Insights from forum sponsor CarePayment

When pre-service payment discussions include a payment plan option, patient collections can more than double.

Patients strapped by high deductibles and other out-of-pocket expenses pose a mounting financial dilemma for hospitals and health systems. As they assume greater financial responsibility for their own health care, patients represent a growing share of total provider revenue. However, hospitals collect just 16 cents on average for every $1 in unpaid patient balances, according to ACA International.

To improve patient collections, more providers are looking at starting or expanding patient financing programs that allow people to pay their medical bills over time without breaking the family budget.

In this brave new world of population health management and healthcare consumerism, revenue cycle professionals need a fresh approach to evaluating the ROI of payment plans. Choosing a patient financing program is no longer just about weighing the potential increase in collections and reduction in operating costs against the fees a provider will be charged. A net collections improvement based on hard costs is becoming a must when evaluating a partner, even to the point where you can expect a partner to guarantee their results. Although this traditional ROI model plays a vital role in the decision-making process, additional strategic considerations can offer long-term value.

Make the billing process patient-friendly. Patient financing programs should fit into overall revenue cycle operations and organizational goals. Traditionally focused on large commercial and government payers, hospital revenue cycles need a major makeover to become more patient-centric. Offering multiple payment options is key to that goal, according to Money Matters: Billing and Payment for a New Health Economy, a recent report from PwC’s Health Research Institute that calls for a structural overhaul of patient billing and payment systems.  A one-size-fits-all approach doesn’t work. You need a plan for every patient.

Present payment plans up front to maximize success. Fears of cannibalizing cash collections have often stopped providers from promoting payment programs pre-service. However, when the pre-service payment discussion of “cash, check, or charge” is supplemented with the option of a payment plan, patient collections can more than double, even accounting for the fees paid to a third party managing the payment programs.

Depending on the healthcare finance company, providers can receive the amount of the patient’s unpaid balance, minus the fees paid to the financing partner, as soon as the hospital turns over the patient account, reducing accounts receivable days and bad debt expense while boosting cash flow. With a professional healthcare finance company managing the payment programs, providers also save staff time and money spent trying to collect patient payments.

Give patients budget-friendly options. Having multiple payment options enables more people to proceed with necessary care while helping ensure providers are paid for their medical services. No-interest financing means patients don’t add to their medical bills even as they pay them off over time.  Some payment programs offer flexible term lengths so people who might not otherwise qualify for plans with a single payment term—either because their balance is too low or too high—can be accommodated with a monthly payment they can afford.

Avoid consumer credit compliance risk. Payment plans that extend beyond four payments are subject to a slew of state and federal consumer credit laws and regulations. In addition, scrutiny of these programs is on the rise from the Consumer Financial Protection Bureau, state attorneys general, Congress, and others. Healthcare providers can reduce their risk and compliance costs by working with healthcare finance companies that ensure their programs are compliant with all applicable laws and regulations.

Remove obstacles to care for a healthier population. Already, one out of every three Americans is skipping essential care because they can’t afford it, according to a recent Gallup poll. This trend represents a genuine threat to population health management, value-based payments, and provider volumes and revenues. If hospitals and health systems want to engage patients clinically to improve health outcomes and lower costs, they first must engage them financially. And patient financial engagement hinges on payment plans that deliver clear value for both patients and providers.

Brian Brown is vice president of sales, CarePayment, Lake Oswego, Ore., and a member of HFMA’s Oregon Chapter.

Publication Date: Monday, August 17, 2015