism, despite increasing demand, competition for patient loyalty and plenty of lip service to the idea -- and that's true across a range of hospitals, payers and pharmaceutical companies, according to research presented last summer by branding and marketing consultancy specialist Prophet.

Along with identifying the problem, Prophet also outlined potential opportunities for improvement -- namely partnering with digital, bringing in external perspective and measuring what matters. It all comes down to treating consumers as participants in their own health and, increasingly, healthcare organizations' bottom lines now require meeting patients halfway -- or more.
 

Twitter: @JELagasse

Email the writer: jeff.lagasse@himssmedia.com