According to a recent Gallup poll, the number of insured individuals is increasing. But this increase in insured families has also come with increased high-deductible health plans (HDHPs). This means that insured patients are responsible for higher and higher out-of-pocket payments.
Increasing costs seems to be the general rule in health care. More than one-sixth of the U.S. economy is devoted to health care spending and that percentage continues to rise every year; an estimated $2.7 trillion spent annually on health care.
Rising health care premiums and deductibles are making health care coverage more expensive for individuals, families and employers. In the past six years, employers have seen the amount they spend on employee health care increase by 40%. Over this same period, employee out-of-pocket and payroll costs for health care have increased 82% per year according to Kaiser/HRET. Growth in premiums is tracked to the growth in underlying medical costs.
The organization, eHealthInsurance, shows that deductible thresholds for insurance packages are at 11% for $2500 with 9% over $5,000 annually. A family could potentially have $12,000 in annual out of pocket expense, but a consistent family savings plan is not typically the norm in U.S. households. This can create the dynamic for late or missed payments, and more families going to collections. In turn, this creates friction between employees, employers, insurance companies, as well as your clinic providers and business office. After all, who enjoys paying a $1200 medical bill?
On the bright side, most high deductible health plans (HDHPs) provide many preventative services at no cost to the patient, such as annual appointments. However, communicating with patients what is covered under the preventative service and clearly stating that the patient will be billed for services that are not preventative will reduce patient complaints on unexpected bills.
Let’s not forget that many patients have choices in which plan they choose. There is a preference for low-cost premium plans with high deductibles. However, do patients really understand that while their monthly premium will be lower, their deductibles will be higher which in most cases will mean they are paying more. Additionally, the monthly premium can be deducted before taxes while deductibles require that you are saving to cover future expenses. Healthcare Savings Accounts (HSAs) have helped in this area but how many families keep $6,000 in their HSA?
Providers need to pay their bills and keep cash flow consistent. This can start with having clear policies in place to navigate the relationship and payments. Helping patients understand their responsibility up front and providing multiple strategies to pay the patient portion go directly to the clinics bottom line. The next step is evaluating patients for their ability to pay before delivering optional services and developing a pre or post payment plan for those services that are required.
In essence, clinics are providing a no-interest loan to their patients with no bearing on ability to pay. Borrowing for a home is based on factors including the consumers existing debt, repayment history, credit score, employment, and income. Lending institutions also consider other assets and liabilities to weigh the risk of default. In the case of healthcare there is no pre-approval process.
Providers will need to face the reality that many patients lack the financial reserves to pay for their healthcare. The Bureau of Economic Analysis found that in 1980 health care costs accounted for an average of 9.5% of family expenses while currently they account for 16.3%. 75 million people reported problems paying their medical bills and debt in 2012. Most consumers are now self-funding their medical care costs whether they can afford it or not. A Cashnetusa.com survey found that 22% of those surveyed had savings of less than $100 for unexpected expenses.
The challenges are clear; however, having a strategy can make all the difference on your clinic’s margins. The following recommendations are the starting point for any clinic:
Encourage your patients to access their preventative care services
- Ensure that patients are aware of what is covered and what is not with a preventative care flyer at the time of service.
Have a clear policy for patient financial obligations that your staff understands and adheres to
- Policy must be written with a copy provided to patients and signed
- Policy should also be posted in the clinic
- Staff must be able to clearly describe the policy and know the payment options
- Policy must include timeline of statements, calls and consequences for non-payment (i.e. refusal of future service, being sent to collections)
Provide patient estimations upon request, especially for high cost or optional procedures
- There are tools offered that allow patient estimation such as Zirmed’s Patient Estimation
Provide multiple options for payment
- Cash, check and most credit cards should be accepted payment options
- Ensure the front desk, the billing office and online portals are available for accepting payments
- Provide the option for pre-authorization on a credit card of the expected amount of the patients’ responsibility
- Allow approved payment plans for balances that are based on a consistent payment of a specified amount
Ask for payment at the time of service
- Give your patients a reminder call and ask them to be prepared to pay for services
- According to MGMA, 30% of patients don’t pay at the time of service resulting in an average of 3.3 billing statements before payment or write-off.
Have a structured process that ends with patients going to collections.
- Ensure that patients are aware of the timeline and process for payment and that they will be sent to collections for non-payment
- For bad debt sent to collections only 15-20 % on average is recovered if the accounts are placed within 6 months of the date of service.
The reality is that providers are not financial institutions. With high deductible plans, clinics can no longer provide no-interest, unsecured loans to any patient who walks through the door. Moreover, without the availability of real-time information on patients’ deductible status, providers will increasingly require credit card pre-authorization for payments or cash payment for services. To facilitate this change to high deductible plans clinics need to have a process in place which ensures patient expectations are clear internally and externally. Moreover, having policy in place for each step of the process with a consistent message being presented to each and every patient that receives services will go a long ways to keeping patient satisfaction high and A/R low.