Much has changed in healthcare over the last decade. Technology, of course, has helped make strides in how we detect and treat any number of maladies. You can use your watch to monitor how many steps you take, use your phone to set up (literal) facetime with a physician, and pay bills with a tap of a virtual wallet. Online pharmacies deliver cost savings to customers, Amazon is debuting software that mines data and translates physician notes to improve the continuum of care.
We could go on (and on) about the changes toward the better, but when it comes to payments, among the changes that are less palatable — indeed, at times a bitter pill to swallow — has been the rise of the self-pay patient, carrying the self-pay receivable.
Simply put, Americans are on the hook for more of their medical expenses than they have been before, which means more upfront, out-of-pocket expenses are in the offing — and 90 percent of patients will still pay post-service. The burden of medical debt is a real one. Consider the fact that TransUnion found last year that roughly two in three patients do not pay their balance in full.
Medical debt becomes top of mind in an era where 46 percent of Americans live paycheck to paycheck. Our latest “Financial Invisibles” report found that 37 percent of debt collection efforts involved medical bills.
More Comes Out Of Pocket
Healthcare has changed, indeed, and in a conversation with PYMNTS’ Karen Webster, John Talaga, CEO of Flywire’s OnPlan Health (which was acquired earlier this year), stated that a hallmark of U.S. healthcare has been the high-deductible plan, where the patient foots more of the bill before insurance kicks in, and in fact 10 years ago, patients covered by insurance were liable for an average of 10 percent of the medical bill.
“Roll the clock ahead to 2018 and it’s now 25 percent to 30 percent,” he said. That signals, too, a shift for healthcare providers themselves, from hospitals to physicians, who collect about 30 percent of what is owed — and the rest, said Talaga, has to eventually be written off after phone calls, paper bills sent in the mail, emails and debt-collection efforts.
If, through those traditional processes, said Talaga, providers “are only collecting 30 percent of what is 30 percent of their revenue,” he said, “they are in big trouble.” On the other side of the coin is the patient, who grapples with what Talaga termed a “lack of transparency … that exists in no other industry than healthcare. Nowhere else do you buy services without knowing what it is going to cost. People do not always understand their health plans and they are not budgeting for [their liabilities] and so there are unexpected balances.”
There’s a side effect, too, said Talaga, where patients staring at thousands of dollars in deductibles that need to be paid before coverage kicks in ... simply elect not to get the care they might urgently need. It’s a recipe for disaster.
The Traditional Methods Of Collection
In an effort to stanch the red ink, healthcare providers, said the executive, are outsourcing business operations, from phone calls to chasing down medical debt owed, to third parties — and paying 5 percent to 10 percent on balances as they are collected. Hospitals, he said, are also opting to sell off their “self-pay receivables” to third parties for about 80 cents on the dollar. The third party, then, that is financing the loan and setting up payment plans with patients is the firm that ultimately collects on it (or doesn’t).
“It’s even more expensive,” he said of such efforts, “and it’s a disintermediation of the patient and the provider. You are sending your patient to a third party to collect the balance when the hospital wants to keep the patient” and forge a relationship. The day may come where we see the advent of loyalty programs in place for healthcare providers, he said, helping solidify relationships.
Rx For Healthier Collections?
For now, at least, against a backdrop where traditional collection efforts are proving both costly and less than optimally effective, Talaga said that money is being pumped into early-stage companies that offer technologies tied to analytics on the front end of the patient/provider relationship. The goal, he said, is “to identify up front what that patient is going to be able to afford” — information that can be a challenge for firms to gather but can be placed into an automated framework that allows the provider to make a payment offer and payment plan. Those options can be crafted upon the very first interaction that ensures the balance can be settled and collected without having to resort to financing.
Such tech-driven efforts, he said, lead to transparency and “show the patient they can go and get care and do it in an affordable way rather than being hit with a huge bill.” Pinpointing the exact costs/reimbursement structure can be tough, he noted — as there’s a process that typically takes months, where insurance companies adjudicate claims and patients may not receive a final bill for 60 days. Thus it can pay to get a cost estimate in front of the patient, and adjust it plus or minus 5 percent upon working out payment plans.
After all, he said, the problem that lies in front of healthcare providers “is more of a collections problem than a payments processing problem,” and where it is critical to get that estimate up front at the point where healthcare services are rendered and where 90 percent of payments are tendered. “Asking for a $1,000 balance up front … and asking for it 60 days later still represents the same problem,” he told PYMNTS.
For the healthcare providers working with such financing options, there are technical concerns (tied to PCI DSS) that mount. Credit card payments of course mean that providers must host their data securely. Enlightenment is dawning among providers, he said, now realizing that where they once had 20,000 accounts on file, they now have 100,000 and exist as “a rich target for hackers.” Keeping card information off the network, and embracing point to-point-encryption, he said, have become big topics now in healthcare when it comes to data management, he said.
Technology also provides a salve through a financing model by letting patients and providers see all the relevant billing data in one place, across a continuum of care. The mother who has a payment plan in place for $100 a month tied to a hospital visit and then brings their daughter in for a strep test at the clinic can automatically add that visit, financed, to the monthly payment.
“The choice is more about the setting of care rather than ‘how much is the service going to cost,’” he said.