Can Payments Solve Healthcare’s $20K-Per-Family Cost Burden?

We all know the drill.

After receiving treatment at a hospital (whether an in-and-out affair, such as an MRI, or a multi-day stay in a room), the insurance notices and bills start arriving. The first one, two or three are usually ignored, perhaps put on a pile for later consideration or filing. After all, those early figures are often not what a specific patient will end up paying out of pocket. For hospitals, however, each ignored bill can pose a risk to cash flow and overall operations — hospitals must get paid, too.

If done better, payments can play a major role in easing the frictions, frustrations and delays of healthcare payments, especially when it comes to those hospital bills. Those payments can also reduce the need for debt collections on the part of hospitals, reduce the need for anxiety and headache medication on the part of consumers, and perhaps introduce more efficiency into the healthcare space as a whole.

As hospitals reportedly become more aggressive in chasing down debts from patients (and as U.S. healthcare costs continue to balloon, setting records), PYMNTS’ Karen Webster caught up with John Talaga, EVP and GM of healthcare at Flywire, to talk about how to improve the hospital payments experience to the benefit of most parties involved. Talaga’s words deliver a sense of appreciation for how much payments can improve the common healthcare experience.

Indeed, the issue of hospital costs and payments is the elephant in the room to be addressed, and that goes for the boards and executives running the hospitals as much as it does the patients. “We are finally reaching the point where it can no longer be ignored,” he said. After all, the average U.S. family pays $20,000 a year in healthcare costs.

More Incentives

This is all happening amid shifts that are seeing more incentives — including those based on sophisticated analysis of health data, along with digital devices — offered to consumers to keep them healthier, and to better keep them on track in paying their healthcare and hospital bills. Of course, the situation remains extremely complicated, Talaga told Webster — just think of all the players, processes and legacy operations that make up healthcare and payments. Yet, even within the last two years, that increasingly sophisticated analysis of data, along with ongoing advances in machine learning and artificial intelligence, are opening the door to significant changes when it comes to hospital payments.

“The biggest problem is affordability,” he said. “Patient-friendly billing has been around a long time.”

Indeed, the average hospital balance for a consumer stands at $980, he noted. He added that most consumers don’t have room to spare even an extra $400 at any given time. As recent PYMNTS and Flywire research confirmed via “The Changing Landscape Of Healthcare Payment Plans” report, patients who did not pay their debt and had no plans to do so faced the highest out-of-pocket average of $758. As the research also found, patients are now responsible for about 30 percent of medical treatment costs, and hospitals collect only about 30 percent of that amount.

“That has a major downstream impact,” Talaga said.

However, data analysis can help change that. As he spoke with Webster, Talaga argued for the greater use of data-analysis models that enable hospitals to better determine the repayment capabilities of specific patients. These models could also lead to more discounts and promotions, should those payments be made closer to the beginning of the hospital experience instead of long after services are rendered. Such a model might, for instance, come up with an offer for a specific patient that calls for $100 installment payments over six months, he said.

Retraining Aspect

That will require some work on the part of hospitals, though, and some meaningful changes for most of them. As Talaga told PYMNTS, the hospital departments ultimately responsible for payments are typically divided into two parts: the people who actually speak to current and former patients about collecting what they owe, and the people charged with making hospital appointments and handling scheduling. The first group has training and experience with the sensitive task of collecting overdue bills; the second group does not. As Talaga noted, there is a retraining aspect involved with better collecting payments in the hospital space.

New approaches to hospital payments should also center around the concept of consumer loyalty — something akin to what airlines do with frequent-flier programs, Talaga said. He didn’t say that in a way meant to be crass or glib (airline flights are much different from medical procedures, of course), but as a way to put forth the idea that offering more data-backed and patient-specific payment plans could result in more consumer loyalty. Hospitals are already in the consumer-loyalty business, after all — if one goes by their marketing and fundraising campaigns.

Patients are very likely to respond. As the PYMNTS-Flywire research demonstrated, 89.8 percent of respondents said they would be willing to consider using a payment plan in the future, doubling the current rate of usage.

“If we could leverage the payments part of it, like giving [consumers] points for paying on time,” Talaga told Webster, talking about the hospital consumer experience, “that could help drive loyalty to hospitals.”

Of course, the problems with U.S. healthcare involve much more than just the payments side of it, as he acknowledged during the PYMNTS discussion. “Payment plans aren’t the only answer,” Talaga said. Yet, as healthcare costs continue to soar, and as more hospitals lose patience with patients who don’t pay on time, it is becoming ever-more clear that payments are a big part of whatever solutions will help to fix things.