Reducing Bad Debt with Flexible Patient Financing Options

Out-of-pocket expenses and high-deductible health plans (HDHPs) are on the rise, with some HDHPs calling for deductibles as high as $6,550 for individuals and $13,100 for families annually—expenses that are well beyond what most patients can afford to pay outright without some form of financial assistance or payment plan.

This trend is causing numerous healthcare organizations to see increases in bad debt—particularly as 85 percent of patients with bills $500 to $1,000 do not pay their hospital bills, and nonpayment increases with higher bill amounts, according to a TransUnion analysis. In addition, according a report by the American Hospital Association, U.S. hospitals have provided more than $502 billion in uncompensated care expenses since 2000, which has spurred them to look for solutions to address these growing concerns. 

Some health systems have created flexible financing options that helped them successfully reduce their financial risk and bad debt while easing the financial burden for patients. 

What Are Flexible Patient Financing Options?

Some healthcare organizations already extend payment options to patients. When payment plans are offered directly from an organization, they typically extend only a few months. Some financing options from vendors can often function like credit cards, including very high interest, credit reporting, and other punitive measures. Others automatically enroll patients into monthly payments they ultimately cannot afford, which can create patient satisfaction issues.  

Although having some options are better than none at all, the options often don’t work for everyone. Moreover, situations change, financial priorities shift, and people lose jobs. When patients are locked into payment plans they can no longer afford, they stop making their payments, and the organization ends up losing that revenue. Instead of automatically enrolling patients into a specific payment plan, healthcare organizations should consider offering flexible, opt-in payment options to give patients a choice, achieve more favorable results, and ultimately reduce bad debt. 

Case Example: Atrium Health

One health system that has adopted such an approach is Atrium Health.

This Charlotte, N.C. based health system wanted a flexible, scalable, and compassionateway to extend patient financing to its community. To carry out this effort, the health system developed flexible opt-in options, including longer-term plans with low interest (and lower monthly payments) and shorter-term, interest-free plans to every patient. It also offers charitable financial assistance for qualifying patients. 

The flexible plan allows patients to opt in any time, starting at the time of service and extending throughout the entire payment period. For example, a patient may have the means and intention to pay his or her portion of the cost of care as statements arrive, but if that situation changes two months down the road, the patient can select a new payment plan. Likewise, if a patient initially selects a short term, interest-free option, but later decides an interest-bearing, longer-term plan would be easier to manage, he or she can do so.

What’s Good for the Patient is Good for the Provider

Atrium Health serves more than 12 million patients each year. Since it first launched the flexible patient financing program in 2002, the health system has reduced its bad debt by 8 percent. 

In any given month, 33,000 people are enrolled in the health system’s flexible patient financing program, including 5,400 employees–accounts that could otherwise be at risk of contributing to the organization’s bad debt. 

With HDHPs increasing, many patients now ask about payment plans either up front or after they receive their bills. Returning patients know about the program and often self-refer to it. In today’s consumer-driven market, patients want transparency, convenience, and user-friendly accessibility. Based on these needs, patients are choosing where to go for services. A flexible financing program can offer patients affordable health care as well as the ability to manage their own accounts, make quick payments, or set up recurring payments through a patient portal or call center. 

Rolling Out a Program

Healthcare organizations can empower patients to make payments they can afford by offering flexible patient financing options rather than forcing them into situations that might not work. Some effective strategies include the following.

Offer various types of plans. All patients should have access to multiple plans including short- and long-term plans, with low interest or interest-free, as well as charitable financial assistance.

Roll out the program simultaneously in hospitals and physician practices. Atrium Health piloted and launched patient financing options only in hospitals initially and waited several years to implement in the physician practices. In retrospect, it missed opportunities to enroll patients and reduce bad debt accrued in these settings during this time.

Use cobranded cards and materials. When working with a vendor partner, it’s important that any enrollment cards or information sent out to patients be cobranded with the health system’s logo so patients know they can trust the vendor and will use the service.

Make options easily accessible. Patients shouldn’t have to search for information. At a minimum, a health system should include links to payment plan options in its patient portal, on the health system website, and on statements so patients not only learn about the programs, but also know how to access them.  

Steve Burr is senior vice president of patient financial services at Atrium Health, Charlotte, N.C.