The Rise of the Healthcare Consumer
Healthcare costs have risen for decades, leaving patients with higher out-of-cost expenses. These costs combined with high-deductible health plans and a large uninsured population clearly demonstrate the financial burden patients face today. This is reflected in the notable increase in patient responsibility. Recent estimates predict that self-payments will rise to 30% of healthcare costs within 3-5 years. For healthcare facilities, these will constitute between 20 and 30% of your total accounts receivable. All of this has given rise to the healthcare consumer, which will be explored in greater detail.
The impact of expensive healthcare costs has turned patients into healthcare consumers. Seeking medical care today is similar to shopping. Patients will seek the most cost-effective option for their care, just as a customer seeks the best deals when they are in a store. However, the patient consumer considers other factors when determining where they will seek their medical care. Convenience, level of service, and overall satisfaction with providers play a large role in determining whether or not a patient will return for additional care in the future. Understanding healthcare consumerism, the historical changes that led to it, and how to address it is necessary for providers to succeed in this new healthcare marketplace.
How Did We Get Here?
Rising out-of-pocket costs, high-deductible health plans, and a growing uninsured population are causing healthcare consumerism. The question remains: how did we get here? Beginning in the mid-Twentieth Century, the healthcare system evolved from a non-profit model to a profit-based model. This started with the growing popularity of employer-based healthcare plans. Between 1940 and 1955, the percentage of Americans covered by employer-based insurance grew from less than 10% to over 60%. By the 1960s, Cigna and Aetna were the two largest providers of employer-based insurance. By the 1980s, for-profit hospitals were more common than ever with 1 in 7 hospitals being run by private companies in 1983. The last big event in this transition is when Blue Cross and Blue Shield, the largest non-profit insurance providers, merged and began selling stocks in the 1990s.
By the early 2000s, problems were appearing in this for-profit healthcare model. A lack of government oversight allowed hospitals and providers to charge whatever they wanted for medical services. The decentralized nature of the for-profit healthcare model meant wide disparities in price and availability across different regions and states. Other factors, such as costs associated with litigation and malpractice insurance caused healthcare costs to skyrocket. The number of uninsured patients was growing as fewer employers offered benefits and purchasing health plans directly from insurance companies was prohibitively expensive. The 2009 Affordable Care Act attempted to resolve some of these challenges but had the unintended consequence of ushering in high-deductible health plans.
Nearly 40% of healthcare visits cost between $500 and $1000. With 43 million people already carrying medical debt, seeking affordable healthcare is not just a challenge for low-income individuals. Federal Government research has shown that healthcare costs are rising faster than American wages. Between 2018 and 2019, average employer-provided premiums rose by 4%, with family premiums increasing by 5%. In contrast, worker wages only increased by 3.4%. More than 50% of adults reported that they’d skipped medical care due to costs. From a macro point of view, high deductible health plans will continue to be popular because of their low premiums. Healthcare facilities can expect rates of patient self-pay to continue increasing. With this in mind, complicated payment systems can lead to reluctant healthcare consumers, confusion over financial responsibility, and a propensity to pay slower.
Challenges for Providers and the Future of Consumer-Oriented Healthcare
High-deductible health plans have financial implications for healthcare providers as well. Recent estimates show that providers may receive as little as 18 to 34 cents per dollar billed, due to administrative costs alone. The high occurrence of late or missed payments from patients continues to impact this struggling system. Oftentimes, healthcare facilities erroneously approve medical procedures that are not covered by a patient’s insurance. And, 10% of patients at in-network hospitals are treated by out-of-network physicians. Predictably, this results in surprise bills with long payment periods. In order to combat the systematic challenges of collecting healthcare payments, providers need to start thinking like retail. Fortunately, there are a variety of technological options that can simplify patient self-pay for providers and consumers alike.
Utilizing technology is the best way for providers to alleviate these challenges. It all starts with optimizing the patient experience that keeps your patients engaged. Establishing a clear, convenient, and fair collections process will go a long way in helping these initiatives. In terms of patient engagement, digital payment options reduce the effort for patients and allow them convenience in terms of the timing and location of their payments. Many experts are also promoting options like pre-pay before planned medical costs and 0% interest payment plans for expensive procedures. It is expensive and burdensome to build these systems in-house. Many providers are turning to qualified partners who work with them to optimize their collections process and optimize the patient experience.
Healthcare consumerism will be the norm for the foreseeable future due to a lack of alternatives, such as a single-payer system. Providing your patients with outstanding service, convenience, and reasonable payment options is the best way for your practice to succeed. In future posts, we will outline more steps you can take to effectively serve your patients while bolstering your practice’s financial health.