Change and uncertainty in healthcare are hardly new phenomena, but the industry today appears to be experiencing a period of especially significant transition. Beyond the impact of ongoing policy debates and legislative and regulatory shifts, trends like changing demographics (including an aging patient population, and the emerging cohorts of millennials and Generation Z), increased spending, new models of care delivery, healthcare consumerism and social sharing and rapidly advancing technology are all having a profound effect on healthcare in the U.S.
This content is sponsored by CareCredit.
One trend in particular is already having a pointed impact on care providers of all sizes, from small, independent practices to the largest health networks. Rising out-of-pockets costs are shifting responsibility for payment from traditional payers like insurance companies to individual healthcare consumers. This "payment shift" is affecting the way patients make healthcare purchase decisions, but it also has serious implications for providers, influencing financial policies, patient communications and approaches to billing, collections and revenue cycle management. Fortunately, providers who recognize this transition and take steps to adapt can navigate it successfully and continue to thrive.
Rising cost
Healthcare spending overall in the U.S. has been on a growth trajectory that shows no sign of slowing. CMS projections released in February anticipate 5.5 percent annual growth through 2026, reaching $5.7 trillion by that point.1 This increase is expected to outpace that of gross domestic product, driving healthcare spending to nearly a fifth of GDP (19.7 percent) in 2026.
More tellingly, the share of costs that individuals are paying continues to rise. In addition to premiums, copays and coinsurance for health insurance coverage, deductibles are a major source of out-of-pocket costs for many healthcare consumers. Data released in February by the CDC show that enrollment in high-deductible health plans increased substantially in the first nine months of 2017, from 39.4 percent in 2016 to 43.2 percent in September 2017 (among individuals aged 18 to 64 with private health insurance).2
According to an annual survey by the Kaiser Family Foundation, premiums for individual employer sponsored coverage rose 4 percent, on average, in 2017, more than both wages (2.3 percent) and inflation (2.2 percent).3 The average employee contribution for this coverage was $1,213, and the average deductible (for individuals with a deductible) was $1,505, with the majority of covered employees (51 percent) having a deductible of $1,000 or more. This represents an increase of 37 percent in just five years (up from $1,097 in 2012), and 148 percent over the past decade (up from $606 in 2007).
Pressure on patients — and providers
Rising costs may be inherently concerning and suggest issues to be addressed in the current healthcare system, but they also have a pointed impact on many patients and providers. In some cases, cost can be a significant barrier to receiving care, leading individuals to delay or decline treatment due to concerns about cost.
According to the Federal Reserve, 44 percent of Americans could not cover an unexpected expense of $400 without borrowing or selling something, and the average cost of an unexpected major medical incident is $1,000.4 In an ambulatory surgery scenario, procedures can often be planned well in advance, allowing patients time to prepare financially for the expense. However, this can mean delaying treatment, which can affect health, quality of life, and potentially impact an individual's earning power (e.g., if deferred surgery affects strength or mobility).
For providers, the impact of high out-of-pocket costs goes beyond seeing patients hesitate to move forward with recommended treatment in a complete and timely way, which can affect care quality and outcomes. Delayed or declined treatment also has a financial impact, representing lost or decreased revenue that can affect a practice's profitability, growth or even viability. When patients receive treatment and subsequently struggle with out-of-pocket costs, providers may need to wait longer and devote additional effort to collect payment. In fact, 73 percent of providers say it takes them a month or more to collect balances due.5 In many cases, this additional burden falls on staff members, who may need to devote significant time to paperwork, billing calls and administrative duties rather than spending time with patients and contributing to care.
Even in a best-case scenario, collecting new or larger fees directly from patients represents a shift from traditional revenue models, which focus largely on insurance reimbursement. Surgery centers, hospitals and other providers typically are not structured to function as consumer financial organizations and may face challenges when adapting practices or instituting new policies such as collecting payment prior to service, optimizing post-care collection processes, or even openly discussing patient financial responsibilities.
Innovation and opportunity
As with most major changes, the healthcare "payment shift" from third-party payers to patients is creating new opportunities in addition to challenges. Providers who recognize the transition that is underway, and embrace new approaches and solutions aligned to the current industry reality, can actually strengthen patient relationships, sustain or enhance care quality and achieve business success.
One positive aspect of assuming greater responsibility for care costs is that patients may feel more engaged in their own healthcare and play a more active role in making decisions about care. As technology advances and new treatments become available, patients may have more and better options for healthcare, and many may proactively look for ways to improve and maintain their health and wellness.
Especially when healthcare expenses are planned, rather than unexpected, patients may see them as an investment in themselves. Many ASC procedures can be viewed this way, and providers who help patients understand, prepare for and manage their investment in a life-enhancing procedure may do well, both in terms of patient satisfaction and financial impact. In addition to simple steps like being transparent about costs, sharing this information up front and establishing and communicating clear financial policies, providers can offer solutions to help patients manage out-of-pocket payments, which has been CareCredit's focus for more than 30 years.
Essentially, many healthcare expenses have become like other large, planned purchases and can be underwritten and financed. With special financing options from CareCredit, patients can purchase healthcare services or products today, and make monthly payments over time.* Because CareCredit is a dedicated credit card for health, wellness and personal care expenses, cardholders also enjoy a dedicated credit limit they can use to pay out-of-pocket costs for themselves, family members or even pets. In addition to receiving payment in two business days, providers who accept CareCredit have access to useful resources like the Pay My Provider portal, which allows them to accept online payments easily, and even share a custom payment link with patients.
Making the shift
While ongoing change is likely the only certainty in an industry as complex, large and essential as healthcare, providers who see today's landscape clearly and make the most of current trends will be in a strong position for sustained success. While patients and providers alike may not welcome the "payment shift," new solutions can help them navigate this transition effectively together, partner more closely in an engaged and empowered approach to care and work toward positive outcomes all around.
*Subject to credit approval.
References
1National Health Expenditure Projections 2017-2026, Centers for Medicare & Medicaid Services, February 14, 2018
2Health Insurance Coverage: Early Release of Estimates From the National Health Interview Survey, January–September 2017, Centers for Disease Control and Prevention, National Center for Health Statistics, February 2018
32017 Employer Health Benefits Survey, Kaiser Family Foundation, September 19, 2017
4Federal Reserve Board, Report on the Economic Well-Being of U.S. Households in 2016, May 19, 2017
5InstaMed, Provider Healthcare Payment Survey 2017, conducted by LHK Partners