Patient payments have always been a factor in provider revenue. Until recently, however, direct-from-patient reimbursement was dwarfed by the revenue collected from third-party payers, like health plans and employers; so most health systems didn’t devote much attention to it.
The emergence—and growing ubiquity—of High-Deductible Health Plans (HDHPs) have been a game-changer. According to the National Center for Healthcare Statistics, 40 percent of privately purchased health plans are HDHPs, up from 29 percent in 2011. The percentage of revenue collected directly from patients has increased from less than 10 percent to more than 30 percent within the past decade, according to a report from TransUnion.
A significant side-effect of HDHPs is that more patients are struggling to cover their financial obligations—to the point where many are forgoing or delaying necessary care.
It’s not that patients don’t want to pay. Most do. It’s more that they are unable to pay. Consider that the median household income in the U.S. was $57,617 in 2016. A HDHP with an out-of-pocket cap of $5,000 means the patient responsibility for an expensive episode of care would consume roughly 10 percent of the individual’s or family’s gross income. That’s a huge hit – especially when you consider nearly half of all respondents to a Federal Reserve Board survey said they would struggle to pay a $400 unexpected expense.
The net result is that just as healthcare organizations are being asked to take on more risk by traditional payers, they are also assuming more financial risk of non-payment by patients.
So what’s the answer to this dilemma? At first glance it might seem like providers need to up their collections game. That’s a bad idea on many levels, not the least of which is the risk of damaging the provider/patient relationship at a time when healthcare is becoming more competitive and consumers are already being encouraged to become more active in choosing where they will go for care.
When you look at all the factors, it becomes clear that if you want to change the financial outcome, you have to change the financial experience for patients.
Essentially, healthcare payment is rapidly transitioning from a primarily business-to-business transaction with payers, to one that includes a consumer element. These consumers have heightened expectations for their transactions thanks to their purchasing experiences in every other aspect of their lives.
To succeed in this new world, health systems must be able to deliver a far more consumer-friendly experience. They must recognize that ensuring payment in full is an experience game, not a collections game. In other words, they must build a financial relationship like other consumer-facing businesses. Here are five ways to make that happen.
1. Tie the financial conversation to the clinical conversation. Typically, healthcare providers have held the clinical conversation prior to care being delivered, and the financial conversation afterward. That can no longer be the case. Consumers today are being encouraged to ask questions up-front, including whether there are lower-cost treatment options, and may even price shop. Providers should include information about financial responsibilities and options to pay as part of the medical conversation. This change will be a huge step in creating transparency– and turning a potential negative into a competitive advantage.
2. Understand who patients are and meet them where they’re at. One of the hard realities is that provider billing is managed very differently than other financial obligations consumers face every day. It’s complicated and confusing, and the balances are often large and unexpected. As a result, credit bureau scores and other assessments of how consumers pay their other bills don’t translate to how they pay for healthcare. To succeed, providers first must take an inside-out approach to understanding consumers’ ability to pay and propensity to pay. Those factors alone will help predict how much help a patient needs and how much financial risk exists with the final balance. From there providers should add the ability to further segment the population on other relevant factors, such as whether a procedure qualifies as elective or necessary treatment, how to treat a maternity patient versus one coming in for a total hip replacement, and behavioral factors. Once all of that data has been analyzed, providers can begin designing programs and offers that make sense for their patient base in a “mass customized” way. The most important thing to remember is that “one size fits all” actually fits no one.
3. Make options come alive to consumers in an automated fashion. As everyday consumers, patients are used to receiving information and program terms that are customized and relevant to their individual needs. They are also used to making decisions and moving forward with them instantly. It’s the experience they expect, which means healthcare organizations who offer this experience will gain a significant competitive advantage over those that cannot. Creating this consumer experience is difficult, if not impossible to accomplish with legacy systems alone, however. Healthcare organizations that want to deliver at this level will need to invest in a platform that enables them to tailor data-driven offers that can be fulfilled automatically.
4. Test and adjust. Don’t think you have to get it all correct and locked up right away. Test different offers and different ways of interacting with patients to see what works and what doesn’t. Then make adjustments as you go. Again, a “one size fits all” approach leaves no one satisfied with the outcomes or the experience, making patients less likely to return for care, let alone pay for services that have been rendered. Having a platform that incorporates the ability to test offers and adjust as-needed is essential to getting it right.
5. Measure the results. Once the program is in place, it’s important to use the right type of data and reporting to measure results. This platform should include a feedback loop that allows healthcare organizations to continually optimize and improve financial and satisfaction outcomes. Failure to include this element in the patient financial interaction platform will result in a sub-optimal experience for both patient and provider.
Getting it right
Patients have become far more significant contributors to healthcare organization revenue than they have ever been. Yet unlike traditional payers, they are far more difficult to manage, especially with conventional approaches.
By using technology to build a trusted financial relationship, providers can improve the entire patient experience. Tying a great customer experience drives provider loyalty and builds trust. Do that and patient payments will be less of an issue and more of a key part of a sustainable care model.
Kent Ivanoff is CEO and Co-Founder of VisitPay, a leader in patient financial engagement. VisitPay will be sponsoring the Patient Financial Health Summit on April 12 at the Becker’s Hospital Review 9th Annual Meeting in Chicago.