Less paper, more payments

Feb. 28, 2017

What healthcare can learn from other industries to improve the patient payments experience.

Jeff Lin, Sr. Vice President of Product Management, InstaMed

Despite advances in technology to help improve efficiencies in healthcare, much of the industry continues to rely on paper for administrative processes, including payments. Healthcare’s reliance on paper for payments has contributed to increased costs, wasted spending, and negative experiences for providers and patients alike, yet the industry is slow to change. With increasing patient responsibility and the growth of healthcare consumerism, healthcare needs to face its “too much paper” problem and go paperless.

While providers historically relied on payers for the majority of their revenue, the percentage of revenue from patient responsibility is increasing sharply. With the continued increase of high-deductible health plans and the rise in patient responsibility, healthcare providers must collect more payments—and larger balances—from patients than ever before. As a result, providers send more statements and take on increased costs, including print and mail, to collect patient balances. According to MGMA, on average three statements are printed and mailed by a provider per healthcare encounter to collect from a patient.

Time and money spent on paper-based payment processes create wasted spending in healthcare. According to the Consumers Union, total wasted spending in healthcare is approximately $765 billion. Of that $765 billion, $190 billion—nearly 25%—is identified as excess administrative costs. These excess costs include the time and money spent collecting, processing, posting, and reconciling payments. Advances in technologies like electronic payment methods and system integrations eliminate the need to rely on paper. Healthcare organizations have opportunities to adopt technologies that enable them to reduce the time and costs spent to collect via paper-based processes and get paid faster.

In addition to being costly and wasteful, paper creates a negative experience for patients and providers. According to InstaMed’s Trends in Healthcare Payments Sixth Annual Report: 2015, 87% of consumers received paper bills from their healthcare providers in 2015. These bills usually arrive weeks or even months after a healthcare encounter. Then, when a consumer is ready to pay their bill, only 24% want to use a paper check. This disconnect has caused patients to feel confusion and frustration toward the healthcare payments process. Because of this confusion, providers have a more difficult time collecting payments from patients, as paper lends itself to slow or delayed payments, and confusion can result in no payments at all.

Patients bring experiences from other industries

The payment experience in healthcare is lagging other industries that have been much faster to adopt new payment methods. For example, Uber has created one of the best payment experiences in any industry. Consumers store their preferred payment methods securely in the app, then every time they request a car, payment is collected automatically at the end of the trip. Consumers never expect to receive a bill for their Uber ride; instead, an email receipt is sent automatically, explaining the payment amount and payment method used.

Though healthcare encounters require a bigger commitment and investment from the consumer than a typical Uber ride, it doesn’t mean the easy consumer experience should be discounted. Another industry healthcare can learn from is the hotel industry. When a consumer checks in to a hotel, they always expect to hand over a credit card for the hotel to keep on file during their stay. Even though the consumer usually has an idea of what the total cost of their stay will be, hotels request a payment method upfront to account for unpredictable charges like damages, snacks from the mini bar, or an extra night stay. At checkout, the hotel automatically charges the card saved on file for the total cost of the stay. The hotel staff then offers the consumer the option of taking a paper receipt or receiving a receipt via email. This payment process is straightforward, and the hotel guarantees that it will immediately collect payment from every consumer.

The healthcare industry can benefit from leveraging a similar payment model for patient payments. With the disjointed and paper-heavy patient payment processes of today, providers can only expect to collect 50%-70% of a balance after a patient visit (McKinsey and Company), and for balances that are collected, the time to payment often is slow. In 2015, 70% of providers said that it took one month or more to collect from a patient, according to InstaMed’s 2015 report on trends in healthcare payments. Instead, healthcare can take a lesson from the hotel industry and adopt a simpler, consumer-friendly payment process to collect more patient payments faster, while reducing the costs to collect.

How providers can get started

The first step is for healthcare organizations to make payment part of the conversations they are having with patients. Healthcare organizations can leverage an estimator tool to present patients with an estimate of what they will owe. By giving patients an estimated payment total, healthcare organizations clear up patient confusion about their healthcare responsibility, which makes them much more likely to pay.

Once patients have an idea of what they will owe, they feel more ready to participate in the payments process. Now, healthcare organizations can talk to patients about securely storing a payment method on file and automatically collecting the amount owed upon claim adjudication. By doing so, healthcare organizations never see a patient without securing a payment method first, just like a consumer never checks into a hotel without saving a payment method on file. As a result, the healthcare organization eliminates the need to send paper statements to collect. Once payment is collected, patients receive an email receipt.

This payment model improves the patient payment experience because it mimics a familiar and consumer-friendly experience patients already encounter in other industries. To further improve the experience on the provider’s end, healthcare organizations can leverage technology to automate this entire process. With the right tools, healthcare organizations can securely save patient payment methods on file, automatically collect payments after claim adjudication, and automatically suppress statement printing without any disruption to their workflow.

Taking a cue from other industries to leverage technology, setting patient expectations upfront, and going paperless will help healthcare improve the payment experience for the benefit of all stakeholders.

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