Merchant Innovation

Bringing eCommerce – And The Shopping Cart Model – To Healthcare

eCommerce healthcare

To solve the healthcare payments puzzle — look to eCommerce.

In an interview with Karen Webster, Paul Ketchel, founder and CEO of MDsave, said that online platform models could help bring together patients seeking affordable care with providers and simplify billing and payments collection along the way.

The conversation came against the backdrop, of course, where markets are roiling, there’s talk of recession, and no doubt the health of the consumer is top of mind.

Healthcare — and its affordability or lack thereof — is front and center on the political agenda and likely top of mind for the vast majority of patients.

At a high level, of course, healthcare costs represent a sizable chunk of GDP, at more than 17 percent.

As reported in research conducted by PYMNTS and Flywire, the percentage of healthcare expenses borne by the consumer is more than 28 percent, at $375 billion. Of that amount, about 2 percent, or $7.5 billion of those costs go unpaid.

Out of Pocket’ Design

Ketchel noted that the industry has migrated to “an out of pocket plan design,” where high deductible plans are the most prominent offerings in the country. There are now more than 130 million insured individuals in the U.S. tied to those plans, where deductibles start at $3,000 — and can be significantly higher.

Said Ketchel: “If you look at those high-deductible plans today, 82 percent of members never reach that deductible in a calendar year.” That means more than 100 million Americans are shouldering their healthcare expenses entirely out of pocket.

He said the business model behind MDsave is to give individuals need a way to shop for, compare and purchase healthcare, across a bundled set of services and providers.

“If you see it,” he said of the model, “you can click on it, buy that care and access it.”

The bundling component — offering a continuum of all the providers associated with, say, a knee replacement — he said, eliminates surprise bills.

“We wanted to make sure we mirrored the consumer experience as closely as we could to consumer tech brands,” he said.

On average, the company claims, individuals can save $545 when they buy procedures through MDsave.

The transparency of choosing and paying for procedures online has the ripple effect of creating what Ketchel termed “one true price” for the consumer.

Transparency is a boon in an age where, as Webster noted, paper billing statements still dominate and there is any number of mailings that create confusion and even trepidation.

Call it a form of “mailbox anxiety,” whereas Ketchel said, some consumers just throw away the statements, wait for the provider (or the debt collector) to call, months or a year later, and then haggle on payment terms.

The payment model also helps providers, too, as upfront payment assures visibility on the top line and cash flow.

The Mechanics And The Bundling

Asked by Webster how bundling of complicated procedures can be done across an online platform, Ketchel explained that there’s relatively less variability in healthcare than might be seen in, for example, the online travel industry. In healthcare, he said, knee replacements are rather standardized in terms of how they’re done, and how they are coded.

“There’s plenty of data,” he said, “and unlike other industries where there may be a lot of variability in a transaction moment to moment, there really is not in health care. People just like to think there is.”

And in setting up the bundling, he told Webster that the eCommerce model addresses the bad debt crisis that has bedeviled healthcare for years and is only getting worse. In the old days, he said, providers’ business models took into account that consumers were on an 80 percent insured/20 percent co-pay model, where getting that co-payment might have been a stretch — Ketchel termed it a “bonus” — but providers could rest assured they’d get the bulk of what was owed because the insurance companies paid them.

Fast forward to today, and most patients — 65 percent of them, according to Ketchel — are on a high deductible plan, which means that 100 percent of the responsibility is consumer oriented. The average collection rate for the out of patient responsibility in the hospital is a dismal about zero to 15 percent.

To combat these losses, he said MDsave had gone to providers to find out the average they were netting on procedures, and how long it took to collect those monies.

“And what we said was, ‘we want you to give us [MDsave] a price that is about 10 percent to 15 percent higher than the net average payment.”

That 10 percent to 15 percent increased payment, he said, equates to a 40 percent to 50 percent discount to the patient of what a contracted insurance adjustable rate would be. In terms of the payment itself, MDsave collects payment upfront from the patient and pays the provider within six days — a term obviously better than the months it might take that provider to collect on bad debt.

Additional costs are eliminated by sidestepping the traditional claims process, where Ketchel said there are about 20 cents to 30 cents of additional costs for every dollar just to collect payment. That’s due to eliminating intermediaries — there can be as many as eight to 12 of them — from coders to interchange fees paid to clearinghouses to “revenue integrity specialists” who ensure claims are paid the right way.

As Ketchel said, the model helps patients’ “under deductible” dollars go farther, which means consumers are stretching out their premium dollars and in the process getting better access to healthcare. He said that 65 percent of the company’s patients are provider directed, acquired at the point of service in the health care systems MDsave serve. He said that the company is integrating MDsave transactions into the providers’ revenue cycles at the point of sale. MDsave options also are presented when running eligibility checks on individuals’ insurance — if they have high deductibles, he said.

“What we’re doing for the providers,” he told Webster, “is we’re getting them out of the payment collection space, which frankly, is not the job role that anyone went to medical school to get into.”



The September 2020 Leveraging The Digital Banking Shift Study, PYMNTS examines consumers’ growing use of online and mobile tools to open and manage accounts as well as the factors that are paramount in building and maintaining trust in the current economic environment. The report is based on a survey of nearly 2,200 account-holding U.S. consumers.