Learning from higher ed: 5 cross-industry insights for healthcare payments

David King
David King is CTO at Flywire.

With health care, some analogies work better than others.

As Becker’s Hospital Review’s Editor-in-Chief Molly Gamble has pointed out, the practice of comparing healthcare to other industries has always had its limits. But a new analogy, between healthcare and higher education, has become increasingly valid in light of recent developments. In terms of financial liability, the two industries face many of the same challenges: high consumer liability, multiple payers on an account, and accounts that experience multiple changes (or “noise”). Additionally, each has seen cost increases that traditional third-party payers (insurance companies in healthcare and financial aid sources in higher ed) have opted not to cover. This offloading of risk directly onto the consumer has brought payment support, consumer engagement, and responsiveness to the forefront for both hospital and university business offices.

Let’s examine how a growing number of health systems are making the payment process fit the needs, means, and preferences of their users by putting to use five core concepts gleaned from higher education.

### 1. Shift payments from post-service to pre-service

In higher education, students pay tuition and fees before the semester starts. One of the reasons they can do this is that the price is set before the “service” begins. In healthcare, of course, the expense for a procedure or series of visits requires extremely complicated accounting (including distinct charge capture); is subject to real-time change (if an additional procedure is required during surgery, for instance); and must pass through several hoops (including confirmation of insured status, approval of the procedure, and compliance) before it even makes it onto a billing statement. Still, the hospital has enough data and available technology to estimate the cost of the procedure and start engaging the patient before the service—at the point of registration, for instance, as in higher ed.

The difference between the planned expense of college tuition and an unplanned medical procedure notwithstanding, the notion of price transparency and pre-service payment in healthcare is becoming more familiar—and desirable—to patients. Just as universities have done for students, hospitals will need to offer retail-like tools and payment options to successfully increase payments up-front. They should also be prepared to accurately and constantly re-balance accounts to reflect additional payments, late charges, or even re-bills to insurance.

### 2. Extend credit to students struggling to pay

A part of the college student population has always struggled to bridge the gap between tuition and fees and the financial aid they receive. Historically, these students receive automated outreach from the university with pre-approved payment plan offers to cover that gap over time. The school self-funds what are essentially interest-free lines of credit, asking that the student pay off the balance by the end of the semester (typically a period of three or six months). This orientation toward students—proactive, partner-like, and flexible—is an important one for hospitals to emulate if they want to promote engagement, satisfaction, and loyalty.

Healthcare needs to go the extra mile in terms of early and responsive payment support for patients, foremost because of the nature of the “purchase.” Here is one place the retail analogy falls flat: not only is it the case that in online retail you pay first and then receive the goods, but it is also a scenario controlled largely by consumer choice, without much stress. Meanwhile, the experience of needing and undergoing care is far more complex, often unplanned and seldom completely stress-free.

Hospitals also need to go the extra mile to engage patients because they do not have higher ed’s recourse in the event of a default. Where universities may hold student transcripts until they receive outstanding tuition and fees, hospitals cannot (and would not) hold medical records on the basis of payment status.

### 3. Tailor offers, send them proactively, and include a service fee

As the market dynamics in both industries are becoming more and more alike, each industry has been borrowing best practices from the other. For instance, healthcare has followed higher ed by starting to proactively and automatically offer a range of payment plans, as higher ed has been doing for years. And just as healthcare is working to collect more upfront, higher ed is finding itself holding more post-service debt. (Students with outstanding balances after the tuition due date used to be about 5 percent of the population, whereas now it’s upwards of 30 percent.) Both industries have had to hone their analysis of the people they serve in order to avoid interactions with collections agencies.

In healthcare, successful “pre-collect” strategies depend on accurately answering questions like, “What can they afford to pay?” and “How do they want to make those payments?” When affordability becomes the barrier to payment in either industry, tailoring payment plan offers to the consumer’s situation and allowing them to opt in via a multitude of channels is crucial.

A newer point of overlap is the implementation of a modest service fee for payment plan adopters. Just as students expect to find a service fee for payment processing when they buy an airline seat or choose to pay their car insurance over time, they accept paying a service fee for the choice and convenience of paying their tuition in installments during the semester. This has been the norm at colleges and universities for a decade. Today, several healthcare providers are following higher ed (and retail) in charging a small service fee for opting into their plans, and may use such fees to incentivize payment in full or shorter payment terms. The strategy has proven very effective for these providers, who have seen average payment plan terms cut in half while their cash collections increase.

### 4. Reduce friction for international payments

More and more international students are coming to the United States for education. More and more foreign patients are having procedures or treatments performed here, too. In fact, many hospitals and universities are deploying strategies for attracting more foreign “customers.” Both populations face unique payment difficulties, although not typically in terms of their ability or intent to pay. Rather, they have to deal with the fees associated with their various options to move funds from their home country to the United States, including international credit card fees (paid for both by the card holder and the receiving institution) and the high cost of wire transfers. Higher ed has taken assertive steps to provide a simplified digital experience for foreign students in order to attract and serve this important population. This outreach includes minimizing those fees and costs wherever possible. Hospitals are beginning to follow suit in order to attract and serve the growing number of international patients that come to the U.S. for healthcare.

Simplifying the payment process for this growing subset of patients could translate into an important source of revenue for hospitals, especially as this population pays for care in full before the service takes place. It also helps the whole gamut of people seeking excellent care, from those who end up in the emergency room to those seeking an American doctor’s second opinion via telemedicine to those who are ready to pay whatever it costs to get the surgery or treatment they need. These patients may in turn come back to the hospital when they need additional services. One pair of organizations in the forefront of this trend is University of Pittsburgh and its affiliated medical center, UPMC. While their University’s students have been using Flywire's international payment service for years, their medical center UPMC is now using this same service to simplify international patient payments.

### 5. Maintain credit card data security as efficiently as possible

For decades, higher ed has been attentive to the regulatory standards that apply when an organization accepts credit card payments. (These standards are determined by the Payment Card Industry, or PCI.) Awareness around PCI compliance has come more slowly to the healthcare industry: until recently, the bulk of medical payments came from the government and insurance companies, meaning there was very little credit card activity. Since the rise of high-deductible health plans and the increase in self-pay, however, healthcare organizations have seen more and more medical costs put on credit cards. This trend has rightly attracted the attention of the PCI Security Council, which seeks to ensure that credit card users’ data is kept secure from hackers.

In terms of data security, hospitals and universities alike can be thought of as malls. Both entities manage and maintain several “merchants” under their umbrella—in healthcare, think the hospital and physician group, but also the hospital flower shop and food court. Each of these vendors requires a separate ID (or Merchant Identification Number) for processing credit cards. This structure adds complexity and volume to the capture and transmission of card data, underscoring the need for sophisticated management of PCI compliance. The goal is to provide secure and convenient card processing services at all points in the hospitals ecosystem, while reducing PCI to the lowest scope possible. Applying the right technology can mean the difference from filling out a brief questionnaire to a massive one with a complete enterprise audit. Healthcare organizations must keep PCI compliance in mind as they evaluate potential payment solutions.

### Conclusion

Healthcare has a lot to learn from higher ed. Universities are farther along in terms of digital interaction with students, and have successfully implemented a retail-like payment plan experience, including a service fee model, to drive behavior with students—two areas where healthcare is rapidly starting to follow suit. Universities have had earlier success serving their international “customers” while lowering PCI-DSS compliance scope; healthcare is still catching up in this regard. And they’ll have to, as all signs point to increasing consumer expectations and the continued need to collect directly from patients.

Creating a payment experience that meets consumer preferences and enables them to pay their healthcare balances simply and flexibly is critical to patient satisfaction, a major concern for all hospitals. Importing best practices from truly analogous industries is one way to build that experience.