Hospitals’ new reality: Patients as payers

Healthcare organizations have been slow to react to the fact that an increasing percentage of their revenue is coming from patients. It’s been occurring over the last ten years.

In 2006, just 5 percent of employer health plans had members enrolled in high-deductible health plans (HDHP). Last year, nearly one out of three covered employees was in an HDHP, according to Kaiser Permanente. Along with that enrollment growth is the rise of deductibles, which, notes Kaiser Permanente, is outpacing earnings and savings rates by a factor of six.

Four years ago, the management consultancy McKinsey & Company took a look at revenue cycle operations in hospitals and made the following observations:

● The amount collected from individual patients will be higher than from payers (such as Medicare/Medicaid or health insurance providers).

● Patients pay more than twice as slowly as other payers and require more intervention.

● Increased balance after insurance (BAI) volume will require more efficient and cost-effective collection methods.

Because more of the money being expended in healthcare comes out of the patient’s pocket, hospitals must come to understand that the individual in a recovery room is not simply a number on the admissions census. Consumer-centric healthcare is no longer a term tossed around in discussions at think tanks. It’s real and a driving force in this industry.

Many institutions do not seem to grasp that today’s healthcare consumers’ view of the hospitals in which they received treatment ends when they’re discharged. Consider three key findings from a survey conducted by the Healthcare Financial Management Association:

● Nearly half of respondents were dissatisfied with the way their hospital billed for services

● Some 25 percent said the billing experience damaged their view of the hospital

● A reported 31 percent did not find bills simple to pay

Looking at the other side of the coin, a study by Connance found that among respondents giving billing processes a top score:

● Some 82 percent would recommend the hospital

● A reported 95 percent would return to the same institution for future service

● Some 74 percent paid their bills in full

The researchers of this study assert that the business office of a hospital plays a major role in affecting a positive patient experience, one that occurs before, during and after treatment. Clearly, even the best of health outcomes won’t ensure a prompt payment by a healthcare consumer if the bill is confusing, delivered in a manner that’s not to the individual’s liking and in paper form when they want their expenses presented digitally.

One way hospitals are tackling the challenge of getting payments from patients is implementing a point-of-service collection system. The premise is to ask for as much of the anticipated bill upfront.

But here, too, hospitals must be cognizant of the fact those being asked to pay at the initial encounter are customers who need to be handled in a courteous manner by people who thoroughly understand the sensitivity of the transaction and can accommodate patient’s financial circumstances.

One benefit of seeking payment at, or before, the time of service is that healthcare consumers know what their anticipated financial obligations will be, thus reducing the potential for any awkwardness, frustration or a slow-/no-pay situation.

However, few healthcare consumers are positioned to readily pay a hefty hospital bill. Research has found most Americans have less than $1,000 in savings for health-related emergencies, and that has an impact on patients’ ability to meet the steady rise of patient deductibles. According to an analysis by HealthPocket, the average family deductible in 2017 for the ACA’s popular Silver Plan is $7,474, up about 15 percent from $6,480 in 2016.

Whether it’s part of the point-of-service process or integrated with billing issued upon discharge, a payment plan has to be made available to the patient. More than being fair, it’s practical for a hospital to have such plans if it wants to keep patient debt and write-offs at a minimum.

What’s more, consumers understand the process of paying large balances off over time. They do it with a wide range of businesses for a broad assortment of products and services. A payment plan that is integrated into a hospital’s financial management process allows the institution to maintain control of the process and the positive nature of the customer relationship.

From a technological perspective, all that has been covered here is not hard or expensive to accomplish. In all likelihood, a hospital that embraces the patient-as-payer reality and acts accordingly is likely to see a quick return on investment as well as higher patient satisfaction and lower patient debt.