The Rise of the Third Payer: Disrupting Patient Payment Culture
The next big challenge to the financial health of hospitals isn’t a sweeping new government program or payer initiative; it’s an amalgamation of revenue from thousands of different sources: patients.
Patients are paying a larger portion of their hospital bills, and hospitals are collecting a larger percentage of their revenue directly from patients. Traditionally, hospitals might collect a co-pay at the point-of-service, but billing for patient receivables (also called balance after insurance) would occur after the patient had left the hospital and the claim was processed by their insurance. However, due to larger trends many hospitals are looking at ways they can make the billing experience more consumer-friendly while also improving the capability to complete pre-service and point-of-service financial transactions with patients.
Costs Shifting to Consumers
Individual patients are bearing a greater share of the rising costs of healthcare. There are a number of factors contributing to the rising cost burden for consumers, but a significant one has been the growth of high deductible health plans (HDHPs). In 2006, less than 1 in 20 covered workers were enrolled in HDHPs, while in 2016 nearly 1 in every 3 covered workers were enrolled in HDHPs.
Not only is the number of people enrolled in HDHP plans growing, but deductible amounts are also rapidly outpacing earnings and savings. Since 2011, average deductible amounts have increased by 49%.2 In its 2016 Employer Health Benefits Survey, the Kaiser Family Foundation reports “for the first time, the survey also finds half (51%) of all covered workers face deductibles of at least $1,000 annually for single coverage.” The same study also found that worker’s health insurance premiums are also rising, and while the rising cost of premiums does not directly affect hospitals, the cumulative impact of increased expenses does affect patients’ ability to pay.
Consumer savings is an additional factor in patients’ ability to meet growing deductibles. While a widely reported 2016 survey indicates that 69% of US consumers have less than $1,000 in savings available, Health Savings Accounts (HSAs) hold an estimated $24.2 billion in assets nationally, and the average HSA held $1800 and only 4% of these accounts ended the year with a zero balance.
In 2013, consulting firm McKinsey & Company noted:
An increased volume of BAI (balance after insurance) transactions will require more efficient and cost-effective methods of collection
The volume of transactions passing through hospital revenue cycles will likely increase by about 20 percent
Costs are likely to be significantly higher when collecting from individual patients on a per-transaction basis than when collecting from payers
On average, healthcare consumers pay more than twice as slowly as commercial payers, require more manual intervention
Each rebill costs an average of $25.14
- As the volume of individual patient BAI transactions increases, it becomes increasingly important that providers be able to collect at a lower per-unit cost and decide when to write off balances below a certain threshold
The Patient as a Healthcare Consumer
A recent survey of 1,000 healthcare consumers found that nearly half of patients in fair to poor health were dissatisfied with the way their hospital billed for services:
25% said billing damaged their view of the hospital
28% said they weren’t confident bills were accurate
31% did not find bills simple to pay
42% found medical bills unaffordable
- 47% did not understand cost beforehand
If an unpaid hospital bill goes into collections and the patient is being contacted by a debt collector, patients are much less likely to return to that hospital if they have a choice. “Consumers tend to take a more favorable view of creditors seeking to collect a debt than of debt collectors,” according to a new study, issued January 2017 by the Consumer Financial Protection Bureau. “Consumer Experiences with Debt Collection: Findings from the CFPB’s Survey of Consumer Views on Debt” also indicates that medical debt is the most common type of past-due bill or payment for which consumers reported being contacted, including more than half of consumers participating in the survey. Another significant finding: 28 percent contacted by debt collectors felt threatened.
The studies and findings aren’t all negative, though – research also has shown that patients who are fully satisfied with billing are much more likely to pay their bills in full, and most consumers are willing and able to pay for their medical expenses. Overwhelmingly, nine in ten prefer to pay their bills online rather than receiving paper bills.