Evolving toward engagement: The recent history of patient segmentation

It’s no longer sufficient to classify a patient’s propensity to pay as “red, green or yellow.” To truly optimize collections, health systems should consider intelligent segmentation.

Patient segmentation — classifying people according to their ability and propensity to pay their medical bills — has been around for a long time. In recent decades, technology that determines these classifications and updates the resulting profile has also improved the accuracy of these portraits of patients’ financial footing. Health system use of that information, however, hasn’t evolved at the same pace.

For the vast majority of health systems and hospitals, outreach around account balances has traditionally been so intensive — requiring hours of phone tag, case-by-case negotiation and follow up — that they use segmentation mainly as a tool to determine which patients will automatically be outsourced to early-out vendors. Used this way, segmentation is one of healthcare’s most colossally squandered sources of business intelligence versus it being one of the most useful tools in a healthcare organization’s consumer strategy.

Changes in consumer preferences

A 2019 PYMNTS.com survey of more than 2,800 patients provides insights into consumer preferences around payment plan offers and arrangements.^a The first insight was that over 90% of respondents wanted to receive a range of payment plans offered to them either before their medical service or on the first bill after their insurance company paid its portion. The second was that service fees have a surprising impact on consumer payment behavior. Although about a quarter of respondents said they would avoid a payment plan arrangement when fees were present and a quarter said fees would have no effect on their decision, 45% said that fees would prompt them to either choose a shorter plan term or pay the balance in full. Each of these conclusions should help hospitals and health systems refine their payment outreach.

A long-term plan for patient payment

Healthcare is almost never a one-time purchase, yet patient billing systems are set up to manage only single events. Considering each event as one episode of many can allow healthcare organizations to make the payment experience easier for patients to understand and handle. Starting with a pre-service estimate, hospitals can offer patients a payment plan proactively, adjusting the amount owed as balances are adjudicated or as new services are performed. This approach would break down the more daunting balances into manageable monthly amounts. A less stressful payment experience means patients will be less likely to avoid or put off necessary care.

With a shift to a long-term model, hospitals and health systems stand to improve patient volume and health outcomes as well as minimize patient stress. To do so effectively, however, they must include all the capacities that consumers will expect from this model, including automatic roll up of new services into the existing payment arrangement.

3 factors to help segment consumers

Segmentation can be a useful tool in helping healthcare organizations decide which range of plans to offer to which patients, on what terms. The factors to consider to help stratify groups of self-pay consumers are balance, payment history and credit information.

1. Hospitals will always start with the balance. And they will decide whether to offer financing or other payment arrangements based on their tolerances (typically opting not to offer financing on balances that are too low).

2. Next is some duration of patient payment history. How the patient has historically paid a specific provider directly at a given balance range. In our experience, this component is the best indicator of payment behavior in the future.

3. The last factor is financial credit information. Although it comes at an expense to the inquiring hospital, it rounds out the patient’s profile in terms of their propensity and ability to pay. The use of credit data provides a payment profile when there is no corresponding historical payment, by analyzing areas like credit/debt ratio, employment status and income.

The profile derived from such a robust combination of data currently only guides the hospital or health system’s interaction with certain patients at certain locations, namely self-pay patients with large balances at the point of service. Attempting to collect some portion of the service’s cost up front, billing staff will use segmentation results to help them decide what to offer the patient in question — whether it’s financial counseling, a range of payment plan terms or a nudge toward payment in full.

Evolving toward proactive patient engagement means using this profile to drive the outbound content tailored to individuals, rather than reacting to an inbound call. The knowledge gained from segmentation can stop hospitals from billing balances or offering plans their patients can’t afford, help zero in on patients who can afford to pay off larger balances in shorter timeframes and base each interaction between the hospital and patient on greater understanding of the patient’s individual needs and circumstances.

Leveraging intelligent segmentation

Available technology makes it possible to reach out to all patients automatically, through the channels the patient prefers, with tailored offers that include a range of acceptable options for payment (including by check, still an important pathway for many patients). Rational service fees can be added to each plan, and new charges can be rolled up automatically, without re-initiation or negotiation. Hospitals and health systems can use segmentation to refine and hone the amounts and terms of these automatic offers. Further, they should empower self-learning segmentation so the process is constantly improving and responding to changes in the individual patient’s financial status as well as emerging trends in consumer preference.

The perils of business as usual

Just as healthcare organizations are using analytics to personalize medicine, so should they be using segmentation to personalize communication. The results of that tailored communication should, in turn, inform and improve segmentation accuracy and the range of payment plans and other services offered. Hospitals and health systems that use segmentation intelligently can promote patient loyalty, maintain patient volume and empower patients in a way that appropriately mirrors those patients’ increased financial liability for care. 

Footnote

a. Flywire, “The Changing Landscape of Healthcare Payment Plans,” 2019.