Cash is a scary number: Achieving financial stability for smaller systems
The role facing modern healthcare CFOs is complex, particularly in rural environments where the struggle to stay above operating margins and create a sustainable financial ecosystem is dependent on small, largely flat communities. Achieving financial stability for these health systems can be difficult especially when subjected to the fierce financial headwinds currently impacting the healthcare industry. Denial management and payor contracts, supply chain costs, labor cost inflation, and capital expenditures continue to be strong points of financial pressure on health systems as communities across the country recover from the pandemic.
“It’s a big challenge,” says Heather Schneider, Systems CFO of Penn Highlands Healthcare- an integrated 9 hospital system serving rural Pennsylvania with a current population of roughly 68,000 patients. “The cost of labor has increased tremendously. Even the supplies that we're seeing come through in terms of med surg supplies and pharmaceutical supplies have skyrocketed. And then you have an institution like Penn Highlands that has some big capital projects in the works. With construction inflation, the cost of building new buildings has increased, you know, 40%. So you put all of that together and it makes cash a scary number.”
As health systems continue to look for innovative ways to increase cash collections and accelerate cash flow, an area that is becoming more important is patient payments. Patient responsibility has been a growing financial pressure for health systems over the past decade and is considered a significant area for strategic growth almost by necessity. “You can only do so much with your payors out there, right?,” says Schneider, “Whereas, on the patient payment side, we know people have copays and deductibles. I think those numbers grow as employers push more and more of that back into their employees' bucket. And the more of that we can get up front, the lower our collection costs on the back end.”
According to a leading publisher of healthcare market research, Kalorama Information, estimates that patient out-of-pocket expenses could reach as high as $491.6 billion by 2025. With growing patient responsibility comes growing consumer demand. Patients are now asking for more streamlined technology to make it easy for them to pay their bills and more financial options with their payments. In a recent survey of 2000 patients, 84% believe the healthcare payment system needs to be streamlined. The pace by which the patient billing and payment space has evolved means that you almost have to be in touch with patient demands on a daily basis, according to Schneider. “Those changing demands, I think, would be my number two challenge as a CFO.”
With those changing demands in mind, Penn Highlands Healthcare set out to bring more digital innovation into their billing and payment process, to create a consumer-focused financial experience that would support more patient self-service and positively impact cash growth and acceleration.
Setting a vision: bringing digital innovation to rural communities
Founded in 2013, Penn Highlands Healthcare is relatively new in the healthcare system space. At a little over 10 years old, they’ve grown exponentially during that time, across central and western Pennsylvania, in the heart of the state’s rural communities.
Prior to implementing their new consumer-focused strategy, the biggest complaint at Penn Highlands’ revenue cycle was that patients couldn't keep up with multiple bills, finding it confusing to keep track of what bill was coming and from where. “The biggest complaint that I would hear on the billing side was that the patients didn't understand what they truly owed us,” says Schneider.
Patients would routinely receive multiple bills from physician groups, outpatient facilities, and other care services all for the same visit. Once received, billing statements weren’t designed in a way that made it clear what the patient’s financial responsibility was: “Really, my first challenge here was to give our patients that transparency and bring this all into one.”
With that in mind, Schneider became determined to transform traditional revenue cycle channels into digital advantages to allow patients to clearly understand their financial obligations after insurance. With the goal of one statement across the enterprise to eliminate billing confusion, she looked into finding the right digital solution to support her vision, ultimately choosing to partner with Flywire because alongside billing consolidation, Flywire offered multiple financial options for the patient based on their capacity to pay and actionable analytics to help shape the best patient experience.
Achieving executive buy-in
With a vision set, Penn Highlands’ board was taken through the new financial experience so that everyone would be in unison.
The pitch? This experience would finally be like the other tools that patients use in their everyday lives, making them comfortable and able to adapt quickly. Executive buy-in is important everywhere, but especially in rural areas where communities are more integrated and feedback, positive or negative, is more immediate.
Schneider believed that moving to Flywire’s consumer-focused platform would create a positive experience for patients and she needed the board to buy-into that decision. “To me, it was just kind of a no-brainer. We've got to do this. That's what people are used to. Everybody knew about Amazon out there. Your Amazon cart was the easiest thing that everybody could relate to. When I saw this platform, it felt like an Amazon-type experience and that's how I equated it to the board. And they said, yeah, you're right. It does. So, being able to get there and down to that level with people- for them to understand that this is really simple and easy to use.”
Patient loyalty is the new battleground in healthcare
A central goal of Penn Highlands Healthcare and the cornerstone of the founder's vision is to “keep health care local.” In rural environments where patients need to drive a couple hours to reach the next biggest city in order to receive their health care, a real sense of community and shared history between patients and their providers can foster - with patients, in some cases, going to the same hospital their entire lives. Rural providers rely on that patient loyalty to help create a sustainable financial ecosystem.
But, as patient responsibility grows and patients are asked to take a larger share of the financial investment in their care, winning patient loyalty has become the new battleground in healthcare. Consistently, more patients are finding themselves willing to travel to other locations to receive the experience, both clinical and financial, that they feel they deserve. In a recent survey from PYMTS, 63% of adults said that they will drop healthcare providers over bad payment experiences.
As CFO at Penn Highlands, Schneider believes that investing more in a streamlined patient financial experience will help win that patient loyalty. “Not only do the patients need to have obviously the clinical quality options, but they need it to be affordable. They need it to be transparent for them. So all of that plays into our digital strategy and being able to provide patients with the best of all worlds. Obviously that's an evolving process over time, but as we're able to offer them more payment plans and different options for their payments, and they have that full visibility, it's certainly helping retain them closer to home. And that just helps everybody. It not only helps us but our local community in which we're the largest employer.”
Improving patient billing & payments experience through digital innovation
Most healthcare organizations struggle to implement a well-defined digital approach when it comes to patient billing, believing that sending a text or an email as part of the dunning cycle scratches the itch. But as digital approaches to customer billing and payments become more sophisticated in other industries, this simplistic approach just isn’t enough. Instead, a true consumer-driven digital strategy starts by recognizing that every patient is unique and that includes their communication preferences and also their financial status. Hospitals can create a personalized experience across the patient's overall financial journey by designing their digital strategy around understanding what that patient's capacity to pay is at the time of their bill and using that understanding to engage the patient in the right way, with the right financial offers-like automatically setting up payment arrangements. This approach allows for greater response and greater affordability in the financial process.
Those financial offers allow the patient to feel comfortable that they're able to pay for their healthcare. That confidence can be especially critical in a small town environment where it can be more difficult for a patient to admit to hospital staff that they need financial aid: “We're in a small town population, less than 10,000. So you almost know everybody around or at least they look familiar,” says Schneider. “People don’t like to make a phone call to someone on how you can't afford to make this payment all at once and then turn around and see someone in the grocery store or at their local Walmart that they just talked about their financial situation with. Patients are really finding it very exciting that they can now go online and do this all on their own.”
Creating a financial experience driven by patient self-service isn’t just good for patients, it’s also good for providers. Since shifting to digital, Penn Highlands Healthcare has seen their self-service rates jump to 78%. This has led to a $5.8m yield improvement over the past 12 months. On top of a collections improvement, they’ve also seen 8,000 staff hours saved from not having to process manual payments or field patient billing inquiries.
“We've seen a huge uptick actually. People are self-selecting payment plans now, and actually following through with them because we have offered this option to our patients,” she said. “So I think that's going to be the wave of things to come.”