The financial and administrative experience is no longer considered separate from the clinical experience by patients. A poor experience after their procedure or visit can have just as much negative impact as a bad visit. Key to a positive experience is price transparency, which is not as challenging to achieve as we first believed – according to Cedar CEO Florian Otto.
Healthcare IT Today had the chance to sit down with Otto for an in-depth discussion about price transparency, price certainty, prior authorization, and patient experience.
Importance of Financial Experience
In a recent study, 2021 Healthcare Consumer Experiences Study, Cedar found that a whopping 93% of respondents said that the billing and payment experience was an important factor for them when deciding where to get care. It wasn’t that long ago where financial experience was not a significant factor in healthcare decisions.
Otto believes that financial experience has quickly risen to become a key deciding factor because:
- Patients are shouldering more of the total cost of care. With higher deductibles, patients now have a much more vested interest in where they spend their healthcare dollars.
- As consumers we are used to quick, easy, seamless, and straightforward payment experiences. Healthcare is a laggard when compared to the ease with which we can buy airline tickets, book hotels, and purchase cars online.
“We were a little bit surprised by it [this results] in the beginning,” said Otto. “But when you dig one level deeper, I think you can understand it. If you need to pay $20, you don’t care too much. If you pay $200, you care very much.”
Price Transparency
According to Otto, a good financial experience is tied to price transparency.
“We strongly believe that patients should know before the visit what they are paying,” stated Otto. “To be clear, this is not very innovative. Every other industry has done it. When you go in Uber, Uber tells you before the ride exactly what it costs. Price transparency is the step that is needed for patients to feel comfortable.”
There is a myth that patients would go running for the hills if they knew how much their care will cost them up front. It turns out, patients only go running for the hills when they are hit with surprise bills. Knowing the cost up front is not a deterrent.
“Our study showed that 79% of the patients said that they are willing to pay the out of pocket costs prior to the visit or at the time of the visit, if they are given a guarantee,” said Otto. “That is actually very motivational to me. Why is that? That means consumers want to pay for that visit. That was always what we believed at Cedar.”
A mobile-first approach
Cedar helps healthcare organizations with price transparency by borrowing approaches that worked in other industries.
“We literally took some of the tools that the other companies use,” said Otto. “We want everything mobile-first. Everything needs to be immediate, personalized, convenient and transparent. We basically want to take the patient by the hand from right after booking their appointment, help them through the check-in experience with the financial transparency piece, communicating with them, capturing insurance, and guiding them on their care journey.”
Customers that have implemented Cedar’s solutions have seen an increase in their payment rates, sometimes upwards of 30%, which is vitally important at a time when margins are being squeezed.
Watch the full interview with Florian Otto to learn:
- What Otto thinks about prior authorizations and why it needs a lot of help
- Why hospitals should take inspiration from restaurants when it comes to pricing
- Why 100% price transparency is not a realistic target
Learn more about Cedar: https://www.cedar.com/
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Transcript
[00:00:09] Colin Hung: Hello and welcome to Healthcare IT Today, where we explore the latest healthcare technology trends and discover valuable insights in health it. I’m Colin Hung, and today we’re going to talk about price transparency and maybe a little bit about price certainty. Sitting down with me today is Florian Otto, CEO, and co-founder of Cedar. Florian welcome to the program.
[00:00:41] Florian Otto: Thanks a lot.
[00:00:43] Colin Hung: So Florian, you and I have never actually spoken. So this is fantastic that we’re meeting here. Can you me and the audience a little bit about Cedar?
[00:00:53] Florian Otto: Yes, very happy too. So as you can probably hear from my accent, I’m from Germany originally. I studied medicine and dentistry was a maxillofacial surgeon and then did my PhD. So a pretty academic career. Then after graduation I joined McKinsey & Company, and worked more in healthcare consulting. A lot of projects with providers, payers, government healthcare. Then five years in Brazil, where I started a company that Groupon bought. I was then CEO of the group in Brazil. Then back in 2016, started Cedar, based in New York.
[00:01:24] Colin Hung: And what does Cedar do? Can you tell me a little bit about the company?
[00:01:28] Florian Otto: Yes, absolutely. We started Cedar to enable us all to easily and affordably pursue the care that we need. What we are basically seeing is that a lot of healthcare systems provide an extremely good medical experience and really helping the patients very well on the clinical side.
[00:01:46] But then the administrative experience, which is also very, very important, actually lags behind a lot when you compare it to any other industry. We basically thought that patients deserve better and started the company in 2016.
[00:02:02] Colin Hung: So you’re, you’re helping with the administrative experience, not necessarily the clinical experience. You’re leaving that to the hospitals who you say are doing it well.
[00:02:11] Florian Otto: Yes, 100%. We don’t believe that we’re clinical company. And we believe that the hospitals are absolutely amazing in that. However, where hospitals are not in a good position, is developing great technology to engage with their patients.
[00:02:27] I can think of two main factors why that’s not the case. I think the first factor is it’s just not in the DNA of the company. I mean, it’s the same right now, Colin. If I ask you right now to start a hospital, you’re probably not the best equipped into that, even though you understand healthcare very well. Hospitals of course, are not the best on developing technology.
[00:02:50] The second is just scale. When you develop right now, a good technology should scale throughout all of the different hospitals. You can invest different amount of money and resources into that when you scale it through different implementations.
[00:03:07] Colin Hung: One of the areas that you help hospitals is the financial experience or the price transparency. Let me ask you this question: what is the difference between price transparency and price certainty and which is the right goal we should be striving for?
[00:03:27] Florian Otto: It’s a great question. And I love that you are asking that. We strongly believe that patients really should know before the visit on what they are paying. To be clear, this is not very innovative. Every other industry has done that as well. When you go in Uber, Uber tells you before the ride exactly what it costs.
[00:03:51] Price transparency is the step that is needed for patients to feel comfortable and know exactly what their responsibility is. If they have this price transparency, there’s a certainty for them so that they can pursue the care without needing to worry about the financial experience.
[00:04:15] We believe that there’s a big difference between just thinking about something or having the guarantee. I mean, you might remember when, when Uber just charged you for the minute and for the mile, you always had anxiety on what the trip cost, and then they switched towards an up-front price and everybody loved it.
[00:04:34] Or you might remember the cell phone when they charged by the minute and per text, you always were worried about the bill. Right now with a flat rates, you know what it is, your anxiety goes down. That is the most important piece.
[00:04:46] Colin Hung: Right. I still might not be happy with the total number, but at least I’m not living with the unknown. Is it going to be double what they what I expected it to be? You remove that variability.
[00:04:58] Florian Otto: It’s a very interesting point that you mentioned. So average cell phone bills went actually up when they had the fat rate, but the consumers were happier because they have planability and they have transparency. It’s the same with the ride sharing, for example, prices went up when they had the bulk price.
[00:05:19] Colin Hung: It’s so interesting. I have to ask, why is price transparency so hard in healthcare? Why have we not achieved it already?
[00:05:31] Florian Otto: Yeah, I know. It’s the thing we probably talked about 10 years ago. and we very likely will also talk in 10 years still because it is not a hundred percent solved.
[00:05:42] It has a few different elements. I think the first element is just the payment models. Very often when you go right now to a healthcare provider, it’s not clear what would be done with you. So as an example, you Colin, go and your stomach hurts. You don’t really know what it is. Is it just you ate something wrong? Or is it really something serious that needs exploration? You don’t know that before, so you cannot really say. If there is right now a different code for it and different reimbursements. You just don’t know about these complex procedures.
[00:06:16] However, that should not be an argument that it’s not possible because there are probably something like 70% of the procedures where this is possible.
[00:06:24] The second problem is of course, the complexity with a payer. So the payer usually pays a part of it and then gives the responsibility to the hospital or to the provider to charge the patient for the remainder. And why is that so difficult is because every payer has a different negotiated rate with a provider. And also you don’t know where is the patient on the out of pocket accumulator status. It might be that the patient had already the out of pocket maximum or not. So those are very important drivers on really what would be done there.
[00:07:04] Colin Hung: In your opinion, what’s the linchpin? Is there any “one thing” that if we were to solve that, then it makes price transparency a lot easier for healthcare providers?
[00:07:18] Florian Otto: I think there are a lot of things that can happen to really make it easier. And I think that the worst thing is to just say, “hey, it’s complicated. It’s not possible.” This is absolutely not what we believe. I don’t believe we will get to a hundred percent certainty for every single procedure. That is totally fine.
[00:07:42] You go to the restaurant, right now, you have price certainty on a single item. But you don’t have certainty on what the entire visit will cost because you don’t really know what you’ll be eating, what you be drinking and so on, but it’s very clear to you that you don’t need to pay separate for, the chef for the cleaning. You don’t need to pay for rent and so on, but it’s one price for the food.
[00:08:07] You know exactly what you pay for and you can make the decision. That is the important piece. I strongly believe healthcare can get to that because we if we know what will be done in terms of codes – which MRI will be done, which surgery will be done – you can 100% get to a price guarantee for this certain procedure.
[00:08:30] If the procedure changes afterwards, I come back with a new estimate for that change. I think that is a very fair thing to say, because when you go to a restaurant and you order the steak, and then you decide to do the dessert, the price increases, that is totally fine, but you know before what it will cost.
[00:08:49] That’s where we need to get to. For certain procedures we strongly believe that bundled pricing makes sense so that you don’t pay, for example, by the minute of the anesthesiologist. It can make sense to just bundle it in and say, statistically, it is two hours or 120 minutes of anesthesiologist time. This would be the bundle price for it, then the professional service and so on.
[00:09:13] Colin Hung: Gotcha. And if something happens and they need more time, at least you would have known as a patient what the per minute rate or the per half hour rate. At least I know it’s going to be these two hours, but if there’s more, it’s only because something happened during the surgery, something more complex… at which point you’re probably happy to pay for that anesthesiologist to still be there.
[00:09:33] Florian Otto: Absolutely.
[00:09:34] Colin Hung: Florian let me ask you this question…you recently had a study that came out – Your 2021 healthcare consumer experience study – and one of the statistics in that study really jumped out at me. 93% of respondents said that the billing and payment experience is an important factor for them when deciding where to get care. Why do you think that factor became so important so quickly because this is only fairly recent where financial experience and payment experience has jumped up in terms of the patient awareness.
[00:10:12] Florian Otto: Yeah, it’s a great question. We were also a little bit surprised by it in the beginning, but then when you dig one level deeper, I think you can understand it. I think that there are two main drivers and your question is basically why didn’t it matter so much 10 years ago? It’s a very fair point.
[00:10:28] Two reasons for that. The first reason is the share of out-of-pocket. If you need to pay $20, you don’t care too much. If you pay $200, you care very much. So the rise in the patient payment space is definitely one very, very big factor.
[00:10:48] The second is that the consumer experience is increasing and improving everywhere, except in healthcare. So we had the Uber example. Uber knows where you are going before you opened the app. You have cost certainty right now on your video streaming on Netflix and Amazon. You know exactly how things are cost. It’s very convenient and Amazon has a very nice way of engaging you to check out your shopping cart.
[00:11:16] So the discrepancy between what the consumer is facing everywhere else versus in healthcare is increasing. All of that drives the consumer to be really, really fed up with it. I strongly believe that this is good because as much as consumers are complaining and literally voting with their feet, they are also driving better adoption of those good technologies that make them a better consumer.
[00:11:42] Colin Hung: In other words, Florian, what you’re saying is that Amazon and Netflix have spoiled us. And now we’ve gotten used to a higher level of consumer experience. And now we want that in healthcare
[00:11:53] Florian Otto: 100%. I think there is a saying that your best experience anywhere becomes the expectation.
[00:12:00] Colin Hung: Oh, I like that.
[00:12:02] Florian Otto: And that is exactly this point that you mentioned.
[00:12:06] Colin Hung: I absolutely hear what you’re saying. I think a few years ago, you didn’t have a lot of choice. You couldn’t walk or decide with your feet. Because where else were you going to go? But I now think that smart organizations have adopted some of these consumer-like experiences so that now you do have a choice of which imaging clinic you want to go to, which laboratory you want to go to and other parts of healthcare. So now it is possible to make a choice as a patient to say, I know I’m going to get a better experience over here. So I’m going to go there.
[00:12:44] Florian Otto: Yeah. And that’s what I think will improve the quality of care and also the experience for the consumers. As we discussed in the beginning, we strongly believe that the good medical experience is a table stake. And most of the hospitals, we have good clinical experience. So on top of that, you need to have also the good administrative experience.
[00:13:05] Colin Hung: So was there a finding in your study that surprised you?
[00:13:11] Florian Otto: There were a lot. One number to really point out that I think was really surprising is that that three quarters. I think 79% of the patients said that they are willing to pay the out of pocket costs prior to the visit or at the time of the visit, if they are given a guarantee. And that is one thing that is actually very motivational to me.
[00:13:36] Why is that? That means the consumers, they want to pay for that visit and that was always what we believed at Cedar. People want to pay. You pay for your restaurant with the food and the service is good. You never debate whether you want to pay for Amazon or not. Of course you pay for it when you book a trip on Expedia. And we strongly believe it’s the same in healthcare as well.
[00:14:00] But they want the guarantee and they want the certainty before the visit. 78%. that is quite a bit.
[00:14:08] Colin Hung: That is quite a lot, actually, because there is a myth that if patients knew how much it was, maybe they would not want to pay. Maybe they would forgo the care but your survey is basically saying that’s not the case. 78% are saying “no,I do want to pay. I just want to know. I want that guarantee.” So how, how does Cedar help with this? Can you dive back into, how you help with the whole price transparency and price certainty for a provider?
[00:14:43] Florian Otto: Yes, absolutely. I’m happy to talk about that. That’s literally in the core of what we’re doing, because we want to have that the patient has the same level of experience that they are seeing with other consumer companies.
[00:14:59] First of all, we started with the post-visit billing experience because we saw this was the most broken. When you went on Yelp or Google reviews, the number one problem was the post-visit billing experience. So we dove right in and took this head-on. How did we do this? We literally took some of the tools that the other companies use as well, which is a mobile-first interaction. Everything needs to be immediate. Everything needs to be personalized and, of course, everything needs to be convenient and transparent.
[00:15:32] Those were the pillars when we developed the technology. We strongly believe in personalization of the billing. A $500 bill can mean something for one person and very different for another person.
[00:15:48] We strongly believe that good design science really helps to make it simple for consumers to pay the bill. So median time to pay for a bill on Cedar is 100 seconds. That’s extremely fast, right? When you compare it to normal. So we strongly believe in reducing the friction there.
[00:16:07] And of course we want to have everything mobile-first. We saw this work after the visits. So then we went to the pre-visit and you probably have seen our launch of CedarPre. We basically wanted to take the patient by the hand, from the beginning after booking the appointment, helping them with the administrative check-in experience with the financial transparency piece, telling them for example, that they are in-network or that they’re not in network, and communicating with them, capturing the insurance card and really guiding them through this entire journey so that the consumer can only focus on what is important to them, which is to get healthy again.
[00:16:56] Colin Hung: Florian. Thank you so much for that. I really enjoyed listening to how you’re helping your provider clients. What have you been hearing from your clients in terms of feedback on the experience that you’re now able to provide to their patients?
[00:17:13] Florian Otto: Yeah. We of course have clients, but our clients and us share exactly the same objective, which is making the consumers happy. So they measure us by how happy the patients are. We have right now a satisfaction of 89%. That means 89% of the consumers give us four or five stars out of five. That is extremely high for the part of the healthcare journey that I think had a net promoter score lower than visiting the DMV before.
[00:17:48] It was the most sore point. As we know that trust is consistency over time…if you have a great experience and you didn’t have a consistent billing experience…that erodes trust. And healthcare systems really, really love that point. That we basically elevate this sore point.
[00:18:09] Then of course complaints go down because patients right now think this is fair. This is transparent. They feel that they in the center of everything. So they really liked this. Then of course the happy patients, and that’s the interesting piece, also results in increase of payments.
[00:18:27] We are increasing the payment rates dramatically by around 30% from the patients. So patients are happier and happier patients usually pay. Back to the point, we know that most of the patients want to pay. So we did that. And of course the hospitals and healthcare systems, they are very happy that we have an increased payment rates, especially right now where they are under margin pressure. Because the cost is increasing. Salaries are increasing and reimbursement rates are increasing at a slower rate. So every year they’re needing to increase some of the revenue and Cedar is helping them.
[00:19:01] Colin Hung: So Florian there’s been a topic that’s been bubbling to the surface. And I think a lot of people are becoming more and more concerned about it – both providers and patients – and that is the concept of prior authorization. We’re hearing that this is going to become mandatory or it is mandatory, but it’s causing a lot of concern in terms of workflow and delays and so forth. How does prior authorization factor into what your doing?
[00:19:26] Florian Otto: Yes, you’re totally right Colin, prior authorizations are a problem.
[00:19:31] Let’s be very clear. They are a problem for the provider, for the payer and for the patient. All three entities and all three stakeholders really hate them. So why did they get into place? Of course, because some procedures are very expensive and the payer wants to have some guardrails for the provider who performs them.
[00:19:51] Who is suffering from this back and forth between provider and payer? It’s the patient. That’s the biggest problem. What is the fundamental problem and pain point and how can Cedar help them? The first is this takes time. If you right now have a serious problem, you of course want to be diagnosed or treated immediately. Time really is against you and you really don’t like this.
[00:20:14] Secondly, very often you booked already your visit for this treatment – before the prior authorization is through. So a lot of patients then show up for this appointment only to hear, sorry, your prioritization is not granted yet. Either you pay right now a zillion dollars out of pocket, or you go home and come back. These are both terrible options.
[00:20:38] So two things we can do. Cedar is working on a product for automating the prior authorization process – to have less humans involved in that, to speed up the process because there’s no reason why should it take weeks to do this. And the second, in case it takes longer than the visit at least message the patient: “your prior authorization is not done yet. Please reschedule appointment to next week”. That is the minimum we should do. We owe that to the patient. So the patient stops being the ping pong ball between the two records to be in the center of attention. And that’s strongly where we believe the patients should be.
[00:21:21] Florian, you’ve shared so much wonderful information with us today. Where can people go to find out more about Cedar?
[00:21:28] Yes. So first of all, of course we have a website, cedar.com. That’s the easy way. We provide a lot of interesting content there, a lot of case studies, because in the end, the most beautiful software doesn’t really help you if there’s not the impact.
[00:21:46] Colin Hung: Florian. Thank you so much for being on the program.
