We’re all now keenly aware of high-deductible health plans (HDHPs) and their growing impact on hospital revenue. Since 2011, deductibles have increased 63%, significantly outpacing both inflation at 6%, and earnings at 11%.1 The average self-pay payment is now 10.9 percent across all inpatient accounts receivable and growing at 30% per year.2 We know patients are struggling to pay their medical bills as the average hospital’s rate of bad debt is increasing at well over 30% per year.3 For hospitals and health systems, the discussion around HDHPs generally reflects the impact on the organization’s bottom line yet fails to address the significant impact on the financial and physical welfare of patients. According to TransUnion research, nearly 68% of patients with medical bills up to $500 did not pay the balance in full in 2016. TransUnion predicts that number will reach 95% in the next two years.4 With patients struggling to pay a $500 bill, we can imagine what happens when they’re hit with an extraordinary medical payment, which one in six families will experience in any given year.5 With few payment options, many patients turn to credit to pay their medical bills. The Commonwealth Fund Biennial Health Insurance Survey (2016)6 found:
- 27% of patients took on credit card debt to pay a medical bill
- 39% experienced a lower credit score rating because of medical bills
- 34% used up all of their savings to pay medical bills
- 23% were unable to purchase basic necessities such as food or rent because of medical bills
Financial implications on care avoidance
When patients anticipate they’ll be unable to pay their medical bills, they often choose to forgo care. A poll conducted by the Kaiser Family Foundation found 27% of participants had postponed care in the previous 12 months due to the cost, 23% skipped a recommended medical test or treatment, and 21% chose not to fill a prescription.7 It is clear that when patients can’t pay, it impacts their healthcare decisions. With the implications of Value Based Care, a patient’s ability to pay for needed care is in the provider’s best interest too.
The path forward
First, let’s agree that forcing a patient to use credit to pay their healthcare bills should be avoided if possible. The impact of credit on patients can follow them for years: lower credit scores, higher interest rates, and the inability to purchase a home, take out a student loan or buy a car. Instead, hospitals need to provide payment transparency and tools to help patients self-select the payment options best for themselves and their families.
Collecting from individual patients should be based not just on the patient’s ability to pay, but also their propensity to pay. Hospitals should thoroughly analyze payment plans to determine which ranges produce the highest yield for which balances. With this information, hospitals can implement a responsive payment model to engage patients with offers of tailored payment amounts with multiple payment options and self-service activation—options consumers have come to expect in other areas of their lives. For each new episode of care, hospitals should give patients the ability to add family members and new balances to existing payment plans or pay them in full.
The new age of HDHPs requires hospitals to strike a balance between protecting their bottom line and protecting patient health. Empowering patients with more transparent billing and better, more transparent payment options enables patients to make more informed decisions about their healthcare, and improves the patient experience. Responsive payment options are an important tool to help patients and hospitals navigate the new financial landscape of HDHPs.
1 Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2011-2016; Bureau of Labor Statistics, Consumer Price Index, U.S. City Average of Annual Inflation (April to April), 2011-2016
2 Crowe Horwath, “Revenue Recognition and High-Deductible Plans,” Crowe Revenue-Recognition-and-High-Deductible-Plans-HC-17512-005A.pdf.
3 McKinsey & Company
5 Paying out of Pocket: The Healthcare Spending of 2 Million Families, from the JP Morgan Chase & Co Institute.
7 Kaiser Family Foundation Health Tracking Poll (conducted December 13-19, 2016)