PWC: Antiquated Healthcare Billing Practices Alienating Consumers

Dissatisfied with outdated payment systems, consumers are beginning to circumvent the claims-based healthcare payment system, especially when seeking primary care and chronic disease management, research finds.

Growing numbers of consumers, paying more for their care in high-deductible health plans, are peeved at providers who still use billing and payment systems from the era of Marcus Welby, MD.

An industry survey and report from PwC's Health Research Institute suggests that providers who don't make their billing and payment systems more consumer-friendly and transparent will lose patients to providers who do.

"The very definition of your customer in healthcare is changing right before our eyes," says Ceci Connolly, managing director at PwC HRI. "Healthcare used to be a wholesale industry where it was the business of a provider billing another business entity, an insurer. Now, suddenly much is going directly to the individual patient for services. You need to think about communicating in a very different way that is less about codes and bulk discounts."

The HRI report shows that the tensions over cost between providers and patients is a byproduct of the move toward high-deductible plans. Patients, paying most if not all of the bill, tend to be more price-conscious and astute consumers of healthcare services.

"We used to think that everything in healthcare cost $10," Connolly says. "Back in the old days of very comprehensive first-dollar coverage for so many of us, it was a simple $10 copay no matter who you went to see or for what. We as consumers didn't think too much about what a price was or who was paying what amount or how it was processed."

Updating Billing Practices 'Costly, But Necessary'
"Now that we are on the hook for so much more of it, especially up front with high-deductible health plans, consumers are paying careful attention now and observing what an antiquated system this is," Connolly says. "At the same time the healthcare industry, which is having to perform much more efficiently, wants and needs to collect every single dollar it's owed."

The HRI report surveyed 1,000 adults and analyzed commercial claims from 34 million people. It found that:

• Patients and wealthy consumers are most dissatisfied with the healthcare billing and payment system. One in two Americans in poor or fair health—the greatest users of the system—rated hospitals poorly on price transparency and affordability.
• Millennials are more likely to judge healthcare organizations based on their billing practices. They also are more likely to challenge medical bills, search for better deals and make value-based decisions.
• Consumers and new entrants are beginning to circumvent the claims-based healthcare payment system, especially when seeking primary care and chronic disease management.
• Four in five adults with commercial insurance paid less than $1,000 in out-of-pocket expenses in a year. As deductibles rise, more patients will find paying their share of their medical bills difficult, and medical bills continue to be a major cause of consumer bankruptcy.

Nikki Parham, a principal at PwC HRI, says modernizing healthcare billing processes is a fairly straight-forward idea that in practice becomes highly complicated and costly, but necessary.

Shifting Consumer Expectations
"We are seeing a huge shift in consumer expectations, more than ever, which are really driving the need for providers to determine their strategies and technologies around how to respond," Parham says. "Different groups of people, like millennials who have higher expectations, are putting pressure on the healthcare industry to be more like other industries with a point-and-click environment, and to be much more transparent, customer friendly, easy, and convenient, which is something the industry has not been traditionally."

Parham says most providers want to make the transition, but are stymied by the complexity.

"These integrated healthcare systems are dealing with many disparate systems and interfaces and pieces of technology that don't all communicate and tie together in a way that makes it easy to be transparent, to identify what is your cost, and the total price for receiving a segment of care," she says.

"It is not gross charges that you need to quote. It's 'what is the amount that I as a consumer will have to pay which is different from the amount you will have to pay, which is different from the amount that my mom has to pay.' It's an overly complicated process," Parham says.

"There are tools and technologies that are starting to at least supplement these processes but they are expensive and it requires some level of integration to tie these pieces together."

HRI says consumers expect six things from their healthcare bill: Convenience; transparency; affordability; reliability; seamlessness; and quality. To get there, HRI recommends that providers:

• Accelerate the move to digital. Commercial health insurers conduct just 15% of payments and 27% of remittance advice electronically. The average for payment is 43% among other business sectors.
• Partner with a "sidestepper." Providers and insurers should partner with nontraditional companies offering services that sidestep high-deductible claims.
• Embrace simplicity. Many consumers do not understand their insurance benefits and are confused by their medical bills. Online payment sites, mobile apps and aggregated billing can simplify the process.
• Multiply payment options. Offering choices for payment, making payment easy and helping consumers plan for costs can reduce bad debt and days in accountable.

Connolly likens the upheaval now rattling the healthcare sector to that of the financial sector when it underwent its own fundamental transition toward consumer services.

"We believe that has to happen in healthcare as well," she says. "We try to lay out some short-term improvements, but the healthcare industry is ripe for an entire overhaul when it comes to billing and payment."