Healthcare’s Payment Plan Problem

By Tomer Shoval

Hospitals and healthcare providers must do better when it comes to providing patients with realistic payment plans for medical bills.

At a time when patient out-of-pocket costs have skyrocketed, systems need to structure repayment options more like customized auto, home – even basketball season ticket – payment plans. By better matching payment terms to patient financial realities, health systems can make healthcare more affordable and their own operations more lucrative. 

Healthcare’s One-Size-Fits-All Default Plan

Hospital revenue cycle leaders have historically struggled with how to manage patient payment plans. For some, it is a critical consumer-centric tool in an era of high patient out-of-pocket costs, while others consider it an unnecessary lengthening of the collections cycle.

Caught between these two poles, most health systems opt for the industry’s default ten-payment plan as a one-size-fits-all option. When you consider that out of pocket costs can quickly escalate into the tens of thousands of dollars, this leaves patients with monthly obligations more akin to mortgage or auto payments.

Simplee‘s own analysis of billions of dollars in healthcare payments under management found that the optimal monthly payment amount is $120. To close this gap, hospitals must re-evaluate their payment options. By clinging to the default, hospitals are forcing patients to choose between avoiding care or defaulting on payments…neither of which is good for a hospital’s bottom line.

Just as basketball teams like the Orlando Magic now recognize they will attract more fans with payment options that meet broader needs, so too can health systems succeed in collecting a higher portion of their patient balances with a similar approach.  

Here are three key factors to making payment plans work for your health system.

Tailor your approach

Even within the optimal $120 monthly healthcare payment, there is wide variation with some struggling to pay as little as $50 a month while others can easily handle a $500 bill. To match each patient with their right monthly payment capability, hospitals must take advantage of new data analytics technologies. It is possible to leverage outsourced or off-the-shelf solutions to offer customized payment terms using available data points such as past payment behavior, insurance details, bill size, demographics and other healthcare relevant attributes.

Let the patients lead

Consumers have become accustomed to convenient, self service experiences for paying everything from utility bills to airline tickets in just a few taps on their phone.  Meet your patients where they are with a digital-first, self-service experience that allows them to view payment plan options online or on their smartphone, and evaluate them when convenient instead of having to call your staff or wait for their appointment to discuss options.

Set it and forget it

When patients set up a payment plan through self-service, allow them to complete the process by putting a payment method on file to enable automatic monthly payments. Seventy-five percent of patients have already made it clear they are willing to leave a card on file for automatic payments of less than $200. By doing so, providers can experience over a 95% collection rate on automatic payment plans without the administration expense of trying to collect each month from the patient.

The strategy is simple – offer patients an automated, personalized payment plan that meets their budget – yet powerful. In our experience, providers that avoid the default and embrace this consumer-centric approach, the rewards are immediate: a 10%+ increase in collections for the provider and 20%+ increase in patient Net Promoter Score. When you consider those results, the real question about payment plans is can you afford to not do them well?

Tomer Shoval is CEO and Co-founder of Simplee, healthcare’s leading technology platform for patient financial engagement.