As if the news of record-breaking hospital bankruptcies and healthcare worker burnout weren’t enough to shine a spotlight on the importance of revenue cycle management, click around to GoFundMe for more evidence of the impact of the healthcare affordability crisis.
“GoFundMe has become a go-to resource for patients looking to escape the nightmares of medical billing,” writes Elisabeth Rosenthal, an emergency physician turned health journalist, in her recent article in The Atlantic. Medical fundraising is the most common category of fundraising offered on the platform, the author writes, even going so far as to say that some health finance professionals actually suggest its use.
The healthcare payment system is complex and there is no solution to affordability. But there Is There is widespread agreement that health systems need to take new paths. And the latest Deloitte survey of healthcare CFOs shows that these leaders are looking for effective levers to reduce costs and improve profitability, including improving the revenue cycle and improving their offerings.
Internally managed payment plans – which are widely used today – no longer meet today’s patient needs. Providers are limited in the amount of time they can keep these receivables on their books, and plans are typically designed for 12-month terms. This doesn’t work for most patients with balance. More than half (56%) need more than 12 months to pay off their balance and require longer-term payment plans.
Embedding patient financing options into the billing process provides a very clear solution for providers and patients to balance affordability and increase collectability. Simply put, patient financing provides patients with longer payment terms to meet their financial responsibilities, allowing more patients to pay what would otherwise result in bad debts. Vendors that adopt it see immediate results by freeing up money tied up in the A/R bill for reinvestment. Patients are provided with options to reduce the financial burden of medical debt.
Patient financing is rapidly evolving from traditional medical credit cards and other financial vehicles and mechanisms that providers and patients may be familiar with and which are now drawing the attention of federal regulators. The CFPB is studying the role of credit cards and medical loans to develop rules that will relieve consumers’ medical debt, particularly to exclude medical debt from consumer credit reports. (States like Connecticut are taking even more aggressive steps, working to eliminate the medical debt of thousands of residents.)
These traditional options offer less favorable terms for people with little ability to pay and are limited and inflexible. Patient financing is also not the same as the “buy now, pay later” point-of-sale products that consumers may be familiar with.
Patient financing is intended to offer better and longer conditions to those most in need. Conflating patient financing with these other options can cause confusion and delay strategic purchasing decisions.
A good first step is to debunk some of the biggest misconceptions about patient financing – which is what I’ll do here.
What misconceptions are holding back the introduction of financing options for patients?
Myth: Patient financing is the same as “buy now, pay later.”
Patient financing is sometimes associated with another financial product – Buy Now Pay Later (BNPL). The no-questions-asked point-of-sale line of credit has come under fire for both its potential impact on consumers’ financial well-being and the sustainability of BNPL businesses. It is the exact opposite of patient financing.
There are two reasons.
- They enable very different business goals. The end goal of BNPL is to increase the average basket price for the retailer. The retailer then receives the full amount of the unsecured, very short-term loan (six weeks) for a low-cost purchase (average $135). If consumers do not pay on time, interest accrues. Patient financing is a viable option if the hospital is one not will likely receive the full amount of the bill and will likely be forced to write it off as bad debt. The patient is most likely not choosing to “purchase” and has little to no control over the actual cost – and would benefit from a longer term (without threat of interest) for repayment.
- They operate according to very different business models. Remember that BNPL providers finance the entire purchase price upfront. That’s why she Charge merchants a transaction fee, and consumers will then be charged a flat late fee or a high interest fee if they fail to make the payment due in accordance with the terms. Patient financing, on the other hand, funds providers for a reduced part of the outstanding claims.
Fact: With the right partner, patient financing is not BNPL. It is tailored to the complexity and unique economics of the healthcare industry.
Myth: Patient financing comes with high, unclear interest rates.
“Consumer-friendly” is not a moniker for typical installment loans and medical credit cards. This is primarily because they use the traditional criteria that patients consider creditworthy. As a result, the loans come with high or unclear interest rates, high rejection rates, and uniform payment terms. They are not ideal for providers as they are often recourse based and prevent providers from clearing the balance on their books.
Therefore, it is not surprising that when healthcare finance executives are asked what the most important components of patient financing are, they demand that they be completely different from medical loans.
fact: Patient financing should be available interest-free to all patients who need to access it. There should be no recourse and no surprise fees.
Myth: Medical financing offers push patients out of the patient portal and payment experience.
When asked what the most important aspects of offering patient financing were, the top requirements were having a partner to manage internally managed and funded plans (90%) and embedding this functionality into the patient portal (86%). Finance leaders know that the patient payment experience matters on multiple levels—and it matters to them. In fact, one of the best parts of their work is the feeling that what they do actually helps people.
The right financing partner will have extensive experience integrating software into the system of record and bringing together data in the EHR system and external data sources to create a complete risk profile and provide the patient with the right, personalized payment options online.
A provider with experience in enterprise software integration is critical to ensure:
- Everything looks the same to the patient. You click and select a plan and can enroll in minutes, without the paper-intensive process and separate applications that such financing plans often entail.
- Providers enjoy the same, optimized payment convenience. Automated cash use makes reconciliation easier. Behind the scenes, the provider should do the work of routing the payment to the right recipient – be it the provider or the company underwriting the loans – thereby streamlining the reconciliation process.
fact: Patient financing should be tailored specifically to the unique challenges and considerations of managing medical bills.
The healthcare affordability crisis has two faces – that of patients, who struggle to pay their bills and often ponder life-changing decisions when financing care, and that of providers, who struggle to stay open due to a variety of factors that are more predictable Cash flow that results in higher returns compared to traditional payment plans. Patient financing can help patients better afford their healthcare expenses while ensuring providers are able to collect payments and deliver care.
Image: MrIncredible, Getty Images
John Talaga brings more than 20 years of experience to his role as Executive Vice President of Healthcare. He has worked with hundreds of healthcare providers to develop and innovate billing and payment solutions for patients. Prior to joining Flywire, John was co-founder and CEO of OnPlan Holdings (acquired by Flywire), which launched the first automated payment plan solution for healthcare and the next generation tuition management solution for education. John also co-founded HealthCom Partners in 2001, which launched PatientCompass, a pioneer in patient-friendly billing and the first online healthcare account management solution.
After selling HealthCom to McKesson (MCK) in 2006 as the first acquisition to form RelayHealth, John led the patient billing and payments business at RelayHealth for five years before founding and leading healthcare operations for Doxo, a multi-biller payment network .
He is a member of the Healthcare Financial Management Association (HFMA), the Healthcare Information and Management Systems Society (HIMSS), and the American Association of Healthcare Administrative Management (AAHAM) and has lectured extensively there. John holds a bachelor’s degree from the University of Dayton.