Why Can't US Healthcare Services Be More Like Retail?

 Why can’t US healthcare services be more like retail?

Every day, in all corners of the globe, commerce occurs quickly, efficiently and electronically.   Consumers purchase products and consumer services that, the vast majority of the time, are paid for in full at the time they are consumed.  In some cases (as in hotels and car rental services) consumers don’t know how much they will owe at the time they begin to consume the service.  However, they don’t check into a hotel, or drive away with a rental car, without having made some payment arrangement that gives that hotel or rental agency a high degree of assurance that the service that they are about to provide will ultimately be paid for.   Why then are US healthcare providers never paid for over 50% of what is owed to them by their insured patients and more than 80% of what is owed to them by their uninsured patients?1 

The difference is that, unlike retail, hotel or car rental, the ultimate cost of healthcare, isn’t decided at the time of service based on the provider’s fee schedule and the services a patient consumed.  The actual cost for an insured patient’s healthcare service, and ultimately what a patient will owe, is decided after services are rendered, the provider files a claim and that claim is adjudicated.  A complex calculation must be performed that takes into account the contracted service discount the insurer has negotiated with that provider, the specific covered benefits under that patient’s insurance plan, the patient’s deductible and co-payment requirements.  That is the first point at which there is a final determination of what the insurer will pay and what the patient will owe.  Once a healthcare provider receives that determination they have an amount to actually bill a patient.  At that point, they begin waiting for the patient to pay them for the services that they rendered 30 or more days before.  In the US healthcare industry today, patient accounts receivables represent 15%-30% of the $1.9 trillion spent on healthcare each year, and the patient collection cycle averages three months or longer.1

Another key difference is that in the retail market, when a consumer purchases a product or service, the provider of that service has no expectation of any other party paying besides that consumer.  A retailer doesn’t let a consumer leave his premises with goods unless he has a valid payment method for the full amount of service.  In healthcare, because third parties frequently pay some portion of a patient’s service, one of the most important things to know is whether the patient is covered on the day of service by some form of insurance. While a patient may have an insurance ID card that does not mean that they have benefits at that time.  The patient’s benefit status could have changed and the patient may no longer be covered by that plan.  A provider has to verify on each visit that the insurance listed on the patient’s card is still active.   Frequently, in order to get this information, the healthcare providers office needs to spend time on the phone with the patient’s insurer to obtain this information.  Failure to check the patient’s insurance status may leave a healthcare provider in the position of having a patient that consumes services without paying and the provider learning after the fact that the patient is solely responsible for all of the balance owing.  The provider then may bill the patient and never collect.

Technology exists today that brings healthcare providers the same type of processes used in the retail, hotel and car rental industry, to healthcare.  Through a card swipe terminal, similar to what is seen in retail stores, or through a card swipe reader attached to a PC accessing a website, provider’s offices can verify a patient’s insurance benefits, from all major national carriers and government programs, in seconds.  The response not only allows a provider to know whether the patient’s insurance is active, but also the general makeup of the insurance plan.  The response lists any co-pays that the patient may have.  It provides information identifying in network and out of network benefits, individual and family annual deductibles, amounts of deductible met to date, co-insurance percentages, annual visit maximums for certain services, pre-certification requirements, as well as other data.  Based on whether any of the deductible had been met, the provider’s office would have a fairly good idea, for example, if the patient would primarily be financially responsible for the visit that day. 

Through this innovative technology, a provider’s office can collect any amounts that the patient would be paying that day via credit, debit or HSA card, as well as by check.  Check payments processed through the system are converted electronically for direct deposit into the provider’s bank account so that they do not have to be physically brought to the bank.  For patient’s that haven’t met their deductible, have co-insurance on their plans, or may have amounts owing after a claim adjudicates, this technology allows a provider’s office to accept a patient’s payment information securely into the system so that when the final amount a patient owes after adjudication is determined, it can be automatically collected from the patient’s preferred payment method, based on the patient being provided a maximum amount estimate of liability determined from the insurance eligibility message.  The actual collection of the patient’s payment is triggered based on the remittance data received from the patient’s insurance.  There can also be various options available for the interface of remittance data into a system. For larger, expected patient responsibility amounts, known or unknown at the time of service, a system can allow the provider to enter into payment terms with the patient, at the time of service, if desired.  The system can then automatically collect any balances owed over a pre-agreed schedule. 

Technology exists today that allows a healthcare provider to achieve  shortened patient accounts receivable cycles, increased cash flows, lower uncollectable balances, and decrease write-offs.  Leveraging this technology, healthcare providers can achieve retail healthcare.