Ever since the Affordable Care Act was passed in 2010, more providers are experiencing a shift in healthcare revenue sources, especially as patient financial responsibility increases. While hospitals and physician practices traditionally communicated with a small group of payers to collect the majority of payments, providers are now seeing patients becoming more accountable for their healthcare costs.
Nearly three-quarters of healthcare providers reported an increase in patient financial responsibility in 2015, according to an InstaMed report from June. Participants cited the rise in high-deductible insurance plans, such as many of those offered under ACA health insurance exchanges, as one of the primary drivers for this shift in patient financial responsibility.
Patients are choosing plans with higher deductibles and more out-of-pocket expenses for services because they often offer lower monthly premiums, making them more affordable for relatively healthy consumers who don’t routinely access care.
During the 2016 open enrollment period, CMS found that 90 percent of the 12.7 million consumers in the health exchange program selected a high-deductible plan. Under these plans, patients have paid 225 percent more in out-of-pocket expenses since 2006.
One of the biggest challenges for healthcare organizations in this new landscape is collecting the maximum amount of patient responsibility possible. A McKinsey & Company study found that healthcare providers only anticipated collecting 50 to 70 percent of a patient’s balance after a visit, and 70 percent stated that it takes at least a month to receive payments from patients.
To improve their rate of collections, providers may wish to focus on restructuring their revenue cycle management strategies and embrace the idea of patients as consumers.
“With the dramatic shift in cost sharing and ultimately healthcare payment responsibility, a new, critical stakeholder has emerged: the consumer,” stated the authors of the Instamed report. “With the focus shifted to the consumer, both payers and providers will be challenged to overhaul their payment processes or face lost revenue and poor customer retention.”
To improve patient payment collections, healthcare organizations may want to consider simplifying medical bills, providing electronic payment methods, and educating patients and staff about the changing environment of financial responsibility.
Simplify medical bills to help patients understand financial responsibility
Patients tend to find medical bills confusing, especially when they come weeks after the encounter or contain overwhelming medical jargon. Bills are often unclear about what is owed, how to pay it, and when the balances are due. Consumers also report feeling confused when they receive a separate explanation of benefits letter from their insurance company, especially since it looks very similar to a bill.
“When people fall ill and end up at the hospital with unexpected bills, far too often they have entered into a financial maze,” Richard Cordray, Director of the Consumer Financial Protection Bureau, said in a speech in 2014.
“We are creating progress toward a medical bill that people can actually understand and a billing process that makes sense."
To help patients navigate the financial maze, providers should clarify a patient’s financial responsibility within the medical bill, including how much is owed, how to pay, and what services are included. Providers may also wish to limit the number of letters a patient receives regarding a single transaction, and deliver paperwork in a timely manner.
The Department of Health and Human Services (HHS) plans to assist healthcare providers with producing a simplified medical bill. In May, the department announced the “A Bill You Can Understand” challenge, which aims to generate a standardized medical bill that is easier for patients to understand and pay.
“This challenge is part of HHS’ larger effort to put patients at the center of their own healthcare,” said HHS Secretary Sylvia Burwell. “We are creating progress toward a medical bill that people can actually understand and a billing process that makes sense – progress that includes creating a forum that brings everyone to the table: patients, doctors, hospitals, insurance companies and innovators.”
Participants are encouraged to redesign the medical billing process to improve the patient’s financial experience. HHS also intends to help standardize medical bill documents to help patients better understand bills even if they come from multiple providers.
Implement electronic payment options to streamline collections
Providers may also be able to collect more patient revenue by implementing electronic payment methods. By allowing patients to login to online portals and pay their bills at their convenience, providers can empower individuals to take responsibility for their healthcare costs.
However, many healthcare organizations are not equipped to take electronic or credit card payments. Only 35 percent of providers keep a patient’s credit card filed in their payment system, reported a May survey from Navicure. Only half of the survey participants stated that their organization automates payment plans, while 57 percent reported that they did not send electronic statements to patients.
Researchers advised healthcare organizations to securely store credit card information in an electronic format to reduce the time it takes to receive payments.
“These trends are serving as a catalyst for healthcare organizations to implement patient care estimation and payment technology solutions because they can no longer afford to ignore this major threat to their revenue and reputation,” said Jim Denny, founder and CEO of Navicure.
Patients tend to expect electronic payment options from service providers, the Instamed survey found. Seventy percent of healthcare consumers preferred an electronic payment method to paper billing, while 64 percent also expressed an interest in paying via a mobile payment system, such as Apple, Samsung, or Android Pay.
"[Providers] can no longer afford to ignore this major threat to their revenue and reputation."
“One thing that we’ve heard repeatedly – and these are anecdotes, but they’re anecdotes that come up a lot in conversations with clients with high portal adoption – is patients even without a ton of emphasis from practice staff will often choose to pay online,” said David Clain, Manager at athenaResearch.
“It’s easier in a lot of cases, especially for tech-savvy patients, to get a bill electronically, to go online, see what they owe, see why they owe that amount, what visit it’s from, and pay by credit card right there rather than having to submit a check in the mail.”
Educate patients about financial responsibility and provide price transparency
Unfortunately for providers, many individuals may not be aware of their financial responsibilities before visiting a physician. Many consumers enroll in high-deductible insurance plans because of lower premiums, but they do not always realize the extent of their out-of-pocket expenses.
Despite the need to educate patients about financial responsibility, many healthcare organizations do not have strategies for discussing payments with patients. Only 57 percent of providers participating in the Navicure survey reported that they always educate patients about financial responsibility and their organization’s payment policy.
Providers should train front-end staff to educate patients at the time of the visit about what their insurance covers and what they will owe. Staff should attempt to collect patient financial responsibilities or create a payment plan while a patient is still in the office.
“When presenting the estimated allowable for a procedure, or collecting for a visit at the time of service, providers should use the interaction as an opportunity to educate patients so that they may better understand both their coverage and financial responsibility,” Sean Lundy, CMPE, Hand & Wrist Center of Houston, wrote in April.
“It is very helpful to provide handouts (bi-lingual) that clearly define key terms such as premium, co-pay, deductible, co-insurance, and allowable.”
Providers should also discuss estimates of cost with patients at every encounter. By promoting price transparency, providers reduce the risk of patients being shocked by a medical bill and challenging the amount owed.
Lundy advised providers to “use accurate estimates when collecting the patient responsibility, as inaccuracies can generate added follow-up expenses, such as refunds and bills, which may turn profitable procedures into losses.”
To generate accurate estimates, providers can invest in software tools that use historical data and estimate allowable expenses for specific services and payers, he added.
Healthcare organizations may also want to consider implementing payment plans for patients with higher medical bills. Front-end staff should be able to offer consumers more flexible payment options that spread out large medical bills over time.
With the shift in patient financial responsibility, healthcare revenue cycles are more dependent on the patient than ever before. Providers may need to retrain their staff to effectively communicate with patients and collect payments. At the same time, healthcare employees should also help to empower patients to take charge of their healthcare costs, which will help providers see more patient revenue.