I Have to Pay What? The Patient Payment Transparency Challenge
The rise of the healthcare consumer has been something we’ve talked about for more than a decade, fueled by the trend to shift more out-of-pocket healthcare costs to individuals. Whether it’s the rise in popularity of consumer driven health plans, increased premiums resulting from individual plans purchased on an exchange, or higher deductibles and co-pays resulting from employer health plans with reduced cost-sharing, consumers are feeling the pain now more than ever. On a parallel path, providers are grappling with the new realities of a healthcare system where reimbursement is paid by multiple sources: health plans, government-sponsored health plans, and an increasing percentage direct from individuals/patients. This convergence of macro trends has created the perfect opportunity for industry disruption, as innovators and investors look to solve an important problem: the patient payment transparency challenge.
The Big Gap: Patient Needs are Changing Faster than Provider Capabilities As consumers take on additional payment responsibility, they expect more payment transparency from providers prior to receiving care. Patient enrollment in high deductible health plans (HDHPs) continues to be one of the largest trends driving change in the healthcare industry – now reaching into the payment segment and influencing the effectiveness of traditional reimbursement models. In 2016, roughly 75M consumers were enrolled in HDHPs. Today, out-of-pocket expense for the patient amounts to 30% of the total healthcare bill. Unsurprisingly, patients are demanding clear and concise information about their healthcare bills.
At the same time, providers haven’t kept up with patients’ demand for transparency. In fact, traditional back office tools for managing collections have only exacerbated the problem. In 2015 alone, providers wrote off $35.7B as bad debt or charity care – adding to the $538B in uncompensated care accumulated since 2000. Providers have historically marked up procedures using Medicare as a benchmark to help compensate for bad debt and stabilize collection rates. This practice not only offsets much lower margins on Medicare and Medicaid patients, but also can be used to estimate and collect on patient pay balances at the point of service (as opposed to less effective, downstream billing processes that can take months and often fail to capture the full billed amount). A 2016 JAMA study of 430,000 providers showed that the median charge for procedures across specialties was 2.5 times the Medicare benchmark. The highest upcharge reached 5.8 times Medicare rates.
Many providers have expressed a desire to improve the stability and speed of their collection processes. The reality is that today, few have the necessary tools and resources to offer payment estimation and transparency capabilities at the point of service (i.e. patient registration). In a recent survey, 23% of providers said that they lack the resources to educate patients or answer questions regarding patient payment responsibility, and only 33% offered payment estimation services prior to care.
Why Providers Care about Providing a Positive Patient Billing Experience Providers are recognizing and responding to the correlation between patient experience and collections. A positive billing experience leads to a higher likelihood that a patient will pay his or her bill or refer a friend to that provider. In a recent study, results indicated:
Of patients that were “fully satisfied with billing,” 74% paid their bills in full. Meanwhile, for patients that were “unsatisfied with billing,” only 33% paid their bills in full.
Of patients “fully satisfied with billing,” 95% would return to that provider for future service and 82% would recommend the provider to a friend. Alternatively, for patients “unsatisfied with billing,” only 58% would return for future service and a mere 15% would recommend the provider to a friend. Ensuring a positive billing experience for patients is critical as providers continue to focus their efforts on capturing revenue quickly, reducing bad debt, and avoiding patient leakage.
Providers are also increasingly focused on patient satisfaction as healthcare shifts from fee-for-service to value-based payment arrangements. Value-based reimbursement models used by CMS incorporate patient satisfaction through data collected via the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) survey. Among its comprehensive question list, HCAHPS asks patients to rate their satisfaction through questions such as, “would you recommend this hospital to your friends and family.” As we have touched on, a poor billing experience can wipe out a positive clinical experience. Additionally, a recent survey by Transunion Healthcare indicated that patients who experienced problems with billing were less likely to use non-critical health services, such as check-ups and preventative procedures, than patients that did not report a negative billing experience. Non-critical procedures are vital to driving the improved quality of care and strong patient engagement that are required for success under value-based payment regimes.
Closing the Gap: What Types of Solutions are Available in the Market Today? With increased awareness in the market of the gap between patient payment expectations and the billing experience offered by providers, independent vendors have begun creating different solutions for consumers to determine their out-of-pocket costs prior to receiving care. TripleTree has seen an emergence of solutions from both providers and payers.
Provider-Focused Vendors – Many independent vendors are creating unique models to address the payment transparency challenge. MDSave, for example, has created a model that addresses the consumer's desire to understand out-of-pocket costs and the provider’s need to receive optimal and consistent reimbursement. MDSave negotiates bundled rates for services with providers participating throughout the patient’s care experience. Consumers can shop for and purchase services at discounted rates on MDSave’s online portal. MDSave pays providers directly, allowing providers to accelerate the collection process while significantly improving the billing experience for the consumer. MDSave also eases the consumer’s burden of submitting claims by offering forms that the consumer can print and send to their insurance provider after-the-fact. Healthcare Bluebook is another independent solution that helps consumers determine the fair out-of-pocket price for procedures in a specific geographic area. It provides cost savings tips and considerations to consumers, depending on the procedure and service evaluated.
Further, advanced eligibility and patient pay responsibility capabilities that deliver the most complete benefit detail at the point of service can help rapidly accelerate collections for providers. Through automation and enriched data, the delivery of enhanced price estimation and transparency tools to calculate the patient’s liability in near real-time leads to a much more streamlined payment process and an overall happier patient.
Other innovative patient pay capabilities that are gaining momentum include creative patient financing solutions (with both non-recourse and recourse options), personalized patient engagement with a focus on payments and patient experience, and payment portals leveraging a flexible, industrial-strength processing infrastructure required to accept consumer payments across a range of mediums (e.g., credit card, debit, ACH, Check 21, mobile-enabled payments, etc.).
Payer Solutions – Payers have also started creating cost of care estimation and price transparency tools for their members. These tools typically allow members to enter their insurance plan information and healthcare service needed, and provide individualized pre-care cost estimates. UnitedHealthcare’s “MyHealthcare Cost Estimator” and Geisinger’s “MyEstimate” tools both provide cost estimation based on geographic location and insurance information. Other payers, like Aetna, are pre-negotiating rates with providers to ensure members receive a more reliable estimate of the out-of-pocket costs. Some payers, like Priority Health, are directing members to low-cost providers. Priority Health’s payment transparency tool measures the fair market cost of procedures and informs consumers of nearby providers that offer competitively priced services. Castlight Health, another transparency provider, is filling a similar need within the employer marketplace.
State Price Databases – Some organizations approach the price transparency challenge by creating consumer-facing price databases, which provide average costs for specified services. Though these databases do not usually factor in personal information such as insurance coverage, patients can log on, search for procedures, and estimate the average cost of care for their procedure and geographical area. Many state organizations are beginning to offer these databases to residents. For example, Maine Health Data Organization’s “CompareMaine” allows users to determine the average cost for healthcare procedures at different facilities throughout the state. Wisconsin Hospital Association created a similar solution called “Wisconsin PricePoint” which allows users to search for services and compare prices among different hospitals in the state.
Opportunities exist to further improve the patient billing experience, particularly on the front end of the payment cycle. Unsurprisingly, providers report that having face-to-face discussions with patients and gathering insurance information early in the care delivery process tends to bode well for revenue collection. Furthermore, providers that discuss benefits with patients and are upfront about out-of-pocket costs tend to be more successful in collecting payments for scheduled care.