Patients as Payers: Providers, Health Systems Shift Billing Focus, as Consumerism and High-Deductible Health Plans Force Consumers to Pay More Out of Pocket

In order for providers and health systems to get paid, they deal mostly with insurance companies. Today, however, high-deductible health plans (HDHP) have shifted more costs to individuals. In turn, individuals are responsible for paying providers when care is delivered. According the Kaiser Family Foundation 2017 Employer Health Benefits Survey, the percentage of U.S. workers enrolled in an HDHP went from 5% in 2007 to 28% in 2017.

As consumerism and high-deductible health plans take hold, patients are now the third-biggest payer behind Medicare and Medicaid, according to a recent article in Healthcare Dive.

This shift in cost responsibilities to consumers means some patients are foregoing care. A recent study in the Journal of Health Care Finance, for example, found that out-of-pocket costs can result in patients “not filling prescriptions, skipping medical tests and avoiding care.” More specifically, for consumers using HDHPs, a November 2016 report showed it is the sickest HDHP enrollees who are the most likely to forgo care. Just 9% of patients with an HDHP and no chronic conditions chose to delay or forgo care, but among those with three or more chronic conditions, 25% delayed or went without care.

For those patients who do pursue recommended treatments, shifting cost responsibilities to consumers has led to an increase in consumer medical debt, and it has slowed payments to providers. A recent report from Connance shows 70% of providers saying it takes more than a month to collect payments from patients.

While a purported benefit of HDHPs is to help consumers be more cost-conscious in choosing care (studies differ on whether that actually happens, but that is for another day!), one clear downside to HDHPs is the pressure on providers and health systems to manage their revenue cycle as patients are either slow to pay, or cannot pay, contracted cost-sharing requirements.

A few systems are responding with innovative approaches to help patients grapple with these increased costs, and to improve collection rates for providers.

The cost shift to patients has led hospitals and other providers to “shift bill collection efforts, with a focus more directly on patients. It’s an entirely different process that’s more expensive and labor intensive,” according to Les Masterson, author of the Healthcare Dive article. For example, providers and health systems have “added staff to handle billing, worked inter-departmentally to educate consumers on healthcare finances and hired third parties to work with consumers in this revamped revenue cycle.”

“Financing plans, coupled with financial education, can reduce patient stress and make care more affordable. That combination often improves patient satisfaction, which helps a hospital’s reputation,” the article says, citing in interview with KaLynn Gates, president of HealthFirst Financial, a patient financing company. “We know it’s a competitive advantage,” she says, estimating that about a quarter of providers are using a financing program.

The Healthcare Dive article also cites a recent case study in which North Kansas City Hospital partnered with CarePayment to offer six- to 24-month 0% interest payment programs. They also created an outreach program on health care consumerism and patient financing and used the hospital’s website, along with printed materials, to deliver financial messages to patients. As a result, net collections increased 67%, and bad debt decreased 27% in the first six months. The hospital also found that patient satisfaction and loyalty improved.

Geisinger Health System, headquartered in Danville, Pennsylvania, has also created free installment payment plans up to 36 months, along with longer terms that require case review and executive approval. Geisinger, like North Kansas City Hospital, has discovered patient education and outreach are also important. Financial counseling is offered by certified application counselors and patients can review estimated costs for about 300 elective procedures to help determine their out-of-pocket costs. Geisinger uses the Healthcare Financial Management Association’s Patient Financial Communications Best Practices, which highlight transparency and sensitivity to the patient’s needs.

These types of offerings can also improve patient satisfaction. “Health systems are finding that patient financing is as much a patient satisfaction tool as a financial one,” according to the article. “An unpleasant experience with a billing department can lead to negative online reviews and patients getting care elsewhere.” As a case in point, the author cites a recent analysis of Yelp reviews of the top 20 U.S. hospitals, which found 84% of the complaints were on the non-clinical side.

This article highlights a significant shift in the health care world; the fact that patients are now the third largest payer behind Medicare and Medicaid will have profound implications for providers. It will require them to take thoughtful, proactive steps to ensure they are accommodating the financial constraints and individual needs of patients; they will need to take a very different approach with consumers, compared to the traditional approach they’ve taken with insurers. I also believe the rise of the cost-conscious consumer may force providers to adjust some of their costs; if large numbers of patients avoid or delay certain procedures, then over time, we may see providers responding to those pressures.