With the continued growth of high-deductible health plans, patient out-of-pocket medical expenses have increased exponentially, as has provider bad debt. Of the $63.7 billion in patient responsibility each year, approximately $7.5 billion goes unpaid. In other words, more than 11% of all patient balances are never collected.
To understand what influences a patient’s decision to pay and how the billing process impacts the patient-provider relationship, we worked with PYMNTS.com to conduct a survey. We received 2,837 viable responses from patients who had experienced either an in-patient hospital stay or a visit to an emergency room during the previous 12 months.
How patients pay
The survey results showed that the vast majority of patients are willing to pay their medical bills. In fact, 90% of respondents reported wanting to pay their portion of the responsibility in full. Of the 46.1% who had checked in to a hospital, 44.4% chose to use payment plans to pay their bill. Of those, 22.8% reported the hospital made no effort to collect their payment responsibility at the time of service, and just over half said they were asked only for the co-pay. Of all respondents:
- 39.9% paid their co-pay at the time of service and the remainder when they received their bill.
- 26.6% paid the entire portion of their responsibility at the time of service.
- 16.3% paid a portion of the cost via a payment plan the hospital offered.
- 7.1% had no intention of paying at all.
Price as a factor in method of payment
The survey also found that there is a direct relationship between higher out-of-pocket responsibility and a patient’s likelihood to sign up for a payment plan. 38.9% used payment plans for expenses that ranged from $50 to $250, but that figure increased to 51.4% when out-of-pocket expenses were $1,000 or more. The average out-of-pocket portion for all survey respondents combined was $577.33. Those with no plan to pay owed the highest amount at $758, and those who owed the second highest amount ($684), opted to use payment plans. Not surprisingly, the lower the out-of-pocket costs, the more likely patients were to either pay at the time of service or when their bill was received.
These results should be an indication to hospital administrators that less expensive bills may be paid without the need for payment plans, while patients with higher expenses will be more likely to utilize options that make their costs more manageable. Payment plans offer the best opportunity for repayment when patients have more expensive bills for their treatments, because they put even reluctant patients on a path to resolve their medical debt.
Age and income
The survey respondents ranged in age from 18 to 65+, and those aged 24 to 64 had the highest out-of-pocket costs. Additionally, those with higher income levels and steady employment experienced higher out-of-pocket costs (which could be attributable to individuals in this segment choosing to have more elective treatments). Survey respondents with lower incomes often struggled to pay for medical expenses, even though their bills were lower. Based on these pricing factors, offering payment plans to both of these segments would likely help hospitals collect a greater portion of the funds billed to these patients.
Payment plan preferences
Hospitals vary in terms of when, how, and what portion of patient responsibility to collect. Likewise, patients vary in terms of when, how, and what portion they are able or willing to pay. However, among patients who want to be offered payment plans, 57.2% said they would prefer to be presented with that option prior to or at the time of service. Another 35.5% said they would prefer a payment plan be offered when they receive their first bill. Only 6.9% said they don’t want to receive a payment plan offer unless they ask for one.
The survey found that fees significantly influence patients’ payment plan decisions:
- 33% of patients said they would choose shorter payment terms to reduce fees.
- 25% said they would avoid plans altogether due to fees.
- 25% said fees have no impact on their choice of payment methods.
- 17% would pay balances in full to avoid fees.
Regarding the fee patients would be willing to pay, more than 80% of patients said they were willing to pay a monthly service fee ranging from $1.95 to more than $3.95. 19.9% said any fee would be unacceptable, which aligns with the motivating factor for patients who said they would pay balances in full to avoid fees.
Of all respondents willing to use payment plans, 63.4% said they would prefer to pay online, while 22.5% said they would rather pay by check in the mail. Another 7.3% said they would like to pay by phone and 6.8% think paying in person is preferable.
Respondents were fairly evenly split in terms of how they wanted to receive their billing statements. The slight majority (51.2%) said they preferred paper statements, and 48.8% preferred online statements.
Improving the patient experience
There is a direct correlation between the patient financial experience and patient satisfaction. Providing patients with more proactive payment options helps them make more informed decisions about their healthcare and results in an increased likelihood to pay. It also improves the patient experience, which can have a positive impact on patient loyalty. When patients know a hospital is going to do all they can to make it easier for them to pay, they may be more likely to return for future services and less likely to avoid medical care.
Strategic use of payment plans
The use of payment plans in healthcare is nothing new. However, payment plans have traditionally been offered as a last resort tactic or a reactive measure upon patient request. With advancements in technology and data analytics, providers can now determine a patient’s ability to pay ahead of any collection efforts. This allows providers to be proactive in offering payment plan options to patients who need them, at the time they are asked to pay, and at terms they can afford.
Fewer than half of the survey respondents reported currently using payment plans, but 89.8% of these patients would be willing to use payment plans in the future. Of all the findings from the survey, that alone should be compelling enough for hospitals to consider proactively offering payment plans to their patients at or before the time of service, or when they receive their first statement.
As patient responsibility continues to increase, patients will continue to be challenged to pay their medical expenses. Without taking action, hospitals will face decreasing patient satisfaction, lower cash collections, and skyrocketing costs.
View the full survey results: The changing landscape of healthcare payment plans.