Patients are responsible for an increasing share of medical costs. And this shift from insurance companies to consumers has a significant impact on a health system’s bottom line. Even a slight tweak in the payer mix can impact operating revenue by millions of dollars.
Declining margins limit a provider’s capability to invest in caregivers, clinical breakthroughs and capital – all of which are needed to attract more patients and provide high-quality care. However, there’s an easier and smarter way to ensure healthy financial outcomes without sacrificing the quality of medical care.
A personalized financial experience makes it easier for patients to pay. So they can pay. Health systems can, in turn, invest dollars back into the health of communities.
Understanding the importance of a patient-centric payment approach, VisitPay launched its second annual quantitative study in September 2019: the 2020 VisitPay Report. Findings from this research provide health systems a blueprint to understand the needs and behaviors of patients in managing medical obligations.
Want to give patients a voice and reverse declining margins?
The Patient’s Healthcare Burden
Patients increasingly bear the burden of healthcare costs, in large part due to rising insurance deductibles and higher out-of-pocket (OOP) medical expenses.
From 2006 to 2016, insurance premiums for families rose 58%, from $11,480 to $18,142. As a reference, the median monthly mortgage payment for American homeowners is $1,100, the average monthly payment for a new car is $554, and the average credit card balance is $6,194. By the time consumers pay their bills each month, including health insurance premiums, there is not enough disposable income left over to pay OOP medical expenses.
This shift in the payer mix impacts health systems in a number of ways. Patients pay more slowly than traditional payers, if they pay at all. In fact, in 2016, 68% of patients with bills of $500 or less did not pay off the full balance, up from 53% in 2015 and 49% in 2014. That percentage is projected to reach 95% by 2020.
These behaviors have a strong knock-on impact to a health system’s profitability.
The Payer Mix and Profitability
To illustrate the financial impact of the patient as payer, it’s helpful to walk through a health system’s hypothetical P&L over a three-year period. As shown in the table below, as the patient responsibility shifts from 15% in year one to 30% in year three, the impact on profitability is astounding. The operating margin declines by nine points in just three years, all other line items holding constant.
What can health systems learn from other industries to prepare themselves for the tsunami of declining margins? VisitPay’s research cuts to the heart of these very issues.
Communicate Meaningfully with Patients on Cost and Payment Options
When individuals buy cars, clothes and other consumer goods, the price of such items is integral to the purchase decision process. So are the myriad options to pay, from cash to apps to credit options. VisitPay’s research suggests that consumers want a more unified billing experience in healthcare, too.
According to the study, when faced with medical debt, patients most often look for information on payment options in their billing statements (66%). Other important touchpoints include conversations with someone in the finance department (59%), at registration/check-out (58%) and with doctors/other caregivers (55%).
Proactively engaging patients in cost discussions at the point of care will more closely align clinical and financial experience, thus furthering a patient’s willingness to pay.
Provide Patients with Greater Clarity into What They Owe
Clearing up confusion is another important way to improve the patient financial experience. In today’s healthcare landscape, patients usually receive a number of paper statements from different providers for a single episode of care, some of which may not arrive until months after service. There’s no single source of truth to guide the creation of a payment plan, even if an EHR portal is used.
To better understand how health systems might alleviate confusion, VisitPay asked research participants to identify features of a digital payment solution that would, in fact, provide greater visibility into costs. Their responses included a view of the Explanation of Benefits (20%), a consolidated view of all hospital/physician charges (18%) and cost estimates (17%).
If patients better understand what they owe in total, what insurance covers and how they can pay, they are more likely to do so.
Give Patients More Time to Pay Off Obligations
With limited disposable income, a single, pay-in-full option to manage medical debt no longer suffices for many patients. Patients typically need more time to manage and pay off their medical obligations.
VisitPay’s research supports this presumption. Over half (52%) of survey respondents were interested in paying medical bills in monthly installments. Moreover, when confronted with a large medical expense, only 37% can afford to pay a maximum amount of $100 or less each month.
Understand the Needs and Behaviors of Patients
To transform the financial experience and make it easier for patients to pay, health systems need a deep understanding of a patient’s needs and behaviors. The intersection of financial and behavioral insights provides critical guidance to increase operating margins – and continue an investment in high-quality care.
Ready to create your blueprint for healthy financial outcomes? Read the 2020 VisitPay Report now and give patients the voice they deserve.