Ric SinclairThe leading source of uncompensated health care is the portion for which patients are responsible. It’s also the fastest growing source—nearly half of all patient financial obligation gets written off as bad debt, which totaled $65 billion in 2010 and is projected to rise to $200 billion by 2019.a

Given that what we’re actually talking about is the reality of consumer financial behavior and expectation, it is worth examining this reality in the context of consumer mobile and electronic payments. It also is important to recognize that, increasingly, all insured patients are more like self-pay patients than ever before.

The New Meaning of ‘Self-Pay’

In 2009, researchers estimated that out-of-pocket payments for insured patients amounted to $250 billion, and projected the amount would rise to $420 billion by the end of 2015.b Most insured patients now have a significant amount of out-of-pocket obligation.

For patients purchasing insurance on the government-run exchanges authorized by the Affordable Care Act, the amount is even higher. Through the first half of 2014, for example, 80 percent of the plans sold on the exchanges were in the “bronze” or “silver” categories. These plans have very high deductibles, often twice the national average of employer-sponsored high-deductible health plans (HDHPs).

Insured patients with HDHPs are stepping into the role of direct consumer/purchaser and decision maker in a landscape that is either unfamiliar (for the newly insured) or has changed significantly since they first began navigating it (for insured patients newly covered under some form of HDHP). They’re trusting their providers to help them navigate these new landscapes—and they’re also expecting a convenient, transparent consumer experience.

At the same time, mobile and electronic payment technology has had a major impact on consumers across all industries and all forms of commerce. Want to order a pizza on Twitter using an emoticon? You can do that. Want to start a landscaping company and send your clients electronic reminders that they can click through and pay on their phone? No problem. Want to circumvent traditional, high-cost credit card payment terminals and high-risk cash-collection processes for your business? You can definitely do that.

Consumers are accustomed to this technology, and increasingly they expect and demand it. They’re accustomed to having greater insight into their prospective purchases, in a more consumer-empowered online financial landscape where pricing transparency, convenience, and personalization play a central role in how they’re approached as consumers and how they make decisions. 

This personalization, transparency, and convenience is built on a backbone of IT capabilities that are still finding their way into health care—but that are rapidly gaining adoption as leaders recognize the relationship between patients’ experiences as consumers and patient engagement and satisfaction. Patients are becoming increasingly sophisticated in their expectations of costs and payments—and in areas such as electronic billing payment reminders, mobile payments, and automated payment plans, healthcare organizations need to catch up.

Making Sense of Propensity to Pay

With the rise in patient financial responsibility, it might be tempting to double down on traditional collections processes. But as anyone who works in health care knows, these processes have never worked all that well to begin with—hence the 49 percent of patient responsibility that ends up being written off as bad debt.

Foundationally and historically, collection processes in health care have been hamstrung by a reliance on the consumer credit score, which on its own is not a reliable predictor of patients’ true propensity to pay. If healthcare organizations don’t have effective modeling and prioritization of patient accounts—if they rely on credit scores or other overly simplistic metrics to populate collections work flows and build work queues—they inevitably spend an excessive amount of time and money chasing balances that have a higher cost-to-collect and that may not be collectible in the first place. A more accurate analysis factors in historical healthcare payment behavior, as well as where the patient stands in terms of progress toward deductible and how the patient’s coverage (and, thus, expectations) may have changed over time.

If providers have insight into propensity to pay and a reliable process for proactively identifying the need for financial counseling, they can dramatically reduce the cost to collect while accelerating the pace of collections—at the very same time they’re meeting patients’ increasingly sophisticated expectations for transparency, convenience, and consumer-focused financial transactions.

Hello, January

Starting in the new year, more patients will owe more out-of-pocket than they did in 2015. The payment landscape overall is evolving more rapidly than before—and it is dramatically outpacing the evolution and adoption of new payment technology and processes in health care. If healthcare organizations don’t take immediate steps to keep up, they risk getting stuck in a cycle of spending more to collect the same amount (or less)—even as out-of-pocket payments make up an ever greater percentage of the revenue they count on.

That’s why the time to act is now—before the largest and fastest-growing source of bad debt further outpaces healthcare organizations’ ability to manage it.

Ric Sinclair is vice president of Product, ZirMed.


a. “Key Trends in Healthcare Patient Payments,” J.P. Morgan, 2013; and Felix, J.Y., “Surviving in Tough Times. Needed: Patient-Centric Revenue Model,” Group Practice Journal, Citi Retail Services, October 2013.

b. Finn, P., Pellathy, T., and Singhal, S., “U.S. healthcare payments: Remedies for an ailing system,” McKinsey on Payments, April 2009.

Publication Date: Friday, January 15, 2016