By Rajesh Voddiraju, CEO, HealthiPASS
Twitter: @HealthiPASS
More than ever, providers need to deliver greater payment flexibility and transparency to patients amidst the proliferation of high-deductible health plans and soaring patient balances.
In 2021, 55.7% of American private-sector workers were enrolled in high-deductible health plans (HDHPs) the highest on record dating back to 2012 and the eighth consecutive yearly increase, according to a 2023 analysis by ValuePenguin. To get a sense of HDHP’s rapid acceleration, in 2012, 34.4% of workers were covered by them – meaning that the use of HDHPs grew at a rate of more than 20 percentage points in less than a decade among private-sector workers.
Not surprisingly, as HDHPs have expanded in prevalence over time, patient balances have climbed right along with them. For example, the share of patient statements with balances of more than $7,500 grew from 5.2% in 2018 to 17.7% in 2021, while the percentage of balances higher than $14,000 increased from 4.4% in 2018 to 16.8% in 2021, according to a report from Crowe Revenue Cycle Analytics.
That is significant for providers, because, generally, the higher the out-of-pocket costs, the less likely providers are to collect what they are owed. The report found that the collection rate in 2021 for claims between $5,000 and $7,500 was 32%, while the collection rate for claims between $7,501 and $10,000 was 17%.
As patients have been forced to shoulder a higher portion of balances, it has become essential for providers to meet patients where they are financially by providing flexible payment plans that help patients who may struggle to afford paying off high-balance bills immediately and in full.
How payment plans help
For patients, the benefits of payment plans are obvious: they enable patients to access medical services they might otherwise have been unable to obtain due to lack of affordability. Rather than paying up-front, patients gain the opportunity to pay over time, potentially enabling them to access care earlier before their medical conditions deteriorate and become more expensive to manage.
For providers, patient financing needs become an important consideration for procedures that are not covered by insurance, such as cosmetic or elective services, which patients must pay for out of their own pockets.
Generally, payment plans come in three different forms: First, providers can offer patients a payment plan that allows them to pay off portions of their balances over a specified time period, or, second, providers may elect to connect patients with third-party financing companies that will help them cover bills. The third option is the use of “buy-now-pay-later,” similar to the retail industry, which enable consumers to purchase high-price items without any interest.
Offering payment plans to patients yield three major benefits for providers:
- Greater flexibility to continue delivering needed care to patients that are in need of high-priced interventions, such as surgery, expensive diagnostic procedures, or specialty medications
- Increase the likelihood of payment for delivery of high-cost procedures, whether all up-front or over a specified time period
- Higher levels of patient satisfaction, engagement, and retention as patients appreciate the availability of multiple payment options.
How providers can get started
The first step for providers interested in offering payment plan options to their patients is to analyze patient accounts receivable to determine two key factors: First, the types of services and procedures that lead to high patient balances, and, second, the typical dollar amounts associated with these services.
Next, providers should evaluate whether to insource or outsource patient financing and payment plans. Insourcing maintains the patient-provider relationship, but brings on additional financial risk. Alternatively, with outsourcing, third-party partners can handle administrative tasks on behalf of providers while assuming some portion of financial risk associated with future payments.
Finally, develop a launch plan that details how to introduce financing options and payment plans to the appropriate patients at the right time in their care journeys, in addition to other basic processes like patient enrollment. Often large providers employ financial counselors to walk patients through the financial options associated with specific elective procedures or expensive surgeries, as well as to address any financial concerns patients may have.
Although the trend recently abated due to decades-high inflation affecting the broader economy, growth in healthcare spending has for years outpaced growth in the rest of the economy. Specifically, since 2000, the price of medical care, including services provided, insurance premiums, drugs, and medical equipment, has risen by 110.1%. In contrast, prices for all consumer goods and services rose by 71.3% in the same period, according to the Peterson – KFF Health System Tracker.
For Americans who pay a significant portion of their medical services out-of-pocket, this trend is not sustainable. Providers can do their part to relieve financial pressures by offering their patients flexible payment options.
Join host Jared Johnson and Rajesh Voddiraju, Founder and President of Health iPass on this episode of Trending NOW as they cover trends on how an educated patient pays better, price transparency, and other aspects of the patient payment journey.