Tell me about yourself and the company.
I’m a co-founder of OnPlan Holdings. I co-founded HealthCom Partners, which was acquired by McKesson in 2006. We developed PatientCompass, which was the first online account management tool for hospitals. OnPlan Health addresses the market shift to high-deductible health plans. Co-founder and CTO David King and I created OnPlan to help hospitals settle balances with patients with high out-of-pocket costs. The business also supports and serves higher education, which has similar challenges to healthcare.
Premiums and deductibles are rising and few people in America have enough savings set aside for even modest unexpected expenses. What’s it like on the front line of health systems?
The shift has hit the boardroom. Over the last couple of years, the level of executive presence on the rev cycle side has increased. You have VPs of revenue cycle and chief revenue officers that you never had in the past. When you hear the term “third payer”—the patient being the new payer—it’s real. Hospitals are having to deal with so much of the self-pay that it’s as much as commercial and Blue Cross, in many cases. The front lines are asking, what do we do about it? A lot of technology has poured in and has been invested in. Companies are offering automated payment plan functionality, front-end collection at point of service, and scheduling. It’s a form of retailization— trying to collect as much as they can up front, but also trying to automate and reduce the cost that it takes to collect on the back end. You have this new focus of, “The old way of doing things is no longer good enough. We don’t have the staff to be able to do that.” Companies are turning to outsourcing early outs. Some are turning towards financing. But those solutions are expensive and they disintermediate the patient, so they are looking at technology that allows them to work on their own to prevent having to place accounts with those options.
Is the financial conversation that might precede the medical conversation awkward for both the patient and the provider?
It’s a very different environment when you talk about the doctor’s office versus the health system and the hospital. Where my company spends the most time is in the health system, where physicians are part of the health system and are connected to a hospital with the higher cost. In the doctor’s office environment, there still is an expectation that you’re going to pay for your service. We know what it costs, typically. There’s nothing emergent that comes from that visit. They will bill on the back end and typically patients have the money to pay that. It’s the surprising bills that come with services that cost more, typically coming from a service that involves the hospital. The patient doesn’t have budget and sometime doesn’t even realize what they signed up for—what their employer provided them for a health plan—until the bill comes. They wonder, why am I getting a bill for $2,500 when I have insurance? Reality sinks in. It’s this surprise factor that’s difficult on the financial side. Setting those expectations has been a big priority of hospitals. We’re going to do an estimate for you and this is approximately what you’ll owe. They try to collect as much as they can up front, but that expectation carries through after adjudication of the balance.
Is the approach the same for patients who are unable to pay versus those who are simply unwilling to pay?
The expectation is that 80 percent of the patients are willing to pay. They just have to understand what it is they owe. Then they have to have the means. The introduction of revenue cycle analytics has been positive. Analytics can be used from a propensity-to-pay perspective to identify the patient’s ability to pay, but also to determine how much means they have to cover a specific balance. Analytics isn’t just directional. It’s getting to the point where this patient owes this balance, they have this much left on the deductible, so here’s what they can afford. That technology is done on the front end. But now more hospitals are also doing it for self-pay as well. How should we approach this patient? What should we offer them to pay as opposed to just asking for the full balance knowing that they’re probably not going to be able to pay it and they may end up in collections? Propensity-to-pay has evolved into revenue cycle analytics. Addressing those unwilling to pay is going be a difficult one to solve. Those are probably for the collection agencies, simply because you’ve got a different problem than somebody who just doesn’t have the means.
What do health systems do in that case where someone hasn’t made progress on their previous payment plan obligation?
The analytics only go so far. It gives you the profile of this patient at the moment. Hospitals are now taking it to the next level to automate processes and policies to avoid the traditional one-on-one negotiation. In the past, payment plans were set up on a phone call. Somebody who needs help seeks it out and agrees to a payment arrangement. Now companies are using analytics to provide a payment plan offer proactively. We give them an installment offer that they’re able to pay. And if they’re able to pay that, let’s give them the ability to self-activate without having to call us. That could be by going online or mobile to activate the plan or even writing a check based on what they’re willing to do a payment plan for. If they take the call center mostly out of it, about 70 percent of those payment plans are self-activated. The next step is whether the patient stays on that plan. The rules are in place. You have to make your payments. You can’t miss two payments or you’re going be terminated from your plan. Those patients’ payment needs will be addressed differently the next time they come in for service. It’s working the analytics visibility to the staff, putting it into automation so that they don’t have to do hand-to-hand combat, if you will. But then also being able to utilize what happened when the patient presents themselves back in the office.
Is discounting the initial price for someone who has to pay cash a significant factor in creating the payment plan?
For revenue cycle leaders, the goal is still to get someone to pay in full. The goal isn’t to get them on a plan. But for a segment of patients, that’s the only way they’ll be able to pay. The discounting usually comes in after uninsured discounting, when a patient has a balance after insurance or they owe a patient responsibility. They’re driving incentives such as, you can get on this payment plan and we’re willing to do this for you. But if you pay us in full in the next 30 days, as a prompt pay discount, we’ll take 5 or 10 percent off. What they’re doing instead is driving discount incentives, mainly post-service, to try and get them to pay off their balance as opposed to getting on a plan. The plan itself should be enough of an incentive to pay over a time that it makes sense for them. On the front end, if the analytics are there, they will offer some deeper discounting to be able to get them to pay in full. But again, what you’re seeing is payment plans being set up off the estimates. It’s easier to say, you owe $1,000. Do you want to pay $1,000, or do you want to pay a portion of it? How about we set you up on a plan for $100 a month? Then when your insurance pays, we will adjust your balance and your $100 a month will continue until the end of the term. It’s easier for a consumer to accept that as opposed to just paying some dollars towards a cost they don’t know yet.
I assume it’s not in the best interest of either the provider or the patient to turn a bill over to collections.
That comes across loud and clear in terms of our business and how we position ourselves to serve hospitals. They’re trying to reduce bad debt and the amount of placements that they send to bad debt collections, but also even to their pre-collect, early out vendors. Even though early out vendors are first party, you have hospitals that are turning them over at Day One. The big concern is, if I’m using this outsource vendor, they’re collecting and I’m paying for balances that maybe the patient would have automatically paid with a payment plan. If I can get some automation in place, then maybe I only have to place accounts that are expensive to early out at a later time. If I’m placing accounts at Day 60 and I’m trying to collect on my own internally before Day 60, then how can I collect as many as I can by settling on payment plans before I have to turn them over to a collections agency? The whole idea of turning patients over to a collections agency is perceived negatively. They’re trying to keep engagement and patient loyalty so they will come back to the health system. To do that, they want to have that direct interaction with them without having a collection agency asking them to pay their bill.
Do you have any final thoughts?
The revenue cycle leaders are trying to reduce the pain points of increased self pay, so there’s a resurgence of patient financing. You hear about these recourse options for essentially getting a loan to pay off their bills. In terms of financing, the revenue cycle leaders are debating whether to sell their receivables. Where it’s falling is that if they can get more of the functionality and tools with analytics and automation in their system to do it themselves, with the reserves they’re willing to fund for these balances, then they only use financing on the back end for those balances that need long terms. That is the direction that is becoming more acceptable with these leaders, as opposed to one or the other.