Over the past few years there has been somewhat of a “waterfall effect” on the payment side of healthcare.
At the top of the waterfall are rising premiums as healthcare costs in the U.S. continue to grow. Those higher premiums led to the creation of high-deductible health plans (HDHP) as a means to bring premium costs down, or at least keep them level.
With HDHPs patients essentially roll the dice, betting that they will pay less out-of-pocket in a year than the premiums on a more inclusive plan would cost them. For the young and healthy it’s often worth the risk – hence their growing popularity.
For providers, however, HDHPs significantly change the business model. Providers who are used to receiving reimbursement from health insurance payers, a very reliable business-to-business transaction, must now collect more of their revenue directly from patients.
Providers have been told they must make it easy for patients to make these payments by setting up point-of-service (POS) systems that enable them to use a variety of methods, i.e., credit cards, debit cards, electronic wallets, and other technology-driven accommodations. It should essentially be a retail transaction, no different than buying a new pair of shoes, or a meal at a local restaurant, or gas for their vehicle. They are warned that the longer the lapse of time between when they provide the services and the patient is asked to pay for them, the less likely they are to receive payment.
All of that has been theoretical, however, which begs the question “How are providers actually doing?” when it comes to getting paid.
There is good news and not-so-good news based on an analysis ZirMed recently performed on three years of patient payment data. The good news is that overall, patient collections are up.
In fact, the average number of payment transactions per customer increased by 41 percent, and the average dollars collected per customer grew 36 percent. These are indicators that providers are doing a good job of collecting from patients overall, despite industry worries about the difficulties of operating under a direct-to-consumer payment model. Here’s how it breaks down by common payment method.
Point-of-Service
Despite the industry’s emphasis on the need to enable POS systems, those transactions have actually declined as a percentage of overall collections, from 66 percent to 61 percent. The total dollars collected has also shown a decline from 72 percent to 66 percent. Even the total transaction amount collected at the point of service has decreased by 5 percent. It shows patients have not totally bought into the full retail model yet – the model that most reliably guarantees providers will be compensated for their work. Some of this may be habit, or the fact that much of healthcare still occurs spontaneously, and carries a high enough cost that patients feel uncomfortable spending that much money without prior warning. It does show, however, that the healthcare industry still has some educating to do to make the retail model more viable.
Post-service eCommerce
So if they’re not paying at the POS, where are they paying? Patients are showing a preference for paying online after the service has been rendered. It’s essentially the eCommerce model they’ve become comfortable with through Amazon.com and other online retailers.
eCommerce transactions now represent 20 percent of total patient payment transactions, and 21 percent of the total dollars collected. Most indicative of a trend is that the average transaction amount increased 4 percent. Taken with the decline in POS payments that is nearly a 10 percent swing toward eCommerce. Given this preference, providers should ensure they are making secure, online payment available to patients so they can capture the revenue in a convenient way when the patient is ready.
Lockbox payments
Providers should also take note that the total number of transactions being made by lockbox payments (i.e., paper checks) has increased slightly from 13 to 14 percent. This increase may be a result of older populations who still prefer writing checks for many items over using credit cards (and who have high utilization of provider services), or increased access to healthcare by lower-income patients who are unable to obtain credit cards.
Also interesting is that the total dollar value paid by lockbox payments rose from 7 to 8 percent during the three-year period, and the actual transaction value increased 5 percent – again perhaps a function of the populations that prefer to use lockbox payments.
Payment plans
Not much has changed in this area, as payment plans (including payments made via a patient portal or at the POS) have held steady at 4 percent of transactions and 3 percent of dollars collected. At the same time, the average transaction value has decreased by 5 percent, indicating that patients may be struggling with their current payment plans, and may need them adjusted to smaller installments over a longer period of time to meet their financial obligations.
Improving the patient experience
While it is in the best interest of providers to collect payment at the point and time of service, clearly a significant percentage of the population is not there yet. As a result, providers still need to offer other options as they gently encourage patients to move to the POS model. After all, payment is part of the overall patient experience – a very important part, in fact. Making the payment experience as easy to understand, straightforward, and convenient as any other retail transaction is critical to maintaining a great relationship with those patients – and ultimately driving financial success.
By Jay Garmon, Product Manager, ZirMed
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