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Business not as usual

May 1, 2006
by Monica E. Oss
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Consumer-managed plans require new operating strategies

A surprising study released by America's Health Insurance Plans at the end of March found that the number of people enrolled in consumer-directed health plans (with health savings accounts [HSAs] and high-deductible health-insurance policies) had tripled to more than three million in ten months. HSAs are tax-free healthcare saving and spending accounts available in both the group and individual health insurance markets. In March 2005, a little more than one million people were enrolled in HSAs, compared with 438,000 in September 2004.

The growth of HSAs is just one indicator of the increasing interest in “consumer managed” healthcare—an alternative to “managed care,” in which services (and funding) are managed by a third party on behalf of the payer. These particular consumer-directed models are most common in publicly financed programs, including Access to Recovery vouchers, Medicare Advantage Plans, and the new Florida Medicaid model launching in July 2007.

The introduction of consumer-managed plans is being hailed as the consumer-friendly, market-driven path to managing costs. The goal is to provide employees with an incentive to avoid unnecessary services, stay healthy, participate in disease management programs, and shop for care not just on quality, value, and service, but also on price. If consumer-managed plans live up to their potential, we all will pay less for healthcare.

Where does this shift in the business model of healthcare finance leave behavioral health professionals and provider organizations? To me, it all boils down to three questions:

  1. If consumers are paying with their “own” money, will they choose the services that you provide?

  2. Will consumers choose you?

  3. If consumers choose you, will you get paid?

To go with my questions, I have three pieces of advice for my colleagues:

  • Embrace marketing. Consumers vote with their feet. Attracting and keeping consumers will no longer be about signing the right contracts but more on properly managing the consumer relationship. That means making the experience the best it can be, with a renewed commitment and a creative approach to customer service.

    In the consumer-managed world, marketing is everything. Learn it. You need to be a combination of McDonald's and Nordstrom. Most consumers want it convenient, quick, and pleasant. That could mean making consumers wait less. Otherwise, consumers will keep you waiting as they beat a path to someone else's door.

  • Know the price and share the price. When consumers pay out of pocket, they start paying attention to price. The marketplace will demand price transparency. You will need to know how your competitors set prices. You will need to clearly demonstrate the value of what consumers receive if they select you. If consumers are willing to drive an hour or more to save $100 on airfare, they most assuredly will be willing to drive a long distance to save on healthcare costs (which is typified by the booming “medical vacation” market). And if you buy into the premise that consumers will travel for services, then you need to rethink the scope and reach of marketing. More than ever, provider organizations are going to need to tell their story, share their unique selling proposition, and show value.

    For provider organizations and professionals serving Medicaid and Medicare beneficiaries, the Deficit Reduction Act signed into law in February creates a plethora of new copayments, deductibles, premiums, and health plan choices. Providers need to think like consumers and ask what they themselves would demand from those providing healthcare in this new world.

  • Get paid now or you may not get paid later. Accounts receivable tend to rise in healthcare systems in which consumers pay the bills. Most consumers in traditional plans make a copayment (or owe no copayment), and their insurer pays the balance. Thus, consumer-managed plans present a big change. Organizations will need to collect a significant portion of fees at the time of service, rather than bill consumers weeks later.

    You will need to learn the art of collections. The new public relations ambassadors for provider organizations will be accounts receivable and collections personnel. These employees will have to be trained to ensure they handle collections in a professional and sensitive manner because the number of consumer interactions will increase. In addition, consumers will want online access to view bills and balances and to make payments. Because of increased volume, provider organizations will have to adopt best practices from the credit card and banking industries for collections. Service representatives can create loyalists through good service or antagonists through bad service.

Monica E. Oss, Editor Emeritus of Behavioral Healthcare, is CEO of OPEN MINDS, a research and management consulting firm for the behavioral health and social services field.

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