Self-pay and private insurance comprise 68.9% of the typical hospital’s payer mix, representing $759 billion in net patient revenue. The self-pay portion of that amount continues to grow as the adoption of high-deductible health plans continues. This means hospitals must get better at collecting from patients. That, however, is becoming increasingly challenging as a growing number of patients now carry medical debt.
Today, 100 million Americans have medical debt, and 73% of past-due medical debt amounts are owed in part or entirely to hospitals.[1],[2] Because of this, 63% of those patients have cut back their spending on basics like food and clothing.[3] Nearly half have depleted their savings, and 40% have taken on extra work.[4] Sadly, 17% have lost a home or had to declare bankruptcy.[5]
40% of consumers say they are more afraid of medical debt than of getting a severe illness.
Besides the impact on patients, the impact on hospitals is also significant. In addition to increasing collection costs, hospitals can experience poor cash flow, higher fees for collection agencies, increasing write-offs, and lost revenue potential. It can also cause patients to put off care, further impacting hospitals participating in value-based care models and risk-based payer contracts.[6] When patients put off care, their conditions can deteriorate, leading to more emergency department visits and hospitalizations, which drives costs even higher.
46% of patients with medical debt put off care, and 41% didn’t fill a prescribed medicine due to cost.[7]
Putting patients first
The best approach hospitals can take is to improve the patient financial experience by making it easier for self-pay patients to pay without forcing them to take on more debt. By doing so, hospitals can improve collections while attracting and retaining loyal patients. This is important at a time when patients have greater choice in where to receive their healthcare. Retail clinics, walk-in urgent care centers, telehealth companies, and pharmacy clinics are readily available, significantly more convenient, and often less expensive than hospital-based services.
In a survey of 1,500 patients, 90% said that provider loyalty depends on the patient financial experience.[8] Yet close to one in seven U.S. adults with unpaid medical bills say they’ve had a provider deny them care due to that medical debt, leading many to put off care.
Patient-centric payments
A great opportunity to improve the patient experience is by offering digital payment options such as those patients use to pay their mortgages, utilities, car loans, and retail purchases. Digital options should be offered alongside traditional payment options like phone payments via an automated voice response system, in person, or through the mail. This way, patients can choose the option that works best for them.
In addition to digital payments, hospitals should consider offering flexible payment plans based on each patient’s unique financial situation. Today, many hospitals offer payment plans only after a patient requests them or when they are having trouble paying. Besides helping patients pay their medical bills in full, offering payment plans means hospitals start collecting earlier in the revenue cycle. This makes much more financial sense than sending multiple statements only to turn the account over to an agency and collecting pennies on the dollar.
When setting up payment plans, providers should consider allowing patients to add balances from other family members to their own payment plans. Having to manage multiple bills for multiple family members is challenging enough. Being able to do it all via a single payment plan can help.
The bottom line
Hospitals and patients alike are facing unprecedented financial challenges. By taking a patient-centered approach to patient collections, hospitals can make it easier for patients to pay while also improving the patient financial experience, patient loyalty, and their bottom line.
[1] https://kffhealthnews.org/news/article/diagnosis-debt-investigation-100-million-americans-hidden-medical-debt/
[2] https://www.rwjf.org/en/insights/our-research/2023/03/most-adults-with-past-due-medical-debt-owe-money-to-hospitals.html
[3] https://kffhealthnews.org/news/article/diagnosis-debt-investigation-100-million-americans-hidden-medical-debt/
[4] ibid
[5] Ibid.
[6] https://files.consumerfinance.gov/f/documents/cfpb_medical-debt-burden-in-the-united-states_report_2022-03.pdf
[7] https://files.consumerfinance.gov/f/documents/cfpb_medical-debt-burden-in-the-united-states_report_2022-03.pdf
[8] https://patientengagementhit.com/news/90-of-patients-say-loyalty-relies-on-patient-financial-experience