In this episode, we are joined by Chris Cox, Senior Vice President of Product and Strategy at iVita Financial, to discuss the results of a study regarding payment preferences and concerns and implications for health systems.
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Highlights of this episode include:
- Why this study was conducted and who was surveyed
- Key findings around patient perceptions of health care payments
- How patients pay for health care.
- Third-party loans
- What to look for when considering a vendor
- AR and the difference between perceptions
Mike Passanante: Hi, it’s Mike Passanante and welcome back to the award-winning Hospital Finance podcast. iVita Financial recently conducted research looking at perceptions of both patients and providers regarding payment preferences and concerns. Today, I’m joined by Chris Cox, senior vice president of product and strategy at iVita Financial, to discuss the results of the study and implications for health systems going forward. Chris, welcome to the show.
Chris Cox: Hey, Mike. Thanks for having me.
Mike: Great to have you here, Chris. Why don’t you start out by telling us why you conducted this study and who you surveyed?
Chris: Yeah, sure, of course. So over the years, we’ve talked with a bunch of different provider [staff all throughout the?] revenue cycle. This includes front-level staff, managers, VPs of revenue cycle, CFOs. And what we found is that, oftentimes, the messaging wasn’t always consistent when we asked them, “Hey, what do your patients think about their experience at your facility, specifically around paying for health care services?” And given this inconsistency, it kind of spawned on us that, “Why don’t we just ask them ourselves?” So what we did is we conducted an interview of roughly 400 patients, as well as over 100 hospital directors, VPs of revenue cycle, and CFOs, to really get their perspective about the revenue cycle experience and patients’ experience in paying for their health care and then kind of compared and contrasted those differences.
Mike: I love the way you did that, It’s great to see those two populations and how they perceive payments, and we’ll see some of that nuance as we go through the rest of the interview here. Why don’t you tell us what some of the key findings were around patient perceptions of health care payments?
Chris: Sure. Yeah. So it was interesting. Some of it wasn’t completely surprising, but there was some really interesting insights that we drove. One of them, which I’m really happy to see, was that roughly 50% of patients actually preferred to have a discussion about their balance and actually present a payment either pre-service or point of service. In both cases, pre-care. And that’s been an initiative in health care, to kind of drive that point of sale collection strategy. And to see that half of patients actually preferred it was really exciting. And when you broke down that 50% by the different generational groups – so think gen Z, millennial, gen X and baby boomers – I don’t think it’s too crazy to think, but we saw that your gen Z and millennials vastly preferred paying pre-service, where your gen X and your baby boomers preferred to pay when they received their first statement.
The two other things we learned: one, patients, across the board, prefer written statements, texts and emails, over phone calls. I thought that was interesting to see, that phone calls was the least preferred method of communication with patients across the board, across all age demographics, yet it’s one of the most heavily used strategies by providers to get in touch with their patients. So that was really interesting. And then kind of lastly, from the patient side, roughly 60% of patients use cash to pay for health care, which I found very surprising. And out of the 60%, 34% of those actually had to go ask friends and family for help. So it wasn’t as if they had budgeted for this health care experience and had a bunch of cash sitting in a savings account or in an HSA or FSA, and they had budgeted and planned for this. It really came down to the patients live in a cash-heavy world, and when the bill came up, in order to satisfy the obligation, they had to go through kind of an alternative route to get it paid down.
Mike: Yeah, I think patient responsibility is still something that everyone’s coming to grips with in, terms of how much they might owe. And it is a little bit surprising and maybe hard to budget for, still. So as you mentioned in the opener, you survey providers, similar types of questions, and their perceptions were not always in sync with patient responses, as we alluded to. Why don’t you tell us what you found compared to what you just spoke about, regarding patients?
Chris: Yeah, I think the biggest kind of misconception was how patients pay for their health care. And the providers that we had surveyed believe that the vast majority of patients used a credit card to pay for their services. I think that number was around 70%. Where, in reality, and I kind of mentioned earlier, patients are living in this cash world where they get paid every other Friday and they have their expenses that they have planned out for the next two weeks or for that month, and whatever they have leftover is what they have to use for discretionary spend. So that difference in– these patients aren’t using traditional forms of credit to pay their health care providers and that they need alternative sources to pay it back, I think was really powerful. And providers also overwhelmingly believe that patients wanted to pay post-care. And I don’t have the number in front of me, but off the top of my head, it was, I think, like 75% believe that patients wanted to pay when they received their first statement. And that’s aligned with how many providers have structured the revenue cycle, right? It focuses on getting the statements out, you have multiple statements, and day-one early-out vendors and the such to try and drive the majority of their collections activity. And I have the third point in here; I didn’t think it was nearly as powerful, but we found that there was a small misalignment in how providers viewed their revenue cycle as being patient-friendly. 80% of providers believe what they were doing was considered patient-friendly, while just 70% of patients viewed that same experience as patient-friendly. So not groundbreaking epiphanies here, but there is still a delta where providers believe they’re providing that really strong, patient-friendly experience, and patients still believe there’s a little bit of work to do.
Mike: Certainly, when you compare the health care experience to other aspects of what consumers do and how they buy things, it’s different, right? And I think that that maybe makes up some of that delta there.
Mike: So one of the other interesting aspects of the survey is you looked at and asked these providers, how are they going to address some of these issues, right? So first, what I want to do, Chris, is ask you to talk a bit about hospitals and how they plan to address patient payments going forward in terms of the top programs they’re planning to implement in 2022.
Chris: Okay, sure. So we conduct a survey every year with hospital CFOs just to try to understand where is the market going, what are providers and CFOs thinking about and trying to budget for next year’s change management? And this was actually the first year we had done the patient survey alongside the CFO survey. But we were pleasantly surprised to see a positive trend in migrating over to digital strategies. And when we conducted this at around the same time last year, it was all about COVID, and it was all about, “How do we prepare clinically? How do we prepare from the payer side? Do we just halt our revenue cycle altogether and sending statements?” That went away and it was more forward-thinking, and, “I need to create a digital experience for my patient.” We saw a 13% increase in interest in improving the digital and self-service payment options for patients, and roughly a 5% growth in interest in online payment tools and patient portals. And part of that, I think, is going back to the understanding that patients don’t necessarily want to interact with a human. I think you’re seeing that across a bunch of different industries, where self-service is becoming more and more important for creating a positive consumer experience. So having the ability for patients to understand what they owe and then plan accordingly and making payments on that balance in a manner that is comfortable to them, on their time, is really important. And I think hospitals are recognizing that and starting to drive those initiatives forward at their own facilities.
Mike: Chris, earlier you had mentioned that a lot of the payments are cash-centric but patients may need other ways to finance the balances that are due, and one way they do that is through third-party loans, which is a fast-growing initiative. What do hospitals think of them?
Chris: Yeah, no, it’s interesting, right, because I had mentioned earlier, a lot of patients at these hospitals don’t have access to traditional credit markets, right? They’re not pulling out their platinum American Express cards and paying for treatment. Providers increasingly need to have alternative payment plans and financing programs, because as these deductibles increase and balances continue to increase, patients don’t budget for this and they need help paying for it. So it’s an interesting question. Only 25% of providers that we polled use a third-party loan. But of those providers who did, 85% of them indicate that it is an extremely effective collection strategy to drive cash collections and basically reduce [liability?] off their books. And depending on what kind of program you use, it’s a great tool because it doesn’t require a ton of overhead. The staff at the provider can facilitate or introduce the plan or financing option to the patient and basically offload all of that work and overhead, in not sending statements, not making phone calls, and almost divorcing the clinical and patient financial experience totally to a vendor whose sole job is to optimize that experience on the collection side, which is no simple task for a provider, unless you have a dedicated system built to do that patient liability work: extending payments over time, making sure the payments are affordable, having an effective communication strategy. That overhead reduction is a really nice kind of soft benefit when you combine it with just the pure financial [upside?] of being able to receive payment upfront and allowing the patient to make payments over time.
Mike: And I think there was also some information in the study around AR and the difference between perceptions of how much patient AR hospitals collect versus what they actually do. What’s going on there?
Chris: Yeah, no, it’s a phenomenal question. It really depends on who you talk to at the hospital. I think the further up you go within the revenue cycle leadership team, it becomes harder to understand or grasp exactly how much they’re collecting from patients. We found that the average collection rate – on all balances, right? That includes your true self-pay patients and all balances after insurance – typically range between 12 and 24 percent. And we’ve seen some in the single digits across all balances, as well as some nearing that 30 to 35 percent range. But it’s certainly not– it’s the exception rather than the rule. When we polled our CFO panel, the vast majority of them indicated that they were all collecting over 30%. So there appears to be an opportunity for providers to conduct an internal assessment and identify which parts of their patient population could be better served to drive better patient pay collection performances.
Mike: And Chris, we briefly touched on third-party loans, and there’s several options for how patients can finance their health care costs. Could you briefly discuss them and give the hospital some advice on what they should be looking for when considering a vendor?
Chris: Yeah, sure thing. So when I look at this space, I kind of bucket it into three [inaudible]: payment plans, recourse loans, and non-recourse loans. And while payment plans aren’t technically financing, from the patient’s perspective, it’s really no different. The patient is allowed to make payments over time, just like they would in a financing arrangement. The biggest difference is, from the providers perspective, they’re not receiving the cash up-front and they’re only getting it trickled in over time. And having talked with a handful of providers, they seem to understand that payment plans are a necessity and they’re not going anywhere, but it’s kind of a necessary evil and they want to get out of the business of managing those payment plans because of all of the overhead, statementing, and follow-up required to maintain a positive experience for the patient. And there are some third-party vendors out there that do offer payment plans to ease that overhead. Which is something where if you are convicted in offering a payment plan over a loan, certainly go that route.
On the lending side, there’s really kind of two schools of thought in lending, specifically for providers and patients: it’s recourse and non-recourse. With a recourse loan, from the patient side, it’s really no different unless they default. But effectively, what it means is the provider will have to pledge some capital up-front as a contingent liability on their books. And if the patient does default from the loan, the hospital effectively has to buy the loan back from the lender. So you’re temporarily transferring the risk of repayment over to the lender, but if it fails, then comes back to the hospital. And we’ve heard from some providers that that reconciliation process of making sure who owns the patient liability and how do you handle that handoff and patient communications can be a bit of a headache. But one of the nice things about the recourse lending model is that everyone is accepted and almost for any balance. So it’s really all-encompassing, but you don’t benefit from transferring that risk, de-risking your portfolio, but still accelerating the cash. Non-recourse lending programs, they don’t require the upfront investment or the contingent liability. And if the patient defaults on the loan, the hospital gets to keep the cash, in a true non-recourse model. So what that does is, effectively, you’re transferring all of your risk of repayment over to the lender. And all of that overhead associated with working the account and never having to worry about the reconciliation of account balances and patient experience in the event that a default does occur. One of the kind of main tenets– what is the gotcha for a non-recourse program is that the cost or the discount, which many of them offer, are typically higher than recourse programs. But what’s important when you evaluate going through a recourse or a non-recourse program is making sure that, instead of comparing the non-recourse and recourse fees to one another, making sure you add back your expected default rate to the recourse piece. So that way you can compare them apples-to-apples.
Mike: Great advice, Chris. If someone wanted to find out more about the studies we talked about here today or iVita Financial, where can they go?
Chris: Sure. Yeah. So you can go to our website. It’s iVita Financial, I-V-I-T-A Financial dot com, to learn about the patient and CFO surveys. We also have a handful of white papers and past webinars that we’ve conducted all-around kind of revenue cycle management optimization and patient pay strategies to increase cash flow and de-risk hospital portfolios. We are strictly a non-recourse patient financing organization. We offer our patient borrowers with zero-interest financing option in the form of a credit line to allow them to pay it back within three years. So how I explain it to my friends and family, it’s like you set up a tab at the hospital and you can continue to add balances to that tab to kind of make health care a little bit more affordable while locking in a monthly payment that kind of makes sense for your personal situation. And it’s available to everyone to participate. We don’t have strict underwriting guidelines. It’s our belief that everybody has a right to receiving affordable health care. So that’s kind of been our mission.
Mike: Chris, we appreciate all the information today. Thanks so much for joining us on the Hospital Finance podcast.
Chris: Of course. Thanks for having me, Mike. I appreciate it.