Adopted from the marketing industry, customer segmentation allows health systems to further customize the patient financial experience and help them get paid.
Provide a service, send a bill, and hopefully receive money.
That's the way hospitals and health systems have traditionally approached patients' financial responsibilities.
But in an era of high-deductible health plans and increasing demands for price transparency, a one-size-fits-all approach to billing patients no longer makes sense.
"There's just no reason to engage with every patient [using] the same approach," Michael Rawdan, system senior director of revenue cycle and patient experience at St. Luke's Health System, with various locations in Idaho, says. "That's just not smart, and at this point, no other industry does that."
How patients' pay their bills—and if they can or will—varies from person to person. Some patients can always pay their bills on time, while others toss bills in the trash; some plan for every expense, while others favor payment plans. Others like online bill pay, while others will send a check in the mail.
As health systems experience financial gains by giving patients new options to pay such as text payments, digital billing platforms, and in-person kiosks, some organizations are also adding an additional layer of personalization into the mix using customer segmentation.
Segment patients to better understand their needs
Customer segmentation is a marketing technique that targets consumers according to their age, attitudes, income, purchasing history, and payment methods, for example, and has become more appealing to a growing number of health systems.
"We know intuitively, and we know by our processes, that segmentation helps you as you understand that your patients act differently," David Salsberry, chief revenue officer at Texas Health Resources, says. "[S]egmentation is about trying to find ways to give patients options based on their needs along a consistent collection effort continuum."
Segmentation combines data from a variety of sources to paint a more complete financial picture of patients, folding in propensity-to-pay with many other factors.
It includes “financial and clinical patient data from inside the health system; data inputted by the patients themselves (via surveys and preferences); and data from outside the health system, including financial information and population demographics,” says Will Reilly, vice president of client and consumer marketing at the patient billing firm VisitPay.
There are other factors at play in segmentation, too, from determining whether a patient's outstanding balance is a one-time occurrence or is a recurring habit; to comparing patients’ intended financial behavior to their actual behavior; to allowing patients to choose how they want to be contacted, their email or text preferences, and payment due date selection.
Here's a look at how two different health systems are adding segmentation to their existing financial strategies.
1. St. Luke's Health System
St. Luke's Health System's one-size-fits-all approach to collections, lack of patient data, and limited payment mechanisms was not helping it get paid. In 2015, it implemented a digital billing platform that provides patients with a single view of their financial obligations that resulted in a 38% improvement in monthly self-pay collections over the last 16 months, and a 21% reduction in cost-per-dollar collected across the revenue cycle.
Now, they’ve also incorporated automated segmentation capabilities and analytics using propensity-to-pay data provided by VisitPay. Doing so allows St. Luke’s to:
- Know who their patients are: St. Luke's reviews patient factors such as age, primary diagnosis codes, frequency of visits to the hospital, and previous payment history for hospital bills, as well as outside factors like place of employment to understand whether a patient will likely pay and how.
"If we have those data elements, we have a pretty good idea of where that patient is in terms of their overall ability to pay, as well as what types of mechanisms we should present to them … to help them facilitate that payment," Rawdan says. "We can begin to almost customize a solution before we actually speak with them, which is what we try to do."
- Use history as a guide: St. Luke's considers the patient's "last [financial] interaction or last few interactions into account when we're beginning to develop [payment] solutions for that patient," Rawdan says. For instance, the revenue cycle department will offer payment plans to those patients who've used them before. On the opposite end of the spectrum, the department won't ask for the full balance from someone who's received charity care in the past.
- Spend resources wisely: The VisitPay platform prioritizes accounts that are in need of outreach from the billing office, allowing the department to spend its time and resources reaching out to people who need reminders. “We save time on wasted phone calls, texts, and emails to patient who don’t need or don’t want that level of outreach,” Rawdan says. For instance, St. Luke's knows that certain patients with a high propensity to pay need "just a little bit of a nudge," such as a single email or phone call to make sure they're engaged in their payment plan. On the other hand, St. Luke’s also don't spend time and resources on patients that have major financial issues or 100% charity care.
St. Luke's is considering adding segmentation-based education conversations between patients and the patient access/front desk department about estimates and payment options ahead of care, such as talking with patients about coverage differences if they've recently moved from a commercial plan to Medicare, or providing basic healthcare information about coinsurance, copays, deductibles to millennials.
2. Texas Health Resources
Patients' out-of-pocket obligations at Texas Health Resources have grown between 10%–15% per year over the past three years. Patients "have become more discerning in how they purchase healthcare services," Salsberry says.
Although Arlington, Texas–based nonprofit Texas Health Resources, with 29 hospital locations, is in the relatively early stages of patient segmentation, it’s made many changes to better serve its patients' financial needs:
- Use propensity-to-pay scores consistently and across the entire patient population: Instead of only using propensity-to-pay scores on certain patients (such as ones with high-deductible plans), applying scores across the patient population can reveal interesting insights.
"For instance, we found that the patient balances for one of our trauma center hospitals—[which] serves a large uncompensated care population—had a better credit profile than one of our suburban hospitals with a slightly better payer mix," Salsberry says.
He adds that the system just kicked off its first project to propose or “nudge” a monthly payment amount based on whether the patient has a low-to-middle propensity-to-pay score or a middle-to-high propensity to pay. “We will compare these results to a control group who are not proposed any options, but who select the term of their payment plan on their own. And we will compare the behavior of the three groups,” he says.
- Think beyond business-hours customer service: Texas Health Resources is expanding its customer service hours; adding multiple digital communication channels; rewriting many of its patient-facing documents in Spanish; and establishing electronic feedback loops. For instance, patient financial services hours are now 7:00 a.m. to 6:30 p.m.—the same hours that its call center uses for patient scheduling to allow patients to reach the department before or after work.
- Be more flexible with payment plans: Allowing patients to set up payment plans online even before they receive the service was a commonsense change that didn’t require analytics. “We determined that as patient out-of-pocket obligations continue to rise faster than income growth, that patients logically needed more options as they are carrying a higher financial burden for the cost of their care,” Salsberry says.
Developing a personalized, service line–based collections approach that blends a patient's consumer financial behavior with the type of care they're receiving. For instance, the health system is considering spreading dialysis patients' financial obligations across a full year so patients, who may be older or on fixed incomes, can plan for those bills the same way they'd plan for rent or home utility payments.
Alexandra Wilson Pecci is an editor for HealthLeaders.
Tailor billing strategies and payment options to a patient's financial situation to help ensure your organization gets paid.
Apply propensity-to-pay scores across the entire patient population for an accurate assessment.
Know a patient's past financial history with medical bills when approaching them for current payments.