Patients as the New Payer: Five Opportunities to Improve the Patient Financial Experience

Patient collections have become an increasingly difficult challenge for hospitals due primarily to a shift in payer mix. Because of rising deductibles and increased patient responsibility, patients are now a hospital’s third largest payer, just behind Medicare and Medicaid.1 Today, patients account for up to 35% of a provider’s revenue stream.2

Nearly one in five individuals in the U.S. has medical debt in collections 4

Faced with high premiums, deductibles, and copays, patients often have no choice but to borrow money or pay with a credit card. The average premium for employer-sponsored family coverage increased 43% over the last ten years, while the average deductible for single coverage increased 61%.3 According to the JAMA Network, nearly one in five individuals in the U.S. has medical debt in collections, and the total amount of medical debt owed is $140 billion.4

38% of Americans put off care in 2022 because of costs.5

When patients can’t afford the care they need, they often delay getting medical attention. A recent Gallop poll found that 38% of Americans put off care in 2022 because of costs, up 12% from the previous year.5 When patients forgo necessary care, they can experience complications that negatively impact outcomes and drive up preventable hospitalizations and expensive visits to the emergency department.

An Outdated Revenue Cycle

One of the challenges hospitals face in this new patient-as-payer reality is that revenue cycle was designed around payer reimbursement, not patient payments. Collecting from patients was somewhat of   an afterthought, with patient statements going out weeks or months after a service is provided. With patients now owing more of their own healthcare cost, reactive collection practices mean hospitals have to chase revenue on the back end, which is both inefficient and ineffective. Just six percent of patient balances over $200 are ever collected.6 What hospitals need is a new revenue cycle model that improves the patient financial experience and makes it easier for them to pay.

Redesign the Patient Financial Experience

In a 2021 consumer experience study, nearly 40% of participants said they were dissatisfied with provider billing, and 53% said understanding their coverage and what they owe is stressful.7 Another survey found that 63% of patients would switch providers for a better payment experience.8 And yet another survey found that 93% of consumers think the patient billing experience is an “important factor” when determining whether to go back to the provider.9

One of the most effective ways to improve the patient experience is with patient financial engagement (PFE) technology. According to a report by KLAS, the top PFE solutions include a patient payment portal, electronic statements, text-to-pay, text message reminders, and interactive voice response.10 Providers who were first to use these technologies say they saw a “near-immediate” return on their investment.11

Embrace Price Transparency

Although the CMS hospital price transparency rule has been in place for more than two years, few hospitals are fully compliant—by some estimates, just 16%.12 Many have posted prices, but more than half have missing or incomplete data. While there is still a great deal of confusion and lack of clarity around regulation, hospitals would be wise to move forward with initiatives that promote price transparency throughout the patient financial experience. One example is offering patient responsibility estimations.

By providing estimates in advance of treatment, patients can make more informed decisions.

By providing estimates in advance of treatment, patients can make more informed decisions about how to pay for the care they need. Likewise, it allows hospitals to make payment plan arrangements before or at the time of service or discharge. Patients appreciate the transparency and the ability to have more control over their healthcare costs.

Offer Patient Financial Counseling

Along with the tools to make it easier to pay, patients need to understand what financial options are available to them. This includes financial assistance and charity care. Propensity-to-pay analytics can help identify the best resources for the patient. Hospitals should go a step further than just telling patients about their options; they should also help them navigate the often confusing process of applying for assistance. By helping patients get the financial help they need, hospitals can reduce the amount of bad debt written off while improving patient satisfaction scores.

Provide Patient-Friendly Payment Plans

When patients have to pay healthcare bills with a credit card, they can incur high-interest rates and terms that make it hard to ever pay the bill in full. In the end, patients can end up paying substantially more than the original cost of the service. And single households can end up putting charges for additional family members on credit as well, leading to high monthly payments and growing debt.

To help patients avoid the credit trap, hospitals should offer flexible payment plans at reasonable rates or no interest.

To help patients avoid the credit trap, hospitals should offer flexible payment plans at reasonable rates or no interest. Plans should be customized to each patient’s unique financial situation, and they should be able to add future charges, as well as charges of family members, to the plan.

Offering payment plans reduces the likelihood of unpaid balances being sent to collections or written off down the road. And when patients know a hospital is willing to work with them so they can afford the care they need, it’s an opportunity to earn patient confidence,  patient satisfaction and loyalty.

Consider Outsourcing

For many hospitals, outsourcing patient financial processes can be helpful, especially for those with limited resources with which to hire new personnel or invest in PFE technologies. One of the most significant benefits of outsourcing is that it helps relieve stress on already overworked staff. Outsourcing even a portion of the revenue cycle can help, such as working down backlogs or focusing on high-dollar collections.

Outsourcers often have access to a larger pool of revenue cycle experts and more advanced patient financial experience technologies. In this way, hospitals receive all the benefits of the technology without large IT investments.

Reinvent the Revenue Cycle

Hospitals are under unprecedented financial stress. With patients now responsible for up to a third of a hospital’s revenue stream, creating new revenue cycle processes that match this new reality is more important than ever.


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