How Geisinger's 'crazy' idea of refunds turned into a smart business strategy

If you had the chance to request and receive $100 or $2,000, what's stopping you from the latter?

This was an instinctive question after learning of Danville, Pa.-based Geisinger Health System's ProvenExperience program. Under the initiative — spearheaded by new President and CEO David Feinberg, MD, and piloted last October — patients can request refunds if they are dissatisfied with their hospital experience. Refunds work on a sliding scale, meaning patients can seek as little as $1 back. On the other hand, they can request the entire amount of their co-pay or deductible, topping $2,000. Geisinger pays the refund request in three to five business days, no questions asked.

Dr. Feinberg, who is triple board certified in child and adolescent psychiatry, adult psychiatry and addiction psychiatry, didn't anticipate abuse of the warranty system. Cynics may have thought otherwise. Acting in their self-interest, who wouldn't lean to the high end of the spectrum?

Geisinger's reliance on human rationality is what music and hospitality industries have put to the test in recent years, although in reverse. Pay-what-you-want business continues to bring in mixed results and keep social psychologists on their toes. Perhaps the most well-known pioneer on this front is the band Radiohead, which released downloads of its 2007 album with a price tag of "pay what you will." The band later confirmed it made more money before 'In Rainbows' was physically released than it made in total on its previous album.

In the dining world, a New Jersey restaurateur offered menus void of prices for one month in an act of gratitude to his patrons. He found although 20 percent of diners paid less than a dollar a dish, 80 percent did not. "I've learned that humanity is not as bad as we think," he told the New York Times. Indeed, brands and products to which customers feel loyal — be it a band or a dining spot — are most likely to see positive results from this alternative payment model. A landmark study on pay-what-you-want business found when people like the company, they may pay a price that feels right rather than the lowest price possible. 

But it goes without saying: bariatric surgery is different from a rock album or risotto. People have a sense of those enjoyable items' worth. It's not as natural to name the cost of a cruddy healthcare experience.

That's why Dr. Feinberg ultimately doesn't want to give anyone the chance.

A customer service zealot 

When Dr. Feinberg assumed his role as CEO of UCLA Hospital System in 2007, two out of three patients would not refer the system to a friend. Dr. Feinberg made a point to visit with families and share his business card and phone number. In his eight-year tenure as chief, patient satisfaction scores at UCLA grew from the 38th to 99th percentile. His standards remained unapologetically high.

"I'm the most critical of all — 99th percentile patient satisfaction sucks," he told Becker's in 2011. "That puts us in 99th percentile among hospitals, so 85 out of 100 patients would recommend us to family or friends. All that means to me is that we have failed miserably with 15 patients and families." 

Settled into life in central Pennsylvania, Dr. Feinberg's obsession with the patient experience is as fierce as ever, and Geisinger has picked up on his modus operandi.

"We'll answer the phone and everybody is offered same-day appointments," he said at the Becker's Hospital Review 7th Annual Meeting. "You'll be treated as if we've been expecting you. The care of course will be high quality, low cost, safe, compassionate and dignified — care I'd want for my own family. We'll actually send you a bill you understand. I get explanations of benefits at home, and I have no idea what they say. Think about people without health literacy trying to figure out what this costs and what this means."

He said caregivers seek permission for every patient interaction, asking, "Is this a good time to draw blood? Is it ok if I come in?" The system posted online physician ratings and patient comments in November 2015, and its MyEstimate tool lets patients calculate the approximate amount they might owe after insurance.

But Dr. Feinberg wanted to build on the idea of a "warranty," a word the New York Times associated with Geisinger's ProvenCare program. Under that initiative, launched in 2006, patients admitted for elective bypass surgery were charged one flat rate by the system's health plan. That rate covered the costs of post-discharge admissions and procedures that took place up to 90 days after the procedure. If the patient returned with a complication in that time period, Geisinger did not re-bill for care.

Soon after arriving at Geisinger last May, Dr. Feinberg lobbied for a similar warranty or promise — this time about the patient experience. He asked his colleagues a question he considered straightforward enough: Why don't we just tell people they can get their money back if they aren't happy? Peers and executives at other systems first saw this as crazy.

"I'm the sixth CEO at Geisinger," Dr. Feinberg quipped. "The first five were surgeons. When the psychiatrist shows up and says, 'Give people money back,' I think they want to call the executive search firm and say, 'What happened?'"

Six months later
In October, Geisinger launched ProvenExperience for spine and bariatric surgery patients, who faced $1,000 to $2,000 co-pays under the system's health plan. The program was expanded to all patients systemwide in early April. Through a complimentary app, patients can rate their experience, provide feedback and, using a sliding scale, ask for a refund up to the total amount of their co-pay or deductible.

Dr. Feinberg said the app emphasizes good will, which discourages abuse of the honor system. Before moving far along in the app, patients encounter a message that says the relationship is built on trust. So far, Geisinger is finding patients are fair and moderate. Skeptics' predictions that Geisinger would face a steady stream of $2,000 refund requests seem ridiculous in hindsight. From October through mid-March the system processed roughly 74 refunds across a half-dozen sites of care. In that time, it waived nearly $79,812.59 in charges, according to the Washington Post.

"We really learned what patients want is to leave positive feedback. When it's negative, it's usually mixed, and almost every single person has only asked for some of the money back," said Dr. Feinberg.

One patient left a review highlighting three negative moments during her stay after bariatric surgery. An IV didn't work and it wasn't fixed for three hours. One nurse didn't smile during her shift, and the patient felt uncomfortable to ask for help to the commode. The construction that was supposed to end at 9 p.m. went until 10 p.m. After recapping these lows, the patient asked for a refund of $100 out of $1,000.

"This has allowed us, more than anything, to listen to what went wrong and give patients some assurance that we'll make it better next time," said Dr. Feinberg. He has compared the moderate refunds to the likely heftier price of bringing in consultants to identify areas for improvement. Looking at it this way, $100 is a small price to pay to learn about three specific deficiencies that occurred on your watch.

By putting a price on disappointment, and getting vivid feedback on what letdowns look and feel like, Dr. Feinberg hopes to drive his organization to a relatively straightforward result.

"I would like Geisinger to become most caring organization, period. More caring than anything. We have all the resources. We have no excuse to not get it right," says Dr. Feinberg. "The measure of success is, 'I've never been cared for better.'"

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