Trends in Healthcare Payments Annual Report 2013

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...

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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.


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


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


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


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%


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%


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%


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


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%


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%


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

Mail

Email

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


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

Mail

Email

2%


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%


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


www.instamed.com/blog/risks-and-opportunities-of-healthcare-consumerism-

for-payers


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.

http://www.instamed.com/blog/impacts-of-consumerism-in-the-healthcare-payments-industry/




http://www.instamed.com/blog/risks-and-opportunities-of-healthcare-consumerism-for-payers/




http://www.instamed.com/blog/using-smart-big-data-to-transform-the-collection-process/





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.


www.instamed.com/blog/opening-new-channels-to-collect-patient-payments


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.

http://www.instamed.com/blog/opening-new-channels-to-collect-patient-payments/



http://www.instamed.com/blog/finding-payment-assurance-in-the-healthcare-industry-with-smart-big-data/





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.


www.instamed.com/pdfs/Implementation-Insights-

Models-to-Deliver-EFT-ERA.pdf


www.instamed.com/blog/key-considerations-for-

achieving-eraeft


www.instamed.com/blog/how-much-is-too-much-

best-practices-for-patient-payment-plans

http://www.instamed.com/wp-content/uploads/Implementation-Insights-Models-to-Deliver-EFT-ERA.pdf




http://www.instamed.com/blog/key-considerations-for-achieving-eraeft/



http://www.instamed.com/blog/how-much-is-too-much-best-practices-for-patient-payment-plans/





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 [email protected] for more information.

1880 JFK Boulevard, 12th FloorPhiladelphia, PA 19103

(866) INSTAMEDwww.instamed.com

http://www.instamed.com/

Trends in Healthcare Payments Annual Report 2013

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Transcript of Trends in Healthcare Payments Annual Report 2013