How hospitals are accelerating patient payments

A decade or so ago, only about 5 percent of a hospital's revenue came directly from patients. But due to growth in high deductible health plans, some hospitals now generate 20 to 30 percent of their revenue directly from patients.  With use of high deductible plans expected to grow, the percent of self-pay revenue will only continue to rise.

At the Becker's Hospital Review 10th Annual Meeting in Chicago, Mastercard® hosted an executive roundtable on data-driven, customized strategies hospitals can use to accelerate patient payments. The roundtable was led by Paul Perleberg, Mastercard's executive vice president of healthcare market development and Fope Agbedia, PhD, a former McKinsey consultant who is vice president in Mastercard’s Data and Services division, where she helps healthcare organizations leverage analytics to make data-driven decisions that improve business results.

What hospitals — and others — do today

Because direct patient payment has previously been such a small portion of a hospital's revenue, it hasn't been a priority. Hospitals have generally taken a consistent and unsophisticated approach to billing and collection. Many treat all patients the same — sending an invoice to them, and if the patient doesn't pay in a defined period of time, turning it over to a collection agency. Some hospitals empower frontline call center personnel to offer uniform, ad hoc discounts to any patients who call with a billing issue.

At the same time, companies in other industries, such as retail or financial services, have become increasingly sophisticated in thinking about how to optimize their customers’ value. Instead of extending the same pricing, promotions and offers to every customer, companies are using data-driven approaches to develop highly customized strategies.

For example, Mr. Perleberg described how financial services companies use consumers' FICO scores as the basis for customized offers. One individual's FICO score might result in an offer for a credit line of $500 while another FICO score could leave a customer receiving an offer for a $5,000 credit line.

What hospitals could be doing

Dr. Agbedia explained that hospitals can use their historical billing and payment data to develop an individual profile for each patient. This profile might include information about the amount of a patient's average bill and how quickly they typically pay.

Equipped with these profiles, hospitals can use the cloud-based Mastercard Test & Learn® software platform to take a smarter, more strategic approach to patient billing. Improved results could include increased patient revenue and improved cash flow through accelerated payments.

A test and learn approach, as Dr. Agbedia detailed, involves determining the right tactic or intervention for each patient to achieve the greatest positive impact. Tactics might include billing in full, establishing a payment plan, offering a discount, or writing off an account to charity.
"The tactics are up to each hospital to decide and implement," Dr. Agbedia said. After testing a particular approach, a hospital can use the analytical tools to measure the results and continually tune and tweak the approach. The software's proprietary capabilities allow for tests that can be done more quickly, and with smaller sample sizes, than would otherwise be possible.

To date, Mastercard Test & Learn has been implemented with about 250 companies globally in a broad range of industries, including several healthcare organizations in the United States.


Dr. Agbedia shared three examples of how healthcare organizations have used Test & Learn to produce valuable business results.

1. Patient financing. A hospital thought offering financing services for payments would be beneficial to patients and profitable for the hospital. However, analysis showed the costs of this service exceeded the revenues generated, meaning the hospital was losing money. Test & Learn enabled the hospital to realize that by targeting only a specific subset of patients for this service, the hospital could increase the likelihood of securing payment. This turned a money-losing service into a profitable offering. As Dr. Agbedia summarized, "Figuring out who you target really helps drive value for the hospital."

In addition, "It's not just about the financial," she said. Creating a profile about each patient and analyzing his or her personal situation helps the hospital determine if additional social services are necessary. This hospital found that using these tools to add social services where appropriate led to reductions in length of stay and readmission rates.

2. Outside of the hospital. A non-hospital healthcare organization decided it would go after anyone who was delinquent on day one of the delinquency period. The organization believed this approach worked because it generated incremental revenue. But the organization also found this approach drove a reduction in future visits — in other words, patients weren't coming back. The approach was reducing customer satisfaction and the Net Promoter Score.

The healthcare organization subsequently used Test & Learn to tweak its program; through this approach, it distinguished patients to pursue on day one of delinquency vs. those who would pay eventually if given a few extra days. By turning to this more customized approach, the organization was able to generate incremental profit without jeopardizing patient satisfaction.

3. Optimal discounting. One hospital was struggling to determine how much of a discount to offer patients. It found the typical discounts extended were 10 to 15 percent, but varied greatly based on the time of day a patient called, whom the patient spoke with and what the patient said. Mastercard helped the hospital determine the optimal discount for each patient through a more objective, data-driven process. In addition, the hospital applied this learning to outstanding accounts, identifying a $25 million dollar incremental revenue opportunity.

Mastercard's expertise

Mastercard isn't typically associated with healthcare. However, the company is a world leader in payments technology and data analytics. Over the past 50 years, it has developed great expertise in removing friction from the payment process for merchants, consumers, governments and financial institutions.

Because of the complexities of healthcare, Mastercard sees an opportunity to leverage its capabilities to achieve greater efficiencies in the industry. As Mr. Perleberg stated, "The problems we've solved in other sectors like financial services and retail are similar to the big problems we see today in healthcare. In the case of patient payments, we believe that Test & Learn can enable hospitals to take a smarter, more impactful approach to optimize results."

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Mastercard is a registered trademark, and the circles design is a trademark, of Mastercard International Incorporated. Test & Learn is a registered trademark of Applied Predictive Technologies.



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