Reinventing Medical Payments: The Urgency for Digital Transformation to Prioritize Patients

The rising costs of health care have put pressure on patients, employers, and healthcare organizations alike. As healthcare costs have risen above inflation, health benefits—once a strong recruitment incentive—have become too great of an expense for many large companies. This trend has prompted companies to cap the expense by replacing the defined health benefit approach with one involving a defined health contribution. The effect has been to shift the burden of care from the employer back to consumer, creating a sudden need for patients to adopt the mindset of savvy consumers who can self-advocate for the best care at the best price.

This shift has dramatic implications for providers whose historical experience in managing transactions has primarily involved interactions with large insurance companies. With the shift of greater responsibility for payment to patients, providers are confronted with an immediate need for a retail-like consumer payment process.

Medical Payments: Ripe for Transformation

One challenge in becoming more consumer-facing is the paper-based nature of the healthcare industry. It is still quite common for revenue cycle management companies and clearinghouses to send only paper, distributing electronic remittance advice (ERAs), explanations of benefits (EOBs), and bills to patients and providers through snail mail. Providers also receive many payments in the form of paper checks.

Consider the following statistics: ^a

• Health plans and providers conduct 44 percent of electronic remittance advice transactions manually.
• On average, each manual transaction costs providers and health plans $3 more than electronic transactions.
• Sixty-five percent of consumers would consider switching healthcare providers for a better payment experience.
• Only 21 percent of patients prefer paying by check, but 79 percent receive paper statements.
• Patients can take up to a month or longer to pay invoices, 73 percent of providers report.

Consumer Convenience

The digital transformation already underway will give patients what the industry has traditionally lacked. Technology advances have been built to serve transactions between large health systems and health insurance companies. But with rising deductibles and a greater burden on patients, the need for electronic payments is no longer exclusive to business enterprise transactions. Consumer healthcare spending is making up a larger portion of provider revenue and is expected to reach $608 billion by 2019. ^b

Individuals are accustomed to paying for things seamlessly with visibility into their purchases. Online commerce has conditioned a generation of consumers to expect a high level of convenience and customer service, often in the form of access to product and service ratings and descriptive reviews.

According to the 2015 McKinsey Consumer Health Insights Survey, consumers look for the same benefits from their health care as they do with products from other commercial industries: customer service, delivering on expectations, convenience, and value. ^c

It is only a matter of time before patients will refuse to put up with the mysteries of healthcare costs and demand a better understanding of costs up front. They also will look to provider reviews to influence choices.

The Crushing Cost of Inefficiency

Improving the payments process for patients could not only boost efficiency but also improve revenue cycle performance. Even though most individuals have become accustomed to making payments electronically, the majority of healthcare organizations still send the majority of their patient bills through mailed statements. These mailed statements often lack options for patients to make electronic payments and opt out of paper bills.

Digital Transformation: Stakeholder Benefits

When healthcare providers implement electronic billing and payment processes, patients will benefit immediately from the added convenience and longer-term from the lowered costs driven by increasing process efficiency. For the hospitals and health systems, given the shifting payment mix toward patients and declining margins in Medicare, Medicaid, and commercial health plans, the cost of inaction could be extinction. So the question is not whether they should adopt modern payment processes, but how quickly they need to make the change.

For health plans, the motivation is more about operational efficiency and improved customer relations. Unlike in the past, health plans now must improve engagement with their members. Leveraging the payment process is the single best way for them to do so. Through payments, health plans are in a unique position to engage with patients across the care continuum in order to share education about the patients’ health conditions, provide details about the options patients have through their benefits, and guide members to obtain proper care that will reduce costs and improve outcomes.

What’s Next?

For healthcare providers (and the health plans they accept), the message is clear: They must transform the way they interact with patients. They must take a page from the playbooks of retail giants, starting with seamless, convenient payment processes. This is a tall order, but now that patient payments are necessary for their sustained financial viability, providers have no choice but treat patients as consumers.

Although healthcare organizations face a challenge with the patient-to-consumer transition, they also are presented with an opportunity to improve income, reduce overhead, and maximize efficiency by leveraging tools that tech-enabled businesses have been using and improving for years. Health care is presented with both an opportunity and an imperative to apply to principles established by other industries and leapfrog into the future, establishing a modern, convenient front-office payment technology for patients and a back-office process that automatically integrates patient payments seamlessly into their electronic health record and banking systems.

When organizations take the leap, they will need a solution that includes the following.

A well-designed online payment portal. Providers should offers consumers a robust online payment portal that features digital wallet capabilities (the ability to digitally store payment methods such as credit and debit cards, bank accounts, health savings accounts, flexible spending accounts, and health reimbursement arrangements) and mobile-friendly optimization to meet their payment expectations.

According to recent research findings, 81 percent of consumers already pay their household bills online, and more than half prefer an online payment channel for their healthcare bills. ^d The portal should allow users to create an account and save demographic information, payment preferences, and payment methods, for convenient payment without repeatedly reentering information.

User-friendly payment options. Organizations should make it easy for patients to pay online. The payment website should be viewable from any device, with the same functionality across devices; patients should have a full range of payment options, including paying online, through a mobile app, through their bank’s bill payment site.

Transparency and simplicity. The solution should take the mystery out of healthcare payments for patients.Providers should discuss payment up front to help patients anticipate the cost of a procedure and verify how much they have left on their deductibles. The process should be as effortless as possible, beginning with the provider confirming the payment method up front and then allowing patients to opt-in and have their portions of their bills paid automatically after the claims have been adjudicated. When a larger balance must be collected, providers should offer an automated payment plan or a cash-pay discount (based on a “propensity-to-pay” tool displayed alongside eligibility information).

Consolidated statements. The solution should streamline how consumers pay all of their different balances with simple, consolidated electronic statements for services across an entire organization.Larger providers can offer convenience by allowing patients to manage and pay multiple bills for different procedures or family members through a consolidated bill for a seamless payment experience.

Connectibility to most bank websites. For people who have ongoing healthcare expenses, being able to pay them the way they pay their other household bills will be attractive. Such an arrangement can be set up using a patient’s existing bank bill pay portal. Connections with banks allow a healthcare organization to immediately receive payment with the patient information, instead of receiving payment as a paper check to be manually entered into the system.

A rich variety of online options. An effective solution will offer consumers diverse online payment experience. Besides the ability to pay online, an efficient payment portal will offer features such as the abilities to store payment methods in a digital wallet, access payment history, to view and print payment receipts, to view and control payment plans, and to manage multiple bills for different procedures or family members with one login.

Integration of billing and payment. An effective solution integrates billing and payments to ensure consistency across all patient touchpoints. Paper statements, electronic statements, automated communications, receipts, and staff-facing reporting should all have the same, accurate information about every patient balance. This way, when patients make payments online, they won’t experience errors such as multiple bills for the same payment.

Strong security. The solution will work only if the organization can deliver a trusted experience. In 2017, the healthcare industry averaged one data breach per day, and that was actually an improvement over 2016. ^e Every payment interaction point involving a credit card must be secure. Providers should use payment card devices that leverage point-to-point encryption for card-present and card-not-present transactions. For online payments, organizations should understand their payment card industry (PCI) scope, according to standards set by the PCI Security Standards Council. ^f

The Future of Healthcare Payments

Although health care has been a slow adopter of online payments, the industry is beginning to recognize the need to respond to this consumer imperative.

Imagine that in a matter of years, patients will have smartphone apps where they can compare local service providers and costs, and view and pay all family medical bills and expenses in one place. Patients will be able to walk into physicians’ office, see how much is left on their deductibles, opt-in for one-time or monthly installment payment plans, and automatically schedule their next appointments.

Some progressive healthcare organizations already have begun differentiating themselves by providing a more customer-friendly, tech-enabled experience, but the industry as a whole has a long way to go to fully embrace this new technology, despite its inevitability. Those organizations that move quickly to adopt streamlined payment solutions and enhanced patient engagement will emerge with their reputations and bottom line intact.

Footnotes

a. CAQH, “2016 CAQH Index Report”; InstaMed, “Eliminate Print and Mail Costs to Collect Patient Payments,” 2018; InstaMed, Trends in Healthcare Payments Seventh Annual Report: 2016 , May 2017.
b. Seib, C., “Payments: A Matter of Survival for the C-Suite, Part One,” HIMSS, May 17, 2017.
c. Cordina, J., Kumar, R., and Moss, C., “Debunking Common Myths About Healthcare Consumerism,” McKinsey&Company, December 2015.
d. InstaMed, Trends in Healthcare Payments Seventh Annual Report: 2016 , May 2017. 
e. Landi, H., “2017 Breach Report: 477 Breaches, 5.6M Patient Records Affected,” Healthcare Informatics, Jan. 23, 2018.
f. See Librizzi, U., “What Defines PCI Scope?” PayJunction Blog, June 20, 2017.