As consumerism and high-deductible health plans take hold, patients are now the third-biggest payer behind Medicare and Medicaid.
That's led hospitals and other providers to shift bill collection efforts, with a focus more directly on patients.
It's an entirely different process that’s more expensive and labor intensive. Providers and health systems have added staff to handle billing, worked inter-departmentally to educate consumers on healthcare finances and hired third parties to work with consumers in this revamped revenue cycle.
Financing plans, coupled with financial education, can reduce patient stress and make care more affordable. That combination often improves patient satisfaction, which helps a hospital’s reputation.
“We know it’s a competitive advantage,” KaLynn Gates, president at HealthFirst Financial, a patient financing company, told Healthcare Dive. She estimates about a quarter of providers are using a financing program.
A decade ago, providers mostly needed to deal with health insurance companies for payments. Now, high-deductible health plans (HDHPs) have shifted more costs onto individuals. Even more established plan types like PPOs and HMOs are boosting out-of-pocket costs. A Kaiser Family Foundation study found the average deductible for people in employer-based health insurance increased from $303 in 2006 to $1,505 in 2017. That number will only increase, especially if catastrophic health plans become more of the norm. The deductible for an individual catastrophic plan is $7,350 per person.
Higher deductibles can mean more medical debt for consumers and slower payments to providers. A Connance report said 70% of providers note it takes more than a month to collect from patients.
These financial issues don’t just affect individual and health system finances.
Patient health is also influenced. A recent study in the Journal of Health Care Finance found medical debt and bills negatively affect healthcare access. Out-of-pocket costs can result in patients not filling prescriptions, skipping medical tests and avoiding care.
The report said zero interest rate healthcare financing programs can play a role in managing medical debt and improving “key determinants that influence their health.”
“What we’re seeing and studies are showing is that consumers are delaying care because of out-of-pocket costs. Consumers aren't going to their doctor because of out-of-pocket expenses,” CarePayment CEO Craig Hodges told Healthcare Dive.
And medical bills often sit near the bottom of the pile.
McKinsey & Company reported that only 7% of consumers said medical bills were one of the top two they pay. That’s well below mortgage or rent and utilities and even less than cable/phone/internet.
Delaying payment leads to delinquent bills, which add more work on health systems and providers. Providers send an average of 3.3 billing statements before a healthcare bill is paid in full.
One major issue is that consumers don’t have enough disposable income to pay their medical bills. A 2017 HealthFirst Financial Patient Survey said more than 40% of respondents are “very concerned” or “concerned" about whether they could pay out-of-pocket medical bills over the next two years. More than half said they are worried that they might not be able to afford a $1,000 bill, more than one-third are concerned about a $500 bill and 16% said they fret about paying a bill less than $250.
Without funds to pay their medical bills, patients get creative. Some patients push back payments until they get their tax refund or delay care until the end of the year when they’ve met their deductible.
Chris Hargis, finance director at Intermountain Healthcare’s Alta View Hospital in Sandy, Utah, told Healthcare Dive that the end-year push means physicians, especially surgeons, work long hours in November and December to meet the demand. Flu/pneumonia season at the same time only makes matters worse.
“I’ve had surgeons approach me and ask, ‘Is there anyone we can talk to about getting the plans to stagger their plan years, so we don’t starve in the first quarter and kill ourselves in the fourth?’” Hargis said.
Health systems and providers are finding ways to improve the revenue cycle while helping consumers deal with debt. Payment plans, either in-house or partnering with third-party companies that specialize in healthcare financing, are a common solution.
In a recent case study, North Kansas City Hospital partnered with CarePayment to offer six- to 24-month 0% interest payment programs. They also created an outreach program with the hospital's marketing and finance departments on healthcare consumerism and patient financing and created messaging on the NKCH website and on statements, with posters and brochures.
Net collections increased 67% and bad debt decreased 27% in the first six months. NKCH also pointed to another byproduct — improved patient satisfaction and loyalty.
Geisinger Health System has also created free installment payment plans up to 36 months with longer terms that need case review and executive approval. Providing interest-free payment options is a step, but Barbara Tapscott, vice president of revenue management at Geisinger, told Healthcare Dive that patient education and outreach are also important.
The integrated health system offers patient education and financial counseling by certified application counselors, conducts outreach during open enrollment periods and provides estimates for out-of-pocket liability on scheduled procedures or services. Patients can also see the estimated costs of about 300 elective procedures to figure their out-of-pocket liability. The health system’s patient portal MyGeisinger allows patients to communicate with the provider and financial counselors, and they're able to pay bills online.
She added that Geisinger uses the Healthcare Financial Management Association Patient Financial Communications’ best practices that highlight transparency and sensitivity to the patient’s individual needs.
Financial companies help health systems
Collecting from consumers and educating them about healthcare finances often comes from outside vendors.
CarePayment sells financial counseling tools, staff training and quarterly training with staff. The company sells 0% interest financing up to 72 months on balances ranging between $200 and $50,000. Consumers can add new charges from the same facility.
The company co-brands communication with the healthcare partner, so patients know the mailing, email or other interaction is associated with their provider. Hodges said making sure the provider is prominent in communication is key.
“We have been adapting our approach to this to improve the relationship between the patient and provider. That’s critical for good health outcomes and also critical to revenue cycle performance,” Hodges said.
Meanwhile, Gates said HealthFirst’s consumer load increased 46% over the past year and the company is now working with more than 220 facilities in 35 states. Gates said the consumers range from lower income to wealthy. Healthcare financing has changed in recent years from patients seeking financing when they have a major, expensive procedure to include everyday healthcare costs.
“There’s been a shift from catastrophic to now it’s just part of family budgeting,” Gates said.
Patient financing and patient satisfaction
Transitioning from a payer-heavy reimbursement model to one that relies on a steady stream of individual payments is key in this consumerism environment. But how do you go about doing that? Tips from healthcare finance experts Healthcare Dive interviewed include:
- Offer flexible payment arrangements in length and balance thresholds
- Provide price transparency tools, such as estimator tools
- Fully integrate consumerism into your entire revenue cycle
- Communicate clearly and via multiple avenues early and often at discharge or even before
- Dedicate and train patient-facing personnel on healthcare finances
- Think of your call centers as service centers — not collections centers
Health systems are finding that patient financing is as much a patient satisfaction tool as a financial one. An unpleasant experience with a billing department can lead to negative online reviews and patients getting care elsewhere.
Billing plays an important role in patient satisfaction. A recent analysis of Yelp reviews of the top 20 U.S. hospitals found 84% of the complaints were on the non-clinical side.
Hodges said consumers can have a great clinical encounter, but that can be wiped away if they’re frustrated about a billing experience. A positive financial experience also has a positive financial return, he said.