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Almost all hospitals responding to a recent survey said that reduced payer payments is the biggest threat they would face this year.

On average, hospitals operate on a slim profit margin of 7.2 percent; regulatory changes, the transformation of the traditional revenue cycle, and decreased payer responsibility all squeeze the bottom line and place increased emphasis on capturing patient payments (Selvam, A., “One for the Record Books,” Modern Healthcare, January 2012). Patients have a lower propensity to pay than payers, which puts hospital cash flow in jeopardy. Offering patients a diverse set of payment options will allow them to choose the method that works best for them and reduce barriers to payment.

Revenue Capture Challenges

Collecting payments from payers is not as easy as it once was, and 91 percent of respondents from the 2014 Healthleaders Media Industry Survey said reduced payments was the largest threat they would face this year. ICD-10 will introduce 124,000 new codes driving increased coding complexity and potential denials (Ryan, J., Winkelmann, J., “ICD-10 is Coming—Are You Ready?” American Academy of Orthopaedic Surgeons). For every 1 percent of claims rejected, it can cost an organization $50,000 to $250,000 in annual net revenue (“Denial Management,” PhySource Solutions).

To break that down by claim, it costs an average of $6.50 to file an initial claim, versus $25 to resubmit a rejected claim, so correcting and resubmitting a denied claim costs as much as $37 (Marino, D., “Managing Your Business Through Daily Metrics,” Health Directions, presented at the HFMA South Texas Chapter 2010 Annual Institute).

A shift from traditional PPO plans to high-deductible health plans (HDHP) means providers can no longer rely on payers to take responsibility for the majority of medical bills. Forty-four percent of employers said they would only offer HDHP in 2014, and 87 percent of the people who enrolled in health plans through the health insurance exchanges during the 2014 enrollment period selected either catastrophic, bronze, or silver plans, which have higher deductibles than gold or platinum plans (“Medical Cost Trend: Behind the Numbers 2014, pwc, June 2013; “Marketplace Enrollees by Metal Level,” The Henry J. Kaiser Family Foundation, May 2014).

An increase in patient responsibility brings an increase in nonpayment risk to hospitals, as 45 percent of patients wait more than a month to pay medical bills (Lewis Dolan, P., “Patients Say They Would Pay More Quickly with Online Access,” American Medical News, March 2011). In addition, providers continue to lack viable solutions to manage financial performance holistically (e.g., activity based costing, service line profitability, ability to price risk etc.).

These forces collide to make patient payments more important than ever. Offering a variety of ways to pay will allow patients to pay in the way they feel more comfortable and, theoretically, they will pay faster as a result.

Multiple Options for Patient Payment

In addition to increasing patient satisfaction, offering patients a variety of ways to pay can also reduce administrative costs. Many of the solutions outlined below are self-serve options that remove administrative staff from the process entirely. Lowering call volume and automating payment acceptance will reduce administrative expenses associated with collecting patient statements. Furthermore, if patients pay faster, their accounts spend fewer days in accounts receivable (A/R), which further accelerates cash flow.

At Point of Service

  • Benefit to patients:
    • Patients can pay by check, heath savings account (HSA), flexible spending account (FSA), credit card, or debit card.
  • Benefits for hospitals:
    • If hospitals can capture payment up front, they can eliminate part or all of non-payment risk associated with patient payments.
  • Benefits for patients:
    • Patients can conveniently view and pay their bills online.
    • Patients can voluntarily go paperless.
    • Patients receive email notifications.
  • Benefits for hospitals:
    • Hospitals can increase patient satisfaction because online payment is accepted widely with 73 percent of patients saying they would be willing to use a secure online portal to pay medical bills (DuBosar, Ryan, “Patients Don’t Want To Communicate With Their Doctors On Facebook,” ACP Internist, April 3, 2011).
    • Hospitals can lower billing costs by eliminating print and mail costs.
    • Hospitals can expedite the billing process by eliminating the time required for printed statements to arrive via mail.
    • Hospitals reduce A/R days by eliminating the time required for payments to arrive via mail.
    • Hospitals can lower call volume by providing online access to statements and payment histories.
Over the Phone
  • Benefits for patients:
    • Patients don’t have the hassle of writing and mailing paper checks.
    • Patients have an easy-to-use system, allowing them to pay with check, HSA, FSA, credit, or debit card.
  • Benefits for hospitals:
    • Hospitals eliminate the need to promote payment method to patients because more than 9 million Americans pay bills over the phone (“Western Union Survey Reveals Increasing Consumer Adoption of Mobile Technologies for Bill Payments,” March 25, 2013).
  • Benefits for patients:
    • Patients have the option to pay by HSA, FSA, check, credit card, or debit card.
    • Patients who have limited or no access to the Internet or phone have a payment method.
  • Benefits for hospitals:
    • Hospitals eliminate the need to promote payment method to patients because 50 percent of patients still pay bills with paper checks (DuBosar, Ryan, “Patients Don’t Want To Communicate With Their Doctors On Facebook,” ACP Internist, April 3, 2011).

Timely Payments

Revenue capture challenges force hospitals to rely on patient payments as they never have before, which increases nonpayment risk. Providers will benefit from offering patients a variety of choices in how they pay their medical bills. This allows patients to pay in the method they feel most comfortable, which will encourage timely payment and reduce associated administrative costs.

Saleem Tahir is vice president and general manager, Patient Billing & Payment Solutions, Emdeon, Nashville, Tenn.

Publication Date: Tuesday, July 15, 2014