As patients take more control of their healthcare decisions — including where they receive care — hospitals and health systems are focusing on improving patient access.
They’re investing in solutions to enhance scheduling processes, physician lookups and reviews, and quality metrics. It’s all about getting people in the door.
Yet while hospitals are embracing the patient experience from an intake perspective, we’re stuck in a payer-centric rut on the financial side.
Consider this: Almost half of Americans, 44 percent, do not have $400 to spend on an unplanned expense.1 Those without cash on hand turn to credit cards, friends or family, or just don’t pay the expense at all.
There’s a huge improvement opportunity here, but it requires us to shift focus from minimizing cost-to-collect towards maximizing patient payment volume. We see Health Systems grow patient payments by providing more extensive payment options. By changing the traditional ways of thinking about patient payments, hospitals can transform patient liability into a growth engine.
Transition from cost-to-collect to net collections
When 95 percent of net revenue dollars came from insurance payers, it made sense for hospitals to focus on cost to collect. However, for many of our clients, patient out-of-pocket now represents 16%, or more, of net patient revenue. Revenue cycle activities have long been optimized between payer and provider; where both organizations shared an incentive for workflow simplification to drive down administrative costs.
Yet this approach does not apply to provider-to-patient interactions.
In today’s patient-centric world of care, the cost-to-collect mentality could leave significant cash on the table. When considering patient payment strategies, it’s important to prioritize activities that provide a better patient experience and drive higher payment rates to offset collection costs. Instead of a laser-focus on cost-to-collect, take a closer look at net collections. Some strategies that increase payment rates may add cost but result in higher net collections, which is a far better outcome than a strategy optimized for cost-to-collect with low collections.
Most hospitals would balk at the idea of paying 20 percent to collect from a payer. After all, payers have the wherewithal to reimburse and are contractually obligated. For a patient payment, however, that fee could be the difference between collecting 80 cents on the dollar or nothing.
However, if you limit financial access to drive down costs and send the rest to collections, you may offset your low cost-to-collect with high contingency fees and negative patient satisfaction.
Patient satisfaction has exponential financial benefits
Medical costs are the number one source of collection calls in the U.S.2 Consequently, patients almost expect to have a poor healthcare payment experience.
When patients are contacted by a collection agency, they face financial strain, stress — and a possible hit to their credit score. The experience is not a pleasant one, and it makes patients less likely to return to the hospital or recommend it to family or friends.
On the other hand, satisfaction has a multiplier effect. As hospitals create a more positive payment experience, they can generate more patient value, referrals and return visits. The key to maximizing patient payments — and maximizing each patient’s lifetime value — is to look at net collections plus patient satisfaction.
How to make the shift? Focus on patient financial access
Health systems need to measure two success metrics: Net Patient Collections and Patient Satisfaction. To increase both, hospitals should approach AR with a strategy that matches patient liability to the right payment option for that patient.
For example, most of our patients who pay a $200 bill pay in full. However, as bill balances approach $1,000 more patients provide a partial payment than pay in full. For higher patient balances, payment plans or financing options become crucial.
Remember that nearly half of all patients are not able to pay a $400 balance in full. Now consider that patient bills between $1,000 and $10,000 constitute approximately half of all billed dollars in an acute setting. Patients may have the desire to pay, but not the means.
Imagine a patient receives a $3,000 bill. If only offered a six-month payment plan, the patient must accommodate a $500 per month expense. That’s probably more than their car payment and not affordable for many.
Hospitals have the opportunity to solve for the above while generating more payments today and improving patient loyalty tomorrow. By offering flexible payment terms or alternative financial products, like a 0% term loan over 36 months, hospitals can maximize net collections with a superior patient experience.
In looking at patient satisfaction, if hospitals care for patients both physically and financially, patients will likely return for future care needs, and they’ll share their positive experience with others.
It’s time to stop addressing patient payments through a payer filter. It’s rational to have separate processes for each. By measuring net collections and satisfaction — and moving away from the cost-to-collect metric for patients — health leaders can capture more patient payments while growing each patient’s lifetime value.
1 https://www.federalreserve.gov/newsevents/pressreleases/other20170519a.htm
2 https://www.npr.org/sections/health-shots/2017/01/24/511269991/medical-debt-is-top-reason-consumers-hear-from-collection-agencies