Healthcare as pay-as-you-go or installments?
Among the findings of “The Changing Landscape of Healthcare Payment Plans” study, released last month, through the joint efforts of PYMNTS and Flywire: The struggle to pay medical bills is real.
However, when it comes to paying down medical debt, more than 44 percent of the 2,800 individuals surveyed said they have opted for payment plans. That is, perhaps, among the less visible payment options, but one that John Talaga, GM and EVP of Healthcare at Flywire, said deserves careful consideration by healthcare providers seeking to grapple with collecting what is owed.
As much as 57 percent of individuals expressed they would like to have a payment plan offered before or at the time of service, while 35.5 percent would like to see a payment plan offered upon receiving their first bill.
There’s seemingly a disconnect here, though, as respondents also seemed to shy away from being the first movers when it comes to embracing payment plans: Only 6.9 percent said they prefer calling to ask for a plan. That would imply that it’s up to the hospitals to consider adding this financing option in an increasingly complex healthcare financing world — or, if payment plans are already offered, they might want to be more proactive in shining a spotlight on payment plans.
After all, collecting on out-of-pocket medical expenses owed by patients is no insignificant challenge. As noted in this space in recent weeks, of the $63.7 billion in out-of-pocket medical expenses that are owed by patients every year, roughly $7.5 billion goes uncollected. Hospitals have a rough time of it: Patients are now on the hook for about 30 percent of the cost of medical treatment, and hospitals collect only about 30 percent of that tally, leaving a lot of money on the table.
Talaga noted that there are ways to use payment plans in a strategic manner, which can collect on revenues that providers may not have been able to capture.
Talaga said the finding that 57 percent of respondents would like to have payment plans offered before or at the time of service represents a “validation” of such offerings. Hospitals, said the executive, are “all focused on spending and investing money on collections up front, … and yet 90 percent of the dollars are actually collected from patients post-service.”
Thus, in the traditional model, the interaction with the patient who is paying a big chunk of healthcare dollars out-of-pocket becomes what he called “a big collection effort, rather than a payment experience.”
Illustrating how payment plans may take shape in hospital settings (where, after all, treatment can be fluid, and can involve multiple providers, procedures and costs), a theory has evolved, Talaga continued: The healthcare payments continuum might take a cue from the retail or hotel experience.
In that particular model, he said, travelers generally know what the hotel will charge up front. However, there are any number of incidentals — from spas to those expensive little candy bars in the fridge — that can be tacked on to the final bill, and for which the consumer is ultimately responsible.
Step by step, then, Talaga said that providers must get an estimate in place that can be presented to the patient, aligned as accurately as possible with what is going to be done and how much it will cost. Not the easiest thing to do when so little may be fixed in place, especially when someone is being treated in an emergency setting. There are the vagaries of finding out what insurance might pay for and what it won’t — which, of course, can shift, too.
There’s a duality of benefits tied to a payment plan, Talaga noted. Healthcare, of course, is a service that everybody needs and wants to take advantage of, and providers need to figure out the seamless ways through which they can get paid for their services. Against the backdrop of confusion, and in an effort to skirt the “send me a bill and I will figure the rest out later,” he said companies like Flywire and other service providers are starting to use analytics and segmentation up front.
The technology that Flywire and peers have been introducing into the hospital seeks to identify those patients who may benefit most from a payment plan up front, as well as identify what the terms are based on what they can afford to pay. Such efforts leverage credit data and other information that can offer tailored payment plans to individuals.
Amid such tech-driven efforts, added Talaga, more providers are shifting toward offering payment plans to a more visible place in their relationship with consumers.
“The idea in the past has been ‘don’t tell patients that we will take payment plans unless it is a last resort,’” he said of the hospital mentality. However, in an age where healthcare coverage has become much more prevalent, along with significantly higher deductibles, the option is being more widely embraced and presented to users as a subscription model — the ability to pay monthly for their out-of-pocket expenses, much like they pay for their monthly insurance premiums or other day-to-day services.
Vocabulary may be important here, he noted, as subscription plans imply that providers are “able to roll up those services into the single monthly payment patients are making, so … any changes that happen to your account are also going to roll up into one monthly payment.”
In addition, the PYMNTS and Flywire study found that patients said the prospect of paying fees can play a significant role in how quickly they are able to pay down debt. As much as 29 percent said they opted for shorter plans to avoid higher costs.
Setting up plans that are ultimately affordable can help address a lingering problem that has unwittingly marked the Affordable Care Act. As Talaga stated, some patients are opting to skip the care they need that is non-acute or -emergency in nature as they face, for example, $5,000 deductibles. Since only about 7 percent of those surveyed said they had not paid their medical bills and/or had no intention of paying those bills, that means an overwhelming majority (at more than 90 percent) intend to — and, indeed, want to — pay their bills.
That latter statistic and the enthusiastic embrace of the payment plan option, said Talaga, show that “consumers are more closely aligned with hospitals than providers might think.”