Avoiding Friction in the Age of High-Deductible Health Plans
The consumer-driven healthcare era has transformed the role of the patient. Today, patients are more informed about their treatment options and what they will have to pay out-of-pocket. Driven by a desire to obtain affordable healthcare, patients seek providers that align with their overall needs without compromising care.
As higher premiums and deductibles propel healthcare organizations into more consumer-facing interactions, hospitals and physician groups today understand they can no longer solely focus on the clinical side of care. They must also be upstanding in the revenue cycle management process and ensure patients have the information they need to follow through on payments.
Health care's transformative business model
The evolution of the healthcare business model corresponds to the development of the payment process. What once was a business-to-business transaction has been replaced by something more complex and difficult to navigate — a business-to-business-to-consumer model. In a business-to-business model, a practice would file a claim to the insurance company who would then adjudicate the claim and pay the provider for services rendered.
"That was the easy money," says T. Scott Law, founder and CEO of Zotec Partners, the leading provider of revenue cycle management services for radiologists. "The transaction was electronic; you were dealing with a business. You had rules to comply with — but it was pretty straightforward with reasonable technology."
In the business-to-business-to-consumer payment model, providers have to send the insurance company a bill and get it adjudicated. The insurance company may well come back to the provider saying a patient owes the deductible, so the provider then bills the patient for that deductible. After billing the patient for the deductible, a provider has to get that money adjudicated by the insurance company and only then can the provider bill the patient and collect for the services rendered.
This model has taken shape due to rising deductibles and copayments. In 2016, covered employees had an average deductible of $1,478 for single coverage, up from $1,318 in 2015, according to data from the Kaiser Family Foundation. Additionally, many covered workers have copayments. Sixty-seven percent of covered workers have a copayment for a primary care visit. For primary care, the average in-network copayment totaled $24 in 2016. An InstaMed study found the number of consumer payments to healthcare providers increased 193 percent between 2011 and 2014.
All facets of the healthcare industry are waiting to see if Republicans' healthcare bill, the American Health Care Act, will pass, as reform legislation may increase premiums for some and lower rates for others depending on their age and health. Recent Congressional Budget Office data found the average premium for a 21-year-old will total $5,100 under the ACA and $3,900 under the AHCA in 2026. A 64-year-old will pay an average premium of $15,300 under the ACA and $19,500 under the AHCA in 2026. Any escalated premiums will likely create more price-sensitive consumers who seek a relatively seamless process in all aspect of care, including the payment process. Therefore, hospitals and providers will need to employ the right tools to make this process as painless as possible.
Limiting friction in the payment process
When providers fail to effectively manage claims and obtain the necessary information from patients to avoid payer denials, they risk creating diversions in the payment process that can harm the patient-provider relationship and create friction. Mr. Law defines friction as any irregularity to an otherwise smooth payment process.
For instance, a provider could obtain an inappropriate denial from an insurance company, which raises a slew of questions including whether the administrative team received all the correct information from the patient. This could be a product of a staff member failing to verify a patient's information or a patient hastily writing down their information and making an error in the process. Nonetheless, friction occurs and this is a phenomenon providers want to avoid in their RCM process.
Mr. Law cites data that found almost 30 percent of all claims are either inappropriately denied or inappropriately paid. Of that 30 percent, half of claims are not followed up on. In those cases, a provider is essentially walking away with nothing.
"If a patient calls and complains, that's friction in the process," Mr. Law explains. "We measure the amount of friction, which depends on how clean the data is, how the carrier processes the claims, the ability of a patient to pay... Friction is any exception to the payment process."
Zotec's technology has the ability to predict the likelihood of friction on a per-patient basis. Technology can assess several factors to determine this value, including a patient's propensity to pay, as well as the insurance company's likelihood of denying or filing inappropriate denials and the provider's consistency in relaying accurate insurance or payment information to the patient. However, all of this information must be 100 percent correct because inaccurate information can completely alter a specific patient's estimated friction.
"We have statistic modeling tools we use under the umbrella of big data. The most important thing we've found is you have to be able to track these events with a great deal of certainty so you come up with the proper conclusion," Mr. Law says.
How technology can reduce friction
If providers successfully employ technology to determine an estimated amount of friction, they can then fine-tune the best next steps to boost a patient's likelihood of paying. Zotec caters its technological solutions to each patient to ensure they use the platform that best suits their needs and preferences.
"We personalize patients’ profiles based on what they are most likely to appreciate in terms of collection methods," Mr. Law says. "If a patient is a millennial, they may want a text telling them to pay online. If a patient is 70, they may want to receive a text because their grandkids are texting, but they may still want to hand-write a check and mail that in."
Through its individualized platforms, the payment process is easier for patients and will likely translate to a higher propensity for patients to follow through on bills. As the industry continues to trend toward the consumer, providers cannot forgo the importance of minimizing friction, particularly because value-based outcomes and patient satisfaction scores dictate payments.
Employing a third-party revenue cycle management partner can empower healthcare organizations to reduce the friction with patients and help providers bolster their bottom line by increasing collections.
A 2017 Navicure survey found 51 percent of providers say it takes an average patient more than three months to pay their full balance. However, only 18 percent of patients claim it took them longer than three months to pay their last balance, indicating a lack of consensus between the two parties on this topic.
Whether a lapse in communication or varying perspectives on payment dates, many providers and patients are not on the same page regarding payments and their timeliness. Using a third party vendor is becoming more commonplace in the industry, especially as healthcare executives are increasingly adopting more responsibilities, such as improving infection control protocols or meeting CMS' reporting requirements. Letting the patient billing experience fall to the wayside may cost a provider significant amounts of money, which is where a revenue cycle management partner comes into play.
Black Book projected the market for outsourced revenue cycle management services is likely to increase at a compound annual growth rate of 26.5 percent in the next two years, reaching $9.7 billion by 2018. On a micro-level, hospital executives understand the benefits a revenue cycle management partner can offer. The survey found almost 50 percent of hospital CFOs acknowledged outsourcing has become a more viable alternative to in-house management in 2017.
Zotec works with providers around the United States to improve the payment process so practices and hospitals can focus on other areas, such as clinical delivery. Mr. Law says Zotec brings patients into the mix much earlier in the process, which helps eliminate some of the missteps that can occur along the way with payments.
The company will file a claim to the insurance company on behalf of a practice. Once completed, Zotec will send the patient a text message informing them that Zotec filed the claim and the patient should be aware they will likely owe a certain amount of money. In the text, Zotec tells patients they will be notified once the insurance company adjudicates that claim.
"The big problem with consumers is the surprise," Mr. Law says. "They get a bill for $5,000 and they didn't even know. They are getting billed for an entire deductible maybe in the first encounter they have [with a provider]. That's a big surprise for $5,000 that they don't have and for [care] they don't think they need. Who is going to make that choice?"
Being transparent with consumers is increasingly important, and having an open dialogue about the estimated cost of care will often translate to reduced friction. Healthcare payments do not work the same way as other industries. If an individual fails to make a credit card payment repeatedly, this will affect their Federal Insurance Contributions Act (FICA) score. If a patient does not make a payment for a healthcare service they received, this will not impact their FICA score, making it exceedingly difficult for providers to exercise disincentives when collecting payments.
"I don't have a hammer to affect people's credit ratings," Mr. Law says. "[Instead], we introduce things earlier in the process by educating patients on their deductible and why they owe this money. We do it through technology, versus the old days, where you'd send two or three statements and hope patients paid them."
Zotec offers a portal that allows patients to stay updated on their insurance information and set up payment plans through a text or integrated voice response system. Texting is a preferred method of communication for a large portion of patients, and using a platform that bodes well with patients will fare well for providers in receiving payments.
"Text messaging is by far the [most popular] thing when you get into the consumer space," Mr. Law says. "We have to meet consumers in spaces they understand in order for them to appreciate the exchange."
Technology can also minimize the likelihood of a denial due to inaccurate or incomplete information. Equipped with editing engines, Zotec has solutions that compare a claim to a patient's policy information to ensure there aren't any discrepancies that would prohibit a provider from receiving payment in full. Additionally, Zotec does eligibility checks and verifies statements prior to sending those to patients. "We wouldn't send a bill for a high-dollar amount without that [the verification]. Those are the ones that cause the most friction," Mr. Law notes.
With technology, providers can avoid friction that impedes a successful payment process. Zotec was aware of the consumerism shift within healthcare nearly five to seven years ago and has been creating solutions to address this trend. Providers that fail to prioritize the consumer will fall behind their competitors, both in terms of reputation and finances, as patient satisfaction is a core component of the value-based healthcare era. With the rise of high-deductible health plans, patient-focused care is here to stay and providers should prepare to thrive in this landscape.