Hospitals Come to Grips with Consumer-Driven Care

Published April 1, 2007

The hospital industry is slowly waking up to the new environment created by empowered consumers. In an interesting twist, the awakening is being led by the Healthcare Financial Management Association (HFMA), the trade group of hospital chief financial officers and other hospital managers.

Usually trade associations are slower to embrace change than the industries they represent, but HFMA clearly feels it would be negligent not to give its members a heads-up about the changing environment and suggestions on what must be done to respond to it.

Paradigm Change

An example is a January 2007 report, “HFMA’s Healthcare Financial Outlook 2007,” which includes a discussion of “Consumer-Focused Practices.” The report warns, “This notion [patient as consumer] represents a radical shift in thinking for health care: that consumers, armed with solid information about cost and quality of services, will make more of their own informed decisions about how they will spend their healthcare dollars.”

Preparing for this change is important, the report says, “although it isn’t likely to be easy.”

The report quotes Joseph Fifer, CFO of Spectrum Health in Grand Rapids, Michigan and current HFMA chairman, as saying, “Truly embracing consumerism, for the benefit of the people we serve and for the long-term health of our own organizations, requires the right decisions for the right reasons. It requires us to move beyond rhetoric, resistance, explicit priority conflicts, and hidden agendas. It requires accepting that the old provider-to-payer paradigm no longer works. The convergence around the consumers is now, and we need to embrace it.”

Wow! It is nice to hear from a visionary in the hospital industry.

Encouraging Signs

The report goes on to say, “Public indignation over the practice of charging uninsured patients the full list charges for services has also fueled demand that price information be more reasonable and easier to understand.”

A sidebar explains, “As of November, 2006, the [American Hospital Association] reported 32 states had statutes requiring hospitals to report hospital charges or payment rates and six states had voluntary reporting initiatives.”

But the report expresses understandable concern about sledgehammer approaches to these issues, quoting Terry Rappuhn of the Patient Friendly Billing Project as saying, “Price transparency needs to be allowed to bubble for some time, to allow local efforts to develop processes that work in individual communities.”

The paper is also pretty good on quality transparency, noting quality isn’t just about outcomes and procedures. “Patients are also interested in facets such as how long they had to wait, how clean the waiting room was, or whether the scheduler was polite on the phone,” the authors write. They add, “when it comes to the realities of a competitive marketplace in which consumers [rather than clinical professionals] make the decision about where to go for care, customers’ perceptions about their experience are often just as much a deciding factor.”

Overall, a very encouraging paper. Let’s hope the rest of the hospital industry will be willing to follow HFMA’s leadership.

Massachusetts Plan Falling Apart

The big ol’ solve-everything plans rolled out by politicians never work as intended. The reason is simple: The world is a lot more complicated than even the smartest politician can account for (and too many ain’t that smart to begin with).

The latest evidence comes from Massachusetts, where the board of “the Connector”–the state agency through which every uninsured person in the state is required to obtain coverage–thought it would be swell for everyone to have really good prescription drug coverage. Oops! Turns out what the board thought was “good” is well beyond what a lot of people have.

At least 200,000 people with private coverage from the top five insurance companies in the state don’t comply with the Connector’s wishes. If the rule stays in place, they will be fined for noncompliance.

The Connector was supposed to bring coverage to people who are uninsured, but it turns out to be just another mandate generator–albeit one that can bypass the messy legislative process.

On January 30, The Boston Globe reported that coverage, as defined by the Connector, will have an “average premium [of] $380 a month, far above the $200 cited by Gov. Mitt Romney before the health law was passed.”

State Is Decider

The Connector will limit deductibles to $2,000 for an individual or $4,000 for a family, and it will cover drugs and three office visits per year before the deductible applies–disqualifying these plans from having health savings accounts.

“It’s a hard issue,” Jonathan Gruber, a Connector board member and Massachusetts Institute of Technology economist, told the Globe. “There’s a trade-off between making sure we have real coverage and minimizing disruption to the market.”

There certainly are trade-offs, but one wonders whether Gruber is the one who should be making those decisions for every family in Massachusetts. Maybe the families can decide for themselves what “real coverage” is.

Most likely this particular rule will be changed before it goes into effect, because of the embarrassing publicity it has received. But after a while the Globe will get bored following this story. Then the board of the Connector will be free to institute any half-baked idea it may come up with.

Thanks a lot, Mitt.

Greg Scandlen ([email protected]) is president of Consumers for Health Care Choices, a consumer advocacy group based in Maryland.

For more information …

“HFMA’s Healthcare Finance Outlook 2007,” published in January 2007 by the Healthcare Financial Management Association, is available through PolicyBot™, The Heartland Institute’s free online research database. Point your Web browser to and search for document #20717.

“200,000 may need to get more insurance,” by Alice Dembner, The Boston Globe, January 30, 2007,