A new approach to getting paid in the consumer economy.
J. Reuben Clark famously said, “He who holds the purse strings, rules the house, the nation, the world.” Nowhere is this truer than in healthcare.
In the past, control over the healthcare dollar was a push and pull between providers and payers. The fee-for-service model made it easy for unscrupulous providers to submit fraudulent claims or order unnecessary tests to manipulate the system and help pad their bottom line, while payers began pushing the burden of rising costs on to employers. Patients played only a limited role in this model. They simply paid their co-pay and, if they had one, their deductible.
Enter pay-for-performance and high-deductible health plans, and now everything has changed. Today, 30% of provider revenue comes directly from patients. And with that increased responsibility, patients are demanding greater transparency in their healthcare costs and more options for paying.
In other words, the purse strings have been ripped from the hands of providers and placed firmly in the hands of patients. That purse is now more frequently empty, even for patients who have insurance. Today, more than half of all debt collections reported to credit agencies is medical debt. It’s also the most common cause of bankruptcy.
Historically, hospitals have treated patient collections as a back-end, reactive process. Send a few statements, then place the account with an agency. The patient experience wasn’t part of the equation, as they were squeezed into a one-size-fits-all payments model. Outside of pre-service collections efforts, the fewer financial interactions with the patient, the better. This allowed providers to focus on patient care, not debt collections.
That process worked in a time when most patients had insurance that paid for the majority of their care. This is no longer the case for today’s empowered—but financially strapped—patients. A 2017 consumer healthcare payments survey found that 65% of consumers would change providers if it meant a better payment experience. And when loyalty waivers, so do volumes, brand equity, and market share.
Even more problematic is the fact that when patients feel they have limited options for paying for their care, they may choose to delay or avoid all but the most urgent of care needs. A poll conducted by the Kaiser Family Foundation found that 27% of participants had postponed care in the previous 12 months due to the cost. Further, 23% skipped a recommended medical test or treatment and 21% chose not to fill a prescription. When patients put off care, readmissions increase while outcomes plummet. The inability to pay, in this way, results in the opposite of what healthcare is all about—helping people get well and live healthy lives.
No one wants patients to put off care. But providers can’t afford to give their services away for free. The answer is to make it easier for patients to pay. The industry needs a solution that requires less effort and cost on the part of the provider, while improving the patient financial experience. And it needs to start before a patient is seen.
Many hospitals use propensity to pay (P2P) analytics as a way to segment patients based on their likelihood to pay. For the majority that use it, they do so as a means to inform staff or early-out vendors about which patients to pursue—after a patient hasn’t paid. While that’s fine, it doesn’t do anything to prevent patient bills from going into default in the first place.
To be more impactful, P2P should be leveraged on the front end. It should also be based on more than just credit history—it needs to account for a patient’s financial history related specifically to medical bills. Which bills are patients more likely to let slip into default: their mortgage or their medical debt? For some, it’s the former. For others, the latter.
Patients often take a different approach to paying their medical bills than their other bills. Providers need to look at a broader picture when determining the best collection route to take with each patient. This, in turn, helps prevent accounts from being written off or turned over to collections too soon, which leaves money on the table unnecessarily and can damage the patient-provider relationship.
Payment plans are rarely offered proactively and, for many hospitals, are only offered upon a patient’s request. But this to be the opposite of what patients actually want. Our research has found that 56% of patients would prefer to make a payment arrangement prior to their service. Another 35% want to receive a payment plan offer when the first bill comes, after insurance has paid. Only 7% said they would prefer to call and ask for a plan themselves. Yet today, the vast majority of hospitals fall into the 7% category.
Whether a hospital’s accounting system can’t handle responsive payment offerings or they just don’t want to take on the role of a lender, ignoring the opportunity makes it harder for patients to pay, impedes cash flow, and negatively impacts the patient relationship.
Instead of thinking of patient responsibility in terms of a collection burden, providers should look at is a key part of the patient experience. Rather than just thinking of how best to collect, they should look at the obligation from the patient’s point of view and consider the best way to pay. This patient-centric approach enables providers to deliver a better patient financial experience.
When patients know a provider is willing to offer customized payment options that fit into their unique financial situation, they are more likely to get the care they need. And they’re more likely to choose that provider for future healthcare needs—which helps improve loyalty and patient satisfaction.
The move from fee-for-service to pay-for-performance has changed the business of healthcare from provider- and payer-centric to patient-centric. For hospitals to succeed in this new era, they need to change the way they think about the patient experience.
Creating proactive, responsive payment options based on each patient’s unique financial situation not only improves the patient financial experience, it significantly improves a provider’s ability to collect faster, easier and with less effort. Patients benefit by being able to get the care they need when they need it, and providers benefit through reduced collection costs, improved revenue, and more stable long-term financial viability.
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