Post on 14-Jul-2015
Trends in Healthcare PaymentsFourth Annual Report: 2013
Published: April 2014
2 © 2014 InstaMed. All rights reserved.
3 | Executive Summary
4 | Trends in Consumer Payments
6 | Trends in Payer Payments
7 | Provider Sentiment
11 | Payer Sentiment
14 | Consumer Sentiment
16 | Latest Trends and Best Practices
19 | Conclusions
19 | Methodology
19 | About InstaMed
CONTENTS
InstaMed1880 JFK Boulevard, 12th Floor
Philadelphia, PA 19103(866) INSTAMED
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The surge in HDHP enrollment is causing patients to become consumers of healthcare...
3 © 2014 InstaMed. All rights reserved.
EXECUTIVE SUMMARY
The U.S. healthcare payments market is growing at
a rapid pace – reaching an estimated $2.7 trillion,
as a total of both payer and consumer payments.1
However, administrative costs are estimated to
consume 25 to 40 cents of every dollar spent in
the healthcare industry.2 These costs are poised to
increase as changes due to reform and consumerism
reshape the healthcare payments industry at a
staggering pace.
Much of the growth in the healthcare payments
industry has spurred from the rise in patient
responsibility, as the number of patients enrolled
in high-deductible health plans (HDHP) increased
nationally to 15.5 million as of January 2013.3 Due
to this growth in HDHP enrollment, providers are
required to collect more money from their patients,
but many providers still rely on paper-based, manual
payment collection and posting processes. As a
result, providers are spending more money and
more time to collect from consumers than in other
industries, yet still accumulating a large amount of
bad debt.
This surge in HDHP enrollment is causing patients
to become consumers of healthcare who are sensitive
to their healthcare costs. Since the industry is not
prepared to meet consumer payment expectations,
such as convenient payment methods, consumer
dissatisfaction is becoming a growing problem –
which negatively affects both providers and payers.
In addition to meeting these consumer demands,
payers are also challenged with high administrative
costs due to inefficient processes, such as disbursing
paper payments to providers. To reduce these
costs, many payers are trying to promote adoption
of electronic transactions across their provider
networks, which, if fully achieved, could result in
annual savings of up to $11 billion.4
As patient responsibility continues to increase, providers must collect from their patients more frequently – and often for larger amounts as a result of HDHP enrollment growth.
Payers and providers must work together to meet consumer payment expectations that have evolved through experiences in other industries.
To meet the need to collect more and keep costs low, providers are increasingly offering flexible and automated payment options to patients.
Electronic transactions between payers and providers are increasing as each looks for ways to reduce administrative costs.
KEY POINTS
The 2013 Trends in Healthcare Payments Annual
Report demonstrates the business drivers for payers
and providers, and the changes they are making
to operate efficiently, focus on the consumer and
maintain cash flow. This report presents key market
trends impacting the healthcare payments industry
from an objective view in order to educate the
market and promote awareness, change and greater
efficiency. This report showcases quantitative
data processed on the InstaMed Network and
features trends based on qualitative data obtained
from healthcare providers, payers and consumers
nationwide.
4 © 2014 InstaMed. All rights reserved.
TRENDS IN CONSUMER PAYMENTS
As payer responsibility is decreasing, inversely,
consumer payment responsibility, including co-pays,
deductibles, co-insurance and balance billing, is
increasing. This increasing consumer responsibility
means that providers, who
previously relied almost solely
on payer payments for revenue,
are required to bill their patients
for more payments owed. Data
from the InstaMed Network
confirms this trend, as the
total number of annual
patient payments to providers
increased by 72 percent from
2011 to 2013 (Figure 1.1).
Due to the sudden rise in HDHP
enrollment, the amount that patients owe
their providers for each bill is increasing as well. Out-
of-pocket expenses for insured patients are expected
to grow from $250 billion in 2009 to $420 billion by
2015.5 Data from the InstaMed Network confirms this
trend, as the average dollar amount of
each patient payment is growing. In
2011, the average amount of a
patient payment to a provider
on the InstaMed Network was
$110.86, which increased to
$133.15 in 2013 (Figure 1.2).
This increase, combined with
growth in the total number of
transactions, demonstrates that
consumers not only receive more
healthcare bills, but these bills are
for larger amounts.
72%
Increase over thepast 3 years
1.1
1.2
$133 in 2013
$120 in 2012$111 in 2011
5 © 2014 InstaMed. All rights reserved.
In addition to the increase of payment card
acceptance in the healthcare industry, more
providers are also enabling patients to pay off
larger balances over time through payment
plans. As a best practice, these plans should enable
providers to automatically collect payments on a
recurring basis in a compliant and secure way,
without the use of multiple paper statements
and follow-up phone calls – reducing the time
and costs to collect. Data from the InstaMed
Network shows that the total number of annual
transactions for payment plans increased by 284
percent from 2011 to 2013 (Figure 1.3). This trend
is growing rapidly as patients demand ways to easily
budget for their growing healthcare costs.
284%
3xmore
or
3 year increase of
As patient payments represent a growing portion of
provider revenue, providers must meet patient payment
expectations set by other industries, such as offering
convenient payment options and communicating
the estimated amount due upfront. Traditionally,
providers have received patient payments primarily
through paper checks in the mail. Recently, more
providers are allowing patients to pay with payment
cards over the phone, in the mail or through online
portals. Data from the InstaMed Network confirms
this trend, as card payments made by patients
represented 34 percent of the gross dollar volume of
back office payments in 2011, which increased to 42
percent in 2013 (Figure 1.4). This shift in back office
payment methods verifies that more providers are
accepting payments electronically, and when given the
option, patients are willing to pay this way.
1.3
1.4
42% in 2013
6 © 2014 InstaMed. All rights reserved.
As more payers offer ERA/EFT (electronic remittance
advice/electronic funds transfer), more providers
began to accept these transactions to receive
payments faster and improve efficiency with
automated posting and reconciliation. To increase
cost savings, many of these payers try to achieve
more provider adoption of ERA/EFT through
promotional outreach and enabling convenient
registration methods. Data from the InstaMed
Network shows that these efforts have effectively
increased provider adoption of ERA/EFT. In 2011,
payers leveraging the InstaMed Network to promote
ERA/EFT to their providers achieved an average of 44
percent provider adoption based on payer payment
volume disbursed on the InstaMed Network, which
increased to 73 percent in 2013 (Figure 2.1).
TRENDS IN PAYER PAYMENTS
44% 62% 73%
2011 2012 20132.1
7 © 2014 InstaMed. All rights reserved.
PROVIDER SENTIMENT
Based on the data surrounding both payer and patient payments, the 2013 industry trends have had a significant
impact on healthcare providers. To better understand the experiences of providers, InstaMed conducted a
nationwide healthcare provider survey. The survey participants ranged from solo practitioners to billion dollar
health systems. The following are the key data points from the survey:
In 2013, 67 percent of providers indicated
that they saw an increase in patient
responsibility.
In 2013, 42 percent of providers said that
they did not know patient responsibility
during the patient visit.
3.1
3.2
In 2013, 76 percent of providers said that it
took more than one month to collect from a
patient.
3.3
Slightly increased
No change
Slightly decreased
67% of providers saw an increasein patient responsibility
Yes
No
42% of providers were not awareof patient responsibility during the visit
42%
76% of payments took morethan one month to collect
Less than 1 month
1 - 2 months
2 - 3 months
3 - 4 months
More than 4 months
Don’t know
76%
8 © 2014 InstaMed. All rights reserved.
In 2013, 78 percent of providers indicated
that they typically mailed more than one
paper statement to collect a patient payment.
In 2013, 56 percent of providers answered that their primary revenue cycle concern was related to
patient collections.
3.4
3.5
78% of providers sent multiplestatements to collect
1 statement
2 - 3 statements
More than 3 statements78%
56% of revenue cycle concern for providerswas related to patient collections
Increase in patient responsibility for payment
Rise in bad debt due to low patient collections
Days in accounts receivable
Contractual payer payment accuracy
Changes associated with healthcare regulations
Rise in operational costs
Other
56%
9 © 2014 InstaMed. All rights reserved.
In 2013, 59 percent of providers said that they collected some amount of money at the point of service for
the majority of their patient visits. When they did not collect at the point of service, 33 percent said that it
was due to uncertainty of the amount due, while 31 percent said that it was due to patient resistance to pay.
When questioned about their various collection methods in 2013, 86 percent of providers said that they
accepted payment cards from patients. However, 94 percent of providers said that they also still collect
paper checks from patients.
3.6
3.7
86%
Paper checks
Cash
Payment cards (e.g., HSA, FSA, credit, debit)
ACH (i.e., directly from the patient’s bank account)
Other
86% of providers acceptedpayment cards from patients
59% of providers collected some amountof money at the point of service
33% of providers did not collect becausethey were uncertain about the
amount due at the point of service
I do not accept payment cards
Time consuming
Patient resistance
Uncertainty of amount due
No point of service (e.g., anesthesiologist)
Other
Most of the time
Some of the time
Rarely
Never59%
33%
10 © 2014 InstaMed. All rights reserved.
In 2013, 76 percent of providers said that
they offered the option of payment plans to
their patients.
In 2013, 93 percent of providers said that they received payer payments via EFT. However, almost all
providers still received paper payments (paper check or virtual card) from some payers, which are not
compliant with the ERA/EFT mandate.
Of the providers that did not receive payer payments electronically, 48 percent said that it was because
payers did not support electronic payments. However, 41 percent of providers responded with “other”
responses, which most prominently were difficulty with payer websites and the inability to receive ERAs
through the provider’s clearinghouse.
3.8
3.9
3.10
EFT
Paper checks
Virtual card
Other
90% of providers still receivedpaper checks from some payers
90%
76% of providersoffered payment plans
Yes
No
76%
48% of providers did not receive EFTbecause it was not supported by the payer
Not supported by payer
Potential for unauthorized withdrawal
Prefer paper checks
Too much paperwork and staff training required
No technology to support it
Other
48%
37% of providers receivedvirtual cards from some payers
11 © 2014 InstaMed. All rights reserved.
PAYER SENTIMENT
Healthcare payers were also greatly impacted by the healthcare payment trends in 2013. To better understand the
experiences of payers, InstaMed conducted a survey of healthcare payers nationwide. The following are the key
data points from the survey:
In 2013, 50 percent of payers indicated that
they did not currently meet the requirements
for the CAQH CORE Phase III Operating
Rules for ERA/EFT.
Of the payers that offered ERA/EFT to their
providers in 2013, 60 percent indicated that
less than half of their providers accepted
ERA/EFT.
4.1
4.2
60% of payers indicated that the majorityof their providers did not accept ERA/EFT
None
<25%
25 - 50%
50 - 75%
75 - 100%60%
50% of payers did notmeet the ERA/EFT mandate
Yes
No
Working to meet theERA/EFT mandate50%
12 © 2014 InstaMed. All rights reserved.
When asked for the primary reason why providers did not accept ERA/EFT in 2013, 50 percent of payers
indicated that it was due to a preference for paper checks and/or remittances.
When questioned about their top issue when dealing with their provider networks in 2013, 40 percent of
payers said that it was reconciliation of claim remittances and check/EFT payments.
4.3
4.4
50% of payers indicated that their providerspreferred paper checks and/or remittances
Prefer to receive paper checks and/or remittances
Cannot receive ERA/EFT through their clearinghouse
Lack of provider awareness of ERA/EFT offering
Limited resources to complete required paperwork
Do not have the necessary tools or technology
Other
50%
40% of payers’ top issue with providerswas reconciliation of payments
Reconciliation of claim remittances and check/EFT payments
Claim resubmissions and duplicate claims
Claim adjustments and prior payment reconciliation
Call center volumes
Other40%
13 © 2014 InstaMed. All rights reserved.
When questioned about their top priority for 2014, 45 percent said that it is technology-based
regulations, such as PPACA, CAQH CORE and ICD-10.
In 2013, 75 percent of payers indicated that
they leveraged a web portal for member
communications.
4.5
4.6
Call center
Web portal
Other
Text messages
75% of payers leveraged a webportal for member communications
75%
45% of payers said technology-basedregulations are a top priority for 2014
Rising consumerism in healthcare
IT upgrades and system changes
Other legislative regulations
Analytics and business intelligence
Care management
Cost reduction strategies
Other
45%Technology-based regulations
14 © 2014 InstaMed. All rights reserved.
CONSUMER SENTIMENT
The 2013 trends data indicates that consumers have become an important constituent in healthcare payments.
With the rise in healthcare consumerism, it is becoming more important to focus on the consumer experience.
To better understand the experiences of consumers, InstaMed conducted a nationwide survey of consumers who
visited a healthcare provider in 2013. The following are key data points from the survey:
In 2013, 72 percent of consumers said
that they did not know their payment
responsibility during a provider visit.
Only two percent of consumers said that they
received their healthcare bills via email in
2013.
5.1
5.2
72% of consumers were unawareof payment responsibility during a visit
Yes
No
72%
2% of consumers received healthcare bills via email
2%
15 © 2014 InstaMed. All rights reserved.
When asked how they normally pay their non-healthcare bills, such as utility or cable bills, 55 percent of
consumers said that they paid online and 24 percent said that they paid via their bank’s bill pay portal.
If given the option of various methods to pay their healthcare bills, 79 percent of consumers indicated
that they would pay online through their provider or health plan website, and 49 percent indicated that
they would pay online through their bank’s bill pay portal.
5.3
5.4
Provider or health plan website
Bank’s bill pay portal
Mobile device
Payment plan
Bill pay kiosk in a retail location (e.g., Walmart)
79% of consumers would payonline through their provider
or health plan website
49% of consumers would paythrough their bank’s bill pay portal
79%
79% of consumers paidnon-healthcare bills online
Online
Payments set up through my bank’s bill pay portal
Mailed a check
Credit card over the phone or in the mail79%
16 © 2014 InstaMed. All rights reserved.
Opportunities for Consumerism
If given the option of various methods to pay their
healthcare bills, 79 percent of consumers indicated
that they would pay online through their provider
or health plan website.
As patient payment responsibility increases,
patients are quickly becoming consumers who
are sensitive to their healthcare costs. However,
the healthcare industry does not successfully set
payment expectations with patients or offer flexible
payment options, which leaves providers struggling
to collect and their patients dissatisfied. To resolve
these issues and meet the needs of healthcare
consumers, payers and providers must work together
to help consumers take control of their healthcare
payments – or risk further consumer
dissatisfaction and lost revenue.
LATEST TRENDS AND BEST PRACTICES
To learn more, visit:
www.instamed.com/blog/impacts-of-consumerism-in-the-healthcare-payments-
industry
To learn more, visit:
www.instamed.com/blog/risks-and-opportunities-of-healthcare-consumerism-
for-payers
To learn more, visit:
www.instamed.com/blog/using-smart-big-data-to-transform-the-collection-
process
In 2013, 75 percent of payers indicated that they
leveraged a web portal for member communications.
The rise of consumerism in the healthcare industry
presents unique challenges for payers to improve the
member experience. As consumers, members want
to manage, pay and understand their healthcare bills
in one convenient place. Yet, this expectation has
gone widely unmet in healthcare. To address this
gap, payers can work with providers to enable their
members to simplify their healthcare
finances by integrating payment
functionality within their
member portals. This will
ultimately streamline a
confusing process to increase
member satisfaction.
Discovering Payment Assurance
In 2013, 76 percent of providers said that it took
more than one month to collect from a patient.
In today’s healthcare landscape, providers must
operate more efficiently to keep administrative costs
low and collect more from patients. Many industry
experts believe that the recent influx of data and
analytics due to innovation in healthcare technology,
or Big Data, will give all healthcare organizations
the ability to navigate the changes – and ultimately,
to thrive. However, to improve efficiency in
healthcare, Big Data needs to get smarter.
Providers can use Big Data to trigger
automated processes and real-
time decisions at the staff level
in daily operations. Now, that
indeed would be Smart Big
Data.
17 © 2014 InstaMed. All rights reserved.
78 percent of providers indicated that it takes more
than one statement to collect a patient payment.
When you stay at a hotel, are you able to check in
without giving your payment card? Of course not.
However, consumers receive access to healthcare
services with no assurance that they will pay their
portion of the bill on time, or at all. As a result,
providers send multiple paper statements and
even make phone calls to collect payments. And
frequently, the payment is written off as bad debt.
This is costing providers a lot of money.
72 percent of patients said that they did not know
their payment responsibility during a provider visit.
Providers have opportunities to use Smart Big
Data and technology to accurately estimate patient
responsibility and automatically collect payments,
which creates a level of payment assurance already
achieved in consumer-focused industries. When
providers leverage Smart Big Data to accurately
estimate patient responsibility in real-time and
automatically collect on that estimate, it becomes
functional on a day-to-day basis, enabling providers
to efficiently collect payments
and thrive in the evolving
healthcare industry.
To learn more, visit:
www.instamed.com/blog/opening-new-channels-to-collect-patient-payments
To learn more, visit:
www.instamed.com/blog/finding-payment-assurance-in-the-healthcare-industry-
with-smart-big-data
Expanding Patient Payment Channels
Nine in 10 providers will utilize a mobile device
by next year. Half of providers are considered
“digital omnivores” – someone who routinely uses a
smartphone, tablet and a computer professionally.6
Smartphones and tablets are quickly becoming
commonplace in hospitals and provider offices for
clinical purposes, including updating medical records
and writing prescriptions. These mobile devices can
also be leveraged to collect payments from patients at
any location, for instance, when discharging patients
in a hospital or during an at-home
visit. Furthermore, when using
a mobile device, providers
gain real-time access to
payment information at any
time to streamline processes.
However, with the high
security risks associated with
processing sensitive patient and
payment data, providers must ensure that they use a
tool that is independently certified and accredited to
meet the highest regulations for both the healthcare
and payment industries.
55 percent of consumers said that they normally
paid their non-healthcare bills online, and 24
percent said that they paid these bills via their
bank’s bill pay portal.
A growing number of consumers now pay household
bills using their bank’s bill pay portal, so they can
easily manage all of their bills in one place. By
enabling patients to pay their healthcare bills this
way, providers reach their patients where they are
already accustomed to paying other household bills.
This improves the ability to collect patient payments,
while simplifying the healthcare payments process
for consumers.
18 © 2014 InstaMed. All rights reserved.
In 2013, 76 percent of providers said that they
offered the option of payment plans to their patients.
As healthcare providers increasingly rely on
patients for revenue, many have started to use more
consumer-centered strategies, like payment plans,
to collect payments. However, providers will need
to implement best practices
and policies – including
automating payments and
communications, and
ensuring payment data
is secure – to improve
processes and efficiency.
Meeting the ERA/EFT Mandate
50 percent of payers indicated that they did not
meet the requirements for the CAQH CORE Phase
III Operating Rules for supporting ERA/EFT.
While ERA/EFT transactions on the InstaMed
Network significantly increased in 2013, many
payers are still implementing the technology to
meet the ERA/EFT mandate under PPACA. Payers
must ensure that they support ERA/EFT in a way
that is compliant with the operating rules developed
by CAQH CORE. The ERA/EFT mandate requires
that payers include the EFT trace number with the
remittance to allow easy re-association
with the ERA. By accepting
these transactions, providers
can reconcile payments and
remittances automatically,
which reduces hours of
manual administrative work
and the risk of posting errors.
73 percent of all payer payments processed on the
InstaMed Network are ERA/EFT payments.
When evaluating how to achieve ERA/EFT, one of the
first decisions a payer will make is to “build or buy”
– whether to use internal resources to build ERA/
EFT capability or to buy from a third-party vendor.
Irrespective of which model a payer
follows to achieve compliance with
PPACA, there are several key
considerations that should be
included in the project scope
from the beginning:
• Provider Adoption
Reach providers easily to enroll
them in ERA/EFT quickly and
minimize print and mail costs.
• Financial Controls and Daily Monitoring
Establish dedicated resources and processes to monitor
all payment activity on a daily basis, support financial
regulatory requirements, protect against fraud when
enrolling providers, and support bank account changes
and Know Your Customer (KYC) verifications in a
timely manner.
• Compliance Requirements
To avoid penalties, identify resources to understand the
reform mandate and verify that the payer is compliant.
• Third-Party Relationships
If payers choose to work with a vendor, they need to
make sure they know who they are buying from and any
downstream, third-party relationships that the vendor
may require to deliver a complete solution. It is crucial
for a payer to understand all of the relationships in
scope, which will help to assess points of failure, risks
and the continuity of service for dealing with difficult
issues that arise in an electronic processing environment.
To learn more, visit:
www.instamed.com/pdfs/Implementation-Insights-
Models-to-Deliver-EFT-ERA.pdf
To learn more, visit:
www.instamed.com/blog/key-considerations-for-
achieving-eraeft
To learn more, visit:
www.instamed.com/blog/how-much-is-too-much-
best-practices-for-patient-payment-plans
19 © 2014 InstaMed. All rights reserved.
CONCLUSIONS
The data from the 2013 Trends in Healthcare
Payments Annual Report demonstrates that the
healthcare payments industry is continuing to evolve,
and that many providers and payers have already
taken steps to accommodate for these changes. In
order for all stakeholders to thrive as the industry
evolves, they must be aware of how the industry
is changing, acutely understand the challenges
and apply process and policy changes to prepare.
Efficiency, payment best practices, interoperability
and security will be crucial to all industry
stakeholders as the industry continues to change.
METHODOLOGY
The payer data comes from respondents representing
over 3,000 payers nationwide. The group of survey
respondents is comprised of 20 percent regional
payers; 20 percent national payers; 20 percent third-
party administrators (TPA); 5 percent Blue Cross Blue
Shield plans and 35 percent other types of payers,
including state Medicaid payers and PPOs. The
patient data comes from respondents representing
over 200 patients nationwide who visited a
healthcare provider in 2013.
Sources:1 IDC Health Insights (2011)2 NACHA3 AHIP4 U.S. Healthcare Efficiency5 AHIP6 Epocrates, 2013 Mobile Trends Report
The 2013 Trends in Healthcare Payments Annual
Report includes quantitative data from over $85
billion in healthcare payments volume on the
InstaMed Network, which powers healthcare and
payment transactions for a wide range of providers,
from solo practitioners to billion dollar health
systems, and payers of all sizes nationwide. The data
represented was processed between 2011 and 2013.
In addition, this report includes qualitative market
data. The provider sentiment data comes from
respondents representing over 100,000 healthcare
providers nationwide. The group of respondents
is comprised of 69 percent medical practices or
clinics; 2 percent durable medical equipment (DME)
providers, labs or other offices; 6 percent billing
services; 3 percent hospitals, health systems or
integrated delivery networks (IDN); and 20 percent
other types of providers, including ambulatory
surgery centers and physical therapy organizations.
ABOUT INSTAMED
InstaMed simplifies every healthcare clearinghouse
and payment transaction for providers and payers, all
in one place. InstaMed enables providers to collect
more money, get paid faster and reduce the time
and costs to collect. InstaMed allows payers to cut
settlement and disbursement costs with electronic
payments. InstaMed’s single, integrated network
simplifies the healthcare payments process for 1,500+
hospitals, 60,000+ practices/clinics and 100+ billing
services; connects to 3,000+ payers; and integrates
with 50+ practice management systems. InstaMed
processes tens of billions in healthcare payments
each year at a rate of more than $1,000 per second.
Visit InstaMed on the web at www.instamed.com or
contact info@instamed.com for more information.
1880 JFK Boulevard, 12th FloorPhiladelphia, PA 19103
(866) INSTAMEDwww.instamed.com