What does the perfect hospital bill look like?

While recovering from an illness, most hospital patients will gladly go through a test or procedure if they believe it will help them feel better. 

They may think about how much it will cost them, or question whether the test or procedure is truly necessary. But their desire to overcome their affliction often outweighs their concerns, and they agree to the treatment.

Then weeks, or maybe even months, after they've left the hospital, the inevitable happens. They receive multiple bills from different providers, which can be confusing and cumbersome.

A 2014 survey by TransUnion Healthcare found the majority (54 percent) of insured consumers are either sometimes or always confused by their medical bills.

Although the patient may be able to determine the amount they owe, it is not always clear exactly what that amount is for. Bills also contain language that patients don't understand. For instance, most patients don't know what a diagnosis-related group is. For many patients, the date they went to the hospital might be the extent of what they firmly know about their stay, says Mike Brown, executive vice president and treasurer of Children's Hospital & Medical Center in Omaha, Neb.

In addition, many bills contain errors or overcharges. In fact, billing advocates and other health professionals estimate 30 percent to 80 percent of medical billscontain errors, according to a May 2014 report from The Fiscal Times. Recently, accounts of errenous bills and poor billing experiences have hit mainstream media aplenty.

In her March New York Times column, Jane E. Brody wrote about her 88-year-year old aunt, who fainted at home and was taken to the hospital by ambulance. Her aunt was evaluated in the emergency room and then admitted to the hospital for what ended up being a side effect from a new medication. Five months later, her aunt received a bill stating she still owed $992.60 after Medicare and secondary insurance.

Eric Michael David also showed how medical bills contain errors when he wrote an opinion piece in The Wall Street Journal. Mr. David and his wife found a large swollen bruise on their 3-year-old son's head more than a week after he had fallen off his scooter. After an emergency room visit, it was determined that the 3-year-old had an 11-day old bleed inside his head, which was healing. Then the bill came, and it included an erroneous $10,000 charge for "trauma team activation." Mr. David was able to get the charge removed after a lot of negotiating with the hospital.     

Another confusing part of bills, according to a report from Roanoke, Va.-based Medical Recovery Services, is the fact that charges vary greatly from hospital to hospital and from physician to physician. The cost of hospital or physician's office treatments may range from the low thousands to hundreds of thousands of dollars. One need only to look at data released by the federal government in 2013, which shows hospital charges for the 100 most common inpatient procedures. The data contains significant amount of variation.

As far as paying the bills, not all hospitals and health systems offer online access to pay, which, according to a 2011 survey conducted by accounting and financial software company Intuit, is something many Americans desire.

The ideal bill

It's tough to work around the restrictions of today's billing reality. But to get a sense of where billing and collections may be headed, Mr. Brown and Tomer Shoval, CEO of Simplee, a Palo Alto, Calif.-based software company that provides billing and payment platforms for healthcare providers, painted a hypothetical picture of what the perfect hospital bill would look like.

In an ideal world, patients would receive a consolidated bill that shows their responsibility with clear, easy payment instructions, says Mr. Shoval. The bill would be sent immediately when it's ready, and it would include all of the various service charges and insurance adjustments so everything is readable on a clear, itemized statement. The ideal bill represents an entire episode of care or visit rather than fragmented bills for services coming from different entities.

The ideal bill is also without error. As hospitals move forward and try to define and achieve the "perfect" bill, Mr. Brown says one place to start is ensuring the right charges are on the right bill. No hospital or health system is foolproof when it comes to bill accuracy. Therefore, organizations must make sure audits and internal controls are in place to reduce the likelihood of inappropriate charges.

Half the battle is having the right information. The second half is having the right amount of information. It's critical to simplify the bill as much as possible for the patient. "The bill is used for multiple purposes, including billing to the insurance company, but try to take as much extraneous information as possible off the bill," Mr. Brown advises.

The perfect hospital bill would be transparent and explain how much a person needs to pay and why. Mr. Brown says it is important to only get the information on the statement that families need to identify their obligation. "We continue to believe the vast majority…of our patients want to pay what they owe in a timely fashion, and it's incumbent on us to make sure it's clear from the bill what that amount is," Mr. Brown says.

Additionally, in an ideal situation, patients would have multiple payment options at their disposal. For instance, depending on their preference or convenience, patients could pay the bill over the phone, online or on a tablet or mobile device.

Many hospitals and health systems do send electronic bills, but it is often difficult or impossible to view and pay bills easily on a mobile device, according to Mr. Shoval. Simplee offers a patient payment platform for large medical providers called SimpleePAY. Since SimpleePAY is cloud-based, bills can easily be seen on a tablet or mobile device as long as the person has access to the Internet.

Patients receive an email letting them know they have a bill from the organization. They can click a link in the email alert that takes them to the SimpleePAY online platform, and from there they can pay their bill. The system doesn't require patients to create an account to access it.

What's keeping us from the perfect bill?

Plenty of resources are available to help providers move closer to the perfect hospital bill, but the ideal scenario is generally difficult — if not impossible — to achieve. Bills are highly important documents and they represent the interests of multiple parties — physicians, insurers and patients. To develop a bill in a way that pleases every party is extremely difficult. They must be easy to understand for patients, but also meet payers' claim rules and help hospitals improve or maintain collections.

This is also partly because each hospital and provider is different, according to Mr. Shoval. "They have different mechanisms, different processes, different workflows, etc. Everyone is isolated from each other," he says. What might be a perfect bill for one hospital may be a far cry from such at another.

Also, patients are dealing with multiple providers. They must pay the hospital for use of its equipment and facilities, but they may also have to pay an ER physician who's not part of the hospital. Then if the patient has to undergo anesthesia, that's a third entity involved. All of this can lead to several complicated bills, which reach the patient at different times.

"As long as there's not one holistic organization that has it all under roof, that's going to be problem," Mr. Shoval says.

Still, it benefits the hospital to strive for patient-friendly bills. The current problems of bad debt, high costs to collect and angry patients are a result of a broken billing system, according to Mr. Shoval. Therefore, "solving patient billing is, in fact, the solution. Not only does it provide better collections but it also serves as a competitive advantage," he says.

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