Physicians are in short supply. They are costly. Is the APP the answer to the CMO's workforce and budget challenges?

Welcome to our July 2024 cover story. Each month, our editors will be taking a deep dive into the topics that matter most to you in our cover story series. From ways to win the payer/provider war to AI governance, we have a lot of stories up our sleeves this year.

So, what did our team look into this month? Well, it’s time for physician leaders to say the unspoken part out loud: There will never be enough physicians. And even if you can find them and keep them, you can’t pay them all.

The AAMC estimates that in the next 12 years, the U.S. will be 86,000 physicians short, with more than half of those being primary care physicians. The future is a zero sum game, where the clinical need of an aging population runs up against falling numbers of physicians.

To fill those gaps, health systems and hospitals are elevating APPs and giving them more responsibilities. The resulting change in care team design is forcing CMOs and other executives to think about how they manage their physicians to ensure a productive workplace and positive clinical outcomes.

Since this shift, CMOs have begun to wonder if they need as many physicians as they thought, especially since the APPs are sometimes carrying out the majority of the tasks.

So this begs the question, is it time for CMOs to scale back their physicians and usher in more APPs instead? While the question is in part written in jest, it doesn’t mean there aren’t pros and cons to considering APP-lead teams. Our CMO editor Chris Cheney dug into what the experts have to say.

Did you miss our June cover story on turning to automation to streamline revenue cycle operations? No worries, you can read it here.

Hospitals will be seeing a payment bump, but will it be enough to ward off rising inflation and labor costs?

CMS recently released the fiscal year (FY) 2024 Inpatient Prospective Payment System (IPPS) final rule increasing payment rates by a net 3.1% for FY 2024 for hospitals that are meaningful users of electronic health records and submit quality measure data.

This 3.1% payment update reflects a hospital market basket increase of 3.3% as well as a productivity cut of 0.2%. Overall, the agency will increase hospital payments by $2.2 billion compared to FY 2023, which also includes a $957 million decrease in disproportionate share hospital payments and a $364 million decrease in new medical technology payments, according to the IPPS final rule.

While a $2.2 billion increase seems significant, hospitals are facing historic financial challenges. In fact, hospital margins for the year rose in June, but the divide between the haves and have-nots widened as expenses and economic pressures remained high according to a recent Kaufman Hall analysis.

Most hospitals underperformed in June, even as the median year-to-date operating margin index increased to 1.4%, compared to 0.7% in May.

These challenges highlight the fact that leaders need to stop relying on payment rate increases to keep them afloat.

"This 'new normal' is an incredibly challenging environment for hospitals," Erik Swanson, senior vice president of Data and Analytics with Kaufman Hall, said in a press release regarding it's market analysis.

"It's time for hospital and health system leaders to begin developing and implementing a strategy for long-term sustainability, including expanding their outpatient footprint and re-evaluating where finite resources are being utilized," Swanson said.

The AHA doubled down on the “woefully inadequate” payment rate increase for FY 2024.

In a statement shared with the media, Ashley Thompson, AHA’s senior vice president for public policy analysis and development, said, “The AHA is deeply concerned with CMS’ woefully inadequate inpatient and long-term care hospital payment updates. The agency continues to finalize rate increases that are not commensurate with the near decades-high inflation and increased costs for labor, equipment, drugs and supplies that hospitals across the country are experiencing.”

Drew Smith, director of revenue cycle at MainStreet Family Care, talks implementing text-based bill pay and creating a positive patient financial experience.

Digital payment options are becoming increasingly important for revenue cycle leaders as they seek to bolster their technology and better secure revenue. Perfecting and expanding these options should be a priority, especially since the same challenges that made 2022 the worst financial year since the start of the pandemic haven’t abated.

With patients increasingly demanding convenient, digital payment methods, healthcare providers must adapt to meet changing expectations to stay ahead of the competition, and this is what Drew Smith, director of revenue cycle, at MainStreet Family Care is trying to achieve with its new, text-based bill pay.

“We reduced the volume of paper statements mailed to patients by 11%—and this represents significant savings for our 46-facility system. We’ve also saved five hours in manual work per week for our revenue cycle team, or 260 hours a year,” Smith said.

During his conversation with HealthLeaders, Smith touch more on this and chatted about implementing this new technology, what it means for the systems’ patients, and how it significantly decreased accounts receivable days.

HealthLeaders: Why was it imperative to improve the patient billing experience?

Drew Smith: MainStreet Family Care serves a primarily rural population in Alabama, North Carolina, Georgia, and Florida, and often, we are patients’ only option for care. Even though we’re an urgent care center, people in our communities often turn to us for primary care because of the lack of providers available locally. Some of the areas we serve have a county hospital people can turn to for care, but many do not. Without access to care for conditions like diabetes, which impacts people in rural areas more severely than those in urban areas, the health of these communities would severely decline.

So, it’s vital that we have a healthy balance sheet. This means we depend on patients to pay their out-of-pocket costs of care in a timely manner. But research shows 40% of patients are often confused by their bills. Moreover, consumers believe healthcare providers can make it difficult for them to pay their bills. And in rural areas in particular, we’re finding that inflation is affecting residents’ decisions on whether to seek care or delay treatment. This makes clear communication around how much patients owe for their care after insurance and their options for payment crucial.

Pictured: Drew Smith, director of revenue cycle at MainStreet Family Care. Photo courtesy of LinkedIn.

HealthLeaders: How did you determine there was a need for text-based pay?

Smith: We chose text-based bill pay because we wanted to make it easy for patients to understand their financial responsibility for care and simple to pay their bill. Our goal was not only to speed payment but also reduce cost to collect. Paper statements cost $6 per statement for our organization based on paper and postage costs, the time it takes to post physical checks and respond to returned mail and the need for a lockbox. When we improve cash flow and reduce our cost to collect, we strengthen our ability to open new facilities and extend care to underserved areas—and that promotes better health.

One of the things that was attractive to us about text-based bill payment is that we could reach patients through the device they use most: their cell phone. In the rural communities we serve, most adults own a smartphone. We also don’t get charged when we have an inaccurate mobile number for the patient or the text hasn’t been successfully delivered. And the experiences of AccessOne, the vendor we work with, indicated patients pay their medical bills faster when they receive text notifications for payment. We estimated we could save thousands of dollars a week just by avoiding paper statements for a portion of our population while speeding cash flow. 

HealthLeaders: How did your patient population respond to the change?

Smith: We saw an immediate impact on our ability to collect payment sooner through text-to-pay. Since rolling out mobile pay in 2019, 14% of our patients pay their medical bill using our secure text payment feature. Among patients who use mobile pay, 95% pay their balances within two weeks. More than 80% of this bucket make a payment before a paper statement is ever printed. We also offer patients the opportunity to self-enroll in a payment plan using their mobile phone. This makes the process of payment plan enrollment much more convenient. It also adds an element of privacy by enabling patients to take this step from the comfort of home.

Initially, there was some skepticism among our staff about how patients would respond to text-based payment. However, for us, the initial response to text-based medical bill payment was strong. We’ve found that by branding text-based communications to have the same look and feel as other MainStreet Family Care communications, patients more readily accept mobile pay as a valid vehicle for payment.

But that doesn’t mean we haven’t had to modify aspects of our approach. Even as mobile pay exceeded our expectations, when we reached out to patients for feedback, we discovered some people felt the language used in our communications was a little aggressive. In some instances, patients thought the messages were spam. We took a second look at our messaging to soften communication, and the response has been pretty positive. We plan to take another look at our messaging to make sure it still resonates with those we serve in a high-inflation environment.

Of course, some patients still desire paper statements—and that’s OK. Today, we wait a week after a text-based notification is sent before mailing a paper statement. This gives us time to capture payments from those who prefer to pay us electronically while respecting the preferences of those who still want a paper statement. We also allow patients to opt out of mobile notifications.

HealthLeaders: What other benefits has this change created for your organization?

Smith: Text-based payment significantly decreased our cost to collect and our days in accounts receivable. We reduced the volume of paper statements mailed to patients by 11%—and this represents significant savings for our 46-facility system. We’ve also saved five hours in manual work per week for our revenue cycle team, or 260 hours a year. That’s time that can be directed to more value-added tasks, like patient financial counseling.

HealthLeaders: How has the implementation of digital patient payment options improved the patient experience for your organization?

Smith: Digital payment options give us another way of creating better patient financial experiences—and not just around payment. For instance, when patients receive a text from our mobile pay system, they can easily call us with questions right from the payment screen. Many patients who view their statement via text end up calling to make a payment over the phone or update their insurance information. This is a return on investment that may not be reflected on our performance dashboard, but it’s made our call center a better-performing channel while creating stronger connections with patients. We’ve found that the benefit of taking an omnichannel approach to payment is that it builds trust with patients by meeting them where they are. By creating a seamless, consistent financial experience, we can leave a positive impression that carries over to their next encounter with our facility.

Are you interested in sharing your expertise on this topic? Join one of our panels for the upcoming Patient Financial Experience NOW Summit on April 19. E-mail revenue cycle editor Amanda Norris at anorris@hcpro.com for more information on joining the conversation.