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Retail-style payment plans are the cure for rising health care costs

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Payment plans are the answer to manage health care collections. Patient payment responsibility has risen dramatically over the past few years, high-deductible health plans aren’t going away anytime soon, and most consumers don’t have enough savings to cover an unexpected medical bill.

85% of covered workers in 2018 had a deductible as part of their health plan, up from 59% in 2008, according to the Kaiser Family Foundation. The average amount of the deductible rose as well, from $735 in 2008 to $1,573. Simply put, as health care costs rise, high-deductible health plans (HDHPs) have become extremely popular among employers looking to shift that financial burden.

Although the original intent of HDHPs was to reduce health care services utilization by ensuring patients had “skin in the game,” this has not been borne out. The reality is that HDHPs do not curb consumer usage, merely increase the amount owed, according to the Healthcare Cost Institute.
Providers continue to focus on collecting from payers, which still make up a much larger percentage of overall revenue than patient balances. For a variety of reasons, their patient pay collection processes have changed little over the past several years, relying heavily on paper statements mailed to patients. However, as patient-pay amounts continue to rise, providers are recognizing the need for change—67% said their primary revenue cycle concern is patient receivables (Trends in Healthcare Payments Ninth Annual Report: 2018).

Allowing patients to pay large balances over time is the solution to this conundrum. Just as they can better manage their budget by paying for an appliance or piece of furniture through an interest-free store payment plan, consumers are more likely to pay down their health care debt through monthly payments. However, managing such programs manually (i.e., on paper and spreadsheets) is nearly impossible.

Instead, new technology allows physician groups of any size to created automated payment plans that require minimal administrative resources. These programs can remove payment friction for patients with a large debt to pay down and those paying for frequent medical appointments. Importantly, they provide robust reporting tools that quickly show providers outstanding patient payments, broken out by amounts secured in a payment plan versus general collections.

Combined with other efforts to reduce manual processes and eliminate paper billing, automated payment plans are truly a win-win for patients and providers, lowering collections costs while improving the consumer experience.

This is especially important for providers looking to grow their practices, since positive experiences have been shown to increase net margins for healthcare organizations, according to Accenture. Indeed, it found that U.S. hospitals that deliver “superior” customer experiences achieve net margins that are 50% higher than those with “average” customer experience.

The main thrust of improving the customer experience should focus on the clinical, rather than the administrative side. Still, when patients are filling out paper forms prior to visits and receiving paper bills after them, they’re certain to notice the disconnect between that and other daily experiences. For instance, they may use their smartphone to transfer funds from one bank account to another or make a payment to their credit card.

With consumer payment responsibility remaining a powerful driver of overall health care spending (reaching $365 billion in 2017—10% of the total national health expenditure), it’s time for providers to step all the way into the digital age.

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