Patients Have Enough on Their Minds — Take Confusing Medical Bills Off the Table

U.S. healthcare has changed dramatically as patients bear greater costs in the form of high-deductible health plans and larger co-pays. However, hospitals, health systems, and independent medical groups have been slow to evolve their approach to self-pay collections from patients who, given their increased financial stake, have greater expectations of customer service.

Growth in consumer financial responsibility has been a defining trend in recent years. It is significant that this growth has far outstripped both inflation and wage growth. Consumer out-of-pocket spending rose at six times the rate of wages over the past 16 years, according to Kaiser Family Foundation. For households with limited resources, the simple fact is that growing financial responsibility for out-of-pocket expenses now competes with basic needs, such as mortgage payments, car payments, and food.

When patients can't afford their medical bills, hospitals and medical groups take the hit. Days in accounts receivable go up, cash flow slows down, bad debt mounts, and hospitals' credit ratings can suffer. The challenge of self-pay collections has become one more burden for hospitals already struggling to reduce operating costs and improve patient outcomes.

Finally, self-pay accounts are expensive. The cost to collect self-pay accounts is three times that of commercial insurance accounts, and the longer a self-pay balance goes unpaid, the lower the probability of ever collecting. Elevating efforts to collect past-due medical debts on the back-end is helpful, but not enough to drive the bottom line. Instead, health systems and medical groups see value in using automated tools on the front-end to improve the revenue cycle through patient communication and point-of-service collections.

In this article, David Law, EVP of Sales and Marketing at Zotec Partners, talks about business intelligence tools organizations can use to support self-pay collections and the patient experience.

Self-pay collections are still largely retroactive

Friction — an aspect of patient financial interactions negatively affecting patient experience — can occur at any point in the payment process, complicating a provider's ability to collect.

By far, the most prevalent source of friction is patient confusion about how much he or she owes for services after insurance — and it's easy to see why. Healthcare has been slow to effectively respond to consumer demands for financial convenience and transparency. In 2017, nearly 65 percent of healthcare CFOs and revenue cycle executives offer online cost estimation tools, yet patients' chief frustration is inconsistency and lack of salience in using online estimators to drive healthcare decisions.

"If a patient doesn't know they owe money or if they've met their deductible ... then hospitals, health systems, and independent medical groups are already at a disadvantage [to collect] even before services are rendered," Mr. Law says. "It's clear many organizations haven't found the best solution to maximize the time they spend [speaking on] the phone with patients or sending out [collection] letters — whatever approach they take to interact with patients."

As a result, it is not uncommon for patients arriving on the day of service to be blindsided by a $500 upfront payment. When this happens, patients may not be financially prepared to pay, resulting in canceled appointments or increased likelihood of a patient account being sent to collections.

Limited capital for investment purposes are one contributing factor to low digital adoption rates in revenue cycle. "As [health systems] acquire physicians and invest in very expensive information technology and clinical systems, hospitals, health systems, and independent medical groups are trying to maximize [the IT] they've already invested in," Mr. Law says.

When health entities try to make the most of their IT investments, they may use software patches and manual workarounds to make older legacy systems meet modern business needs. Although this might initially seem like a cost-effective solution, Mr. Law has found this approach to be more expensive and resource-intensive than purchasing new technology upfront. This rings especially true in revenue cycle management, where inefficient IT not only contributes to expensive overhead, but can also cause organizations to leave revenue on the table.

Rather than purchase technology, a common way healthcare providers have responded to self-pay collections has been to hire additional personnel to bolster revenue cycle infrastructure — mainly registration, coding, billing, and collections. However, because of the high cost of labor, Mr. Law says this method can be just as financially inefficient.

"Healthcare organizations are throwing bodies at revenue cycle problems — they are building out the billing department, they are throwing headcount everywhere to maximize the likelihood of getting paid," Mr. Law says. "Yet the technology exists today that can minimize the risk of not getting paid and maximize reimbursement for services rendered — and with far less overhead."

3 digital solutions driving patient financial experience and providers' bottom lines

Digitizing patient collection strategies using automated tools is crucial to facilitate faster payments and a higher collection rate. Here are three ways technology can overcome self-pay challenges.

1. Price estimation. "If you can reduce friction before the patient walks through your door, then you're one step ahead of the game," Mr. Law says. "The way to do that from a financial perspective is to emotionally prepare [patients] for what they're going to owe before they arrive."

Helping patients understand what they owe, and why, is key to developing an action plan for patient collections. In fact, a 2016 survey by HealthEdge linked increased price transparency to both improved patient satisfaction and patient payment rates. Giving patients accurate price estimates on the front-end — rather than expecting them to use online estimators at home — ensures patients understand their responsibility and gives them time to prepare, thereby improving providers' likelihood of receiving payment.

2. Assessing propensity to pay. What a patient owes and what he or she can afford may differ. Tools that forecast patients' ability to pay can be just as valuable as price estimators for providers in developing more effective collection strategies. These tools help organizations fine-tune the financial counseling aspect of making payments by determining a patient's likelihood of paying out-of-pocket expenses based on credit history and past payment behaviors, among other factors. This knowledge enables patient services employees to connect patients with appropriate payment options or financial assistance in advance of services. Some organizations have used propensity to pay to drive cash flow between 10 and 30 percent.

Mr. Law sees significant opportunity for growth in this area. Only 14 percent of providers use advanced modeling tools for predicting patients' propensity to pay in 2017, according to a survey of 125 CFOs and revenue cycle executives.

3. Flexible communication infrastructure. Patient financial engagement means understanding your patient population's diverse needs and what your organization is doing to meet each patient where they are, Mr. Law says.

For instance, baby boomers may want a printed statement with the option to speak to someone on the phone about their bill before writing a check. Millennials, accustomed to ordering services through digital devices, may be more comfortable interacting with the revenue cycle using a mobile app rather than speaking to a patient services representative.

Using patient demographics, providers can enhance patient financial engagement by investing in flexible communication strategies that put patients in control of their financial interactions. "[Zotec patients] basically control the mode of their financial point of contact," Mr. Law says. "If we text a patient a link to set up their own payment plan and we don't get a reaction, then we will go to other modes of communication, be it verbal or via mail."

By providing patients with a range of communication channels and opportunities, patients are more likely to engage with the channel that works best for them, thereby improving patient engagement and providers' chances of recouping payment.

Picking the right financial partner

Taking the time to make provider-patient financial communication more efficient and cost-effective can yield tangible benefits for healthcare organizations, including improved patient collections at the point of service. Choosing the right financial solutions partner is key to satisfying parties on both sides of the table.

"[Zotec] differentiates itself as a revenue cycle management partner that focuses on the patient first," Mr. Law says. Zotec's solutions help providers support their patients with improved financial experiences, which gives patients peace of mind while strengthening providers' bottom lines.

"Financial relationship management tools ensure the sanctity between provider and patient remains intact," he adds. "The patient has their health, and their doctor gets paid. In the end, the results positively impact the relationship and keep it moving forward."