“To everything there is a season (Turn, Turn, Turn)” as folk rock band, The Byrds, sang in the late 1950s—and it still holds true today. When applied to modern day healthcare payment cycles, there is a season to pay medical bills—and a time for high deductibles and out-of-pocket expenses to reset. (Ok, so it’s not as catchy as the original.)
Graphing the aggregated data, we can see the ups and downs of the patient pay cycle throughout the year. Compared to the average monthly payments across a calendar year, the number of payments received each individual month fluctuates quite a bit. The trend of most patient pay payments coming in the middle of the year is a result of both patient and insurance seasonal behavior.
The chart below includes MediRevv’s clients showing the average amount of payments and the variance from the average by month.
The green line at 0.0% represents the average of payments. The blue line represents variance from the average by month.
The seasonality fluctuations in patient payments variance are in part due to these reasons:
- When deductibles reset & more responsibility shifts to the patient.
- There’s an increase in spending (a consumer trend we see in other industries) due to $125M in tax returns distributed in the U.S. and that well-earned bonus.
- Patients go back to the doctor—assuming due to new years’ resolutions, more money to spend (see the previous comment), etc.
- Visits early in the year shift to patient responsibility 1-3 months later, resulting in the upward trend we see in March and forward.
- “Holiday hangover” occurs in fall and winter when money is spent on trips, presents, etc.
The cycle repeats each year.
As you can see, it demonstrates a lot of volatility by month at the start and end of the year, with only being above the average from March through August. This is due to a few main reasons like deductibles and out-of-pocket maximums resetting, and the corresponding patient behavior with that event. Heading into the holiday season, for instance, patients are saving up for travel and gifts and not prioritizing their medical bills. And payments rise after January when tax returns are coming in.
A balanced and steady flow of cash makes more a healthier revenue cycle, and fewer account touches for your patient experience representatives.
Patients are putting off medical payments. Employers are opting for high deductible health plans. These trends, and others, have significantly increased out-of-pocket expenses for medical bills. Large employers project that health care costs per employee will surpass $14,000 in 2018. This 5% increase over 2017 translates to employees covering an average of $4,400 or 30% of their own medical care costs. It’s not decreasing anytime soon: out-of-pocket expenses are expected to increase 5.5% a year through 2025 due to high deductible health plans. Who knows what will happen in 2026?
Patients are going to prioritize their expenses— budget and bills— based on the big picture of what is going on in their lives, and the reality is that medical expenses are often perceived as too high of a cost and not of the utmost importance to pay first—also, medical bills are sometimes unexpected or unanticipated and that makes it doubly hard to work into a tight budget.
That’s not to say patients don’t want to pay what they owe for their bills, it’s just that oftentimes there are other factors contributing to their ability to make payments.
Build financial touchpoints into the entire revenue cycle
The good news is that, as a provider, you already have plenty of opportunities to interact with your patients to answer financial questions and improve the patient experience. The goal here is to empower your patients by giving them clear information to make informed decisions about their healthcare finances. Financial transparency in healthcare improves patient trust and loyalty with individuals and within your community for your organization or practice.
Set payment expectations upfront
New year, new you—new deductible. Patient responsibility is higher at the beginning of the year, and that is when it’s most important to collect at point-of-service. Train your staff on the front-end of the revenue cycle to make clear payment expectations by asking upfront.
For larger balances that the patient requests a payment plan for, leverage automatic payments. Other industries have been using autopay options for years, so your patients are likely familiar with the concept. As patient responsibility for out-of-pocket medical expenses continues to climb (25% of all medical revenue currently) it’s imperative to collect money from the patient and as a provider, it’s also important to reduce the cost of collecting. Automatic payment plans accelerate accounts receivable, reduce the overall cost to collect, reduce bad debt risk and improve the patient experience.
Billing support staff can set up patient payments for an agreed upon amount at the point of service for future statements. Once the initial agreement is set up, future statements with balances less than or equal to the agreed-upon payment amount will be auto-paid. For statements over that amount, AutoPay will send an email confirmation for the patient to "green-light" the new amount or it will just charge the agreed-upon amount for that statement. New statements are automatically added to the plan if it meets the criteria that the patient agreed upon.
Offer prompt pay discounts
The industry shift to get patients in the mindset to pay upfront is a slow one. The Advisory Board conducted research showing that 44% of hospitals currently offer a prompt pay discount, which means that 56% do not. A 20% discount is standard.
Forward-thinking organizations even send a pre-encounter statement. It looks like a patient statement but is sent in advance of the visit. The pre-bill identifies each aspect of billing, shows the total patient obligation, explains each change, and includes personalized notes for each patient’s unique circumstance.
Improve payment tools
Medical price estimates are becoming a necessity to meet the demands of consumerism. No one wants to haggle over their medical bills like they haggle over the MSRP price of a new car—Frankly, no one wants to haggle over the price of a car either in this day and age. The buyer or patient rarely comes out with the better deal, and financial uncertainty raises the level of unease among your patients, which impacts the patient experience.Offer your patients options such as:
- Mobile payment reminders
- Easy to use self-service payment portals
- Multiple payment plan options
The less information your patients need to enter into a portal, the easier it is to pay especially in those busy and stressful times of year like the holidays. If it’s quick and convenient to pay through the patient’s preferred method, they are more likely to pay and in a timely manner.
Research your patient demographics and preferred communication channels
As an industry, we must begin to think of the patient as the payer. Many industries understand their customers preferences, and while healthcare reaches every single demographic, your particular geographic footprint, specialty areas, and financial status levels of patients are unique to your organization.
In order to stay profitable, it’s a good plan to research your patient segments and use technological resources to understand your data, and then implement changes to improve your revenue cycle processes and collection strategies. Once you have an informed understanding of your patient preferences and set desired outcomes and goals for your organization, guiding your patients to adopt technology becomes easier.
For instance, you may want your patients to:
- Make payments online
- Enroll in payment plans
- Pay on the first statement cycle
- Enroll in electronic statements
Take into consideration that there are currently three generations of Americans within the healthcare system, and implement new technologies to engage your patients—how they want to be engaged.
The bottom line
As patient responsibility rises, so do patient expectations for quality of care and the desire for transparent billing information. Building trust with your patients by offering clear, concise billing statements and multiple, automated options to pay their healthcare bills can mitigate some of the ups and downs of seasonality in the pay cycle.
Empowering your patients with financial education regarding deductibles and out-of-pocket expenses creates savvy, loyal healthcare consumers— and your patients will be engaged and satisfied throughout the entire year—season to season.