Dysfunctional patient billing is a major distraction for both patients and clinicians, according to recent research conducted by HIMSS in partnership with OODA Health. The research report reveals patients are distracted by bills and payment concerns resulting in a lower level of compliance and adherence to medical plans. Clinicians are distracted by clerical/financial tasks that limit time with or take time away from patients. This research complicates the simple construct of patient billing as primarily a patient-provider issue, implicating the payer and connecting dysfunctional patient billing to clinical care.
State of Patient Billing Today
Today’s current state of provider billing is mapped to contracting and billing relationships, not to how the patient experiences care. For a single hospital visit, a patient may receive a half-dozen bills depending on his providers’ contract and billing relationships. From the patient’s perspective, it’s one episode that confusingly generates five bills from different entities.
High-deductible plans are the norm, and patients are buckling under the financial and cognitive burden. Today, 50 percent of workers now have health insurance with a deductible of at least $1,000 for an individual. The patient receives EOBs from the payer that (theoretically) match with the bills from the provider(s). But, in practice, they often don’t, leading to further confusion.
As a result, 72 percent of patients are confused by their explanation of benefits and 70 percent are confused by their medical bills. Additionally, 65 percent of patients would switch to a new provider if the payment experience was easier. To make matters worse, patients often get re-billed, resulting in billing noise that drowns out real bills and erodes their trust in billing accuracy.
How Did We Get Here?
Today’s current crisis arrived through a series of both intentional and unintentional steps. The introduction of high-deductible plans was intentional, as employers and insurers increased patient cost-share as a way to reduce premiums and incentivize consumer shopping. However, the administration of these plans was unintentional, as providers, without changes to their contracts, were suddenly on the hook for collecting large patient balances and now needed to act as patient educators, collection agencies, and banks.
These issues have forced providers and vendors to figure out how to advise patients on insurance enrollment, benefit education, and financial services; to design, underwrite, and administer payment plans; to provide omnichannel patient engagement and payment platforms. Currently, patient payment is primarily understood as a patient-provider issue. Patients struggle to pay and manage their out-of-pocket liabilities, leading to bad debt. Simultaneously, providers experience declining revenues and are ill-equipped to manage patient payments.
67% of Providers Use Patient Collections to Justify Rate Increases
These challenges, however, have enormous financial implications for other parts of the system. As the expense of provider bad debt moves around, it is now being used in payer negotiations to justify higher rates. This indicates that nonpayment is at least partially baked into the negotiated rate, prompting payers to cost-shift to the patient further in an effort to curb medical trend and keep premiums low.
The report finds 63% of payers cite the top consumer insight they wish they had is how plan complexity affects consumer comprehension and subsequent utilization. Today, the average health insurance deductible for covered workers increased by a whopping 212% from 2008 to 2018. As a result, 67% of providers now use patient collections as a justification for rate increases in payer negotiations, with 21% using prominently.
Payers Split on Their Assumptions of Patient Payment Behaviors
The research finds that actual data on what patients pay is currently unavailable to health plans. As a result, payers design plans based on what patients owe rather than what patients pay, leading to suboptimal products. Evidence of this lack of insight is seen in the wide range of what payers assume patients pay as a percent of total cost-share when designing benefits.
This lack of insight is symptomatic of a more fundamental disconnect within the payer. The research finds that member satisfaction at least moderately drives plan design and pricing decisions, and yet plans acknowledge that members are often not satisfied with their plans.
This disconnect alludes that payers would benefit from additional insights into how members experience and respond to their benefit designs — insights that, to date, have been primarily visible to providers.
The Bigger Picture
As payers and providers fight over patient bad debt, patients are often left holding the bag. Patient experience is a side consideration at the mercy of fragmented billing operations and antagonistic relationships. A patient payment solution that doesn’t break the vicious, underlying cycle of nonpayment and rising deductibles will only ever be a partial solution. This system problem requires a system solution that realigns incentives across stakeholders around comprehensible, smart plan designs, and intuitive patient experience.
Why It Matters
“Provider billing is mapped to contracting and billing relationships, not to how the patient experiences care. From a single hospital visit, a patient could receive five or six bills, depending on their providers’ contract and billing relationships,” said Seth Cohen, president and co-founder, OODA Health. “The research findings reflect what we have been seeing in the market – patients are struggling to pay and manage their medical bills, providers are ill-equipped to manage patient payments, and a lack of insight creates a disconnect with payers. This creates a vicious cycle of bad debt and higher deductibles, while also negatively impacting patient care. It is a system-wide problem and we need a system-wide solution to fix it.”
HIMSS Media conducted two surveys — one provider, one payer — on behalf of OODA Health. Both were blind, online surveys. OODA Health was not identified as a sponsor of the research. The study surveyed qualified respondents from U.S. hospitals and health systems as well as qualified respondents from health insurers, payers and health plan administrators, during June 2019. One-quarter of those surveyed hold C-level titles.