Historically, the health system has been a business-to-business payment model⁶.  

A healthcare provider’s revenue largely depended on how well it managed the flow of claims from its billing system to a payor’s (government or private) claim processing center. 

Until recently, payor rules, regulations, and contracts dictated the level of data transparency for billing information, not patients. Since insured patients bore a small percentage of their healthcare expenses, they weren’t overly concerned with rising costs. Unless a patient’s insurance plan denied a specific service or treatment and shifted the financial responsibility to the patient, billing disputes stayed between providers and payors.

This B2B model offered structure, security, and predictability for healthcare providers when it came to revenue. There were fewer payors in the market, so healthcare facilities could easily adjust their billing operations to meet expectations. Providers didn’t need to worry about payors’ credit risk or payment timing.  Communication channels were easier to manage as well.  

As more payors and regulations entered the healthcare payment space, the pricing models grew in complexity. The price for treatment and the actual cost of treatment varied significantly depending on your insurance plan. Billing processes and systems centered on data transparency from a payor’s perspective, not a patient’s. This contributed to an opaque pricing model from a consumer perspective. Since patients didn’t approach healthcare like a consumer, this lack of transparency had minimal impact on a provider’s revenue and patient satisfaction.

However, that’s not the case anymore. 

Healthcare continues to move to a business-to-consumer (B2C) model where patients play a significant role in providers’ payment process.  

Yet, many of the providers’ payment processes, technology, and systems center on payors rather than patients. Payors act like “Oz” with their rules and regulations impacting the entire patient experience, yet their presence remains invisible. They drive volume capacity and patient communications–from convoluted pricing models to confusing statements laden with medical billing jargon, their presence is felt everywhere.

This payor-centric approach led to less than ideal patient experiences, especially with the billing process.  The systems and processes put in place to meet payors’ payment needs aren’t meeting patients’ needs. 

While several improvements have been made to the billing process, patients are still confused and frustrated–56% of patients would consider switching healthcare providers for a better payments experience.⁷  

The healthcare financial landscape continues to change with patients at the center. 

For the past 20 years, healthcare consumerism has taken hold. The internet has played a big role in shifting the market to a consumer model. Patients can research and compare providers based on customer satisfaction scores and reviews.

Also, the emergence of the EHR played a big role in the shift to a patient-centric model. The need to provide more transparency across all aspects of healthcare continues to grow–patients expect real-time access to their medical records, testing results, billing, etc.  

When it comes to financial transparency, there has been a call for the healthcare industry to step up its game, especially providers and payors.  

Why should healthcare providers strive for “financial transparency”?

• Rising healthcare costs: More and more U.S. healthcare consumers worry about how to pay for their medical expenses. A 2018 Kaiser Health Tracking Poll found that 89% of Americans are concerned about increases in the individual cost of healthcare⁸.  

• Public distrust:  The Kaiser Health Tracking Poll also found that 71% of respondents believe hospitals charge too much for their services⁹. Not only are Americans concerned about rising healthcare costs, but they blame healthcare providers’ charging practices along with fraud and drug and insurance companies’ profits for the predicament¹⁰.

• Government pressure:  With healthcare costs being the top healthcare concern for voters, the government continues to pressure providers to be more upfront with their billing practices. From the Centers for Medicare & Medicaid Services (CMS) 2019 hospital price transparency requirement¹¹ to this year’s  “No Surprises Act”¹², CMS has put in place requirements to help consumers better plan, understand, and pay their bills.  In July 2022, most health plans will be required to provide estimates for services. The healthcare industry can expect to see a continued regulatory change in support of a more consumeristic, patient-centric payment model.

• Financial responsibility shift to patients: The shift of financial responsibility from payors to patients continues to grow. The patient out-of-pocket expenses are expected to grow 10% year-over-year and reach $800B by 2026¹³. Ten years ago, 59% of health plans had deductibles and today that number has climbed to 85%¹⁴. Over half of the U.S. workforce are enrolled in a high deductible health plan (HDHP)¹⁵. Patients have more “skin in the game” when it comes to their healthcare costs. This results in higher expectations and a consumer-minded approach¹⁶.

• Industry disruptors: Innovative companies like Google, Apple, and CVS are challenging the status quo within healthcare¹⁷. They’re creating new patient-centric technologies, like artificial intelligence (AI) diagnoses, and forging strategic partnerships with insurance plans. 

• Pandemic: Overnight, COVID-19 required healthcare providers to change the way they do business with patients. The utilization of contactless technology, like virtual doctor visits and electronic check-in, became the norm. The pandemic pressured healthcare practitioners to launch digital and virtual solutions to render services and get paid. 

All of these factors have contributed to consumer-minded patients with increased expectations for their healthcare experiences. 

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Endnotes

6.  Millenia. 5 Key Steps to Driving Patient Payments and Satisfaction for Hospitals or Healthcare Providers. 27 January 2022. Webinar.

7.  InstaMed a J.P Morgan company. “Patient Billing and Payment Solutions.” InstaMed, 2020, https://www.instamed.com/providers/patient-billing-and-payment-solutions/. Accessed 29 March 2022.

8.  Kirzinger, Ashley, et al. “Kaiser Health Tracking Poll – Late Summer 2018: The Election, Pre-Existing Conditions, and Surprises on Medical Bills.” KFF, 5 September 2018, https://www.kff.org/health-costs/poll-finding/kaiser-health-tracking-poll-late-summer-2018-the-election-pre-existing-conditions-and-surprises-on-medical-bills/. Accessed 30 March 2022.

9.  Kirzinger, Ashley, et al. “Kaiser Health Tracking Poll – Late Summer 2018: The Election, Pre-Existing Conditions, and Surprises on Medical Bills.” KFF, 5 September 2018, https://www.kff.org/health-costs/poll-finding/kaiser-health-tracking-poll-late-summer-2018-the-election-pre-existing-conditions-and-surprises-on-medical-bills/. Accessed 30 March 2022.

10.  Kirzinger, Ashley, et al. “Kaiser Health Tracking Poll – Late Summer 2018: The Election, Pre-Existing Conditions, and Surprises on Medical Bills.” KFF, 5 September 2018, https://www.kff.org/health-costs/poll-finding/kaiser-health-tracking-poll-late-summer-2018-the-election-pre-existing-conditions-and-surprises-on-medical-bills/. Accessed 30 March 2022.

11.  Center for Medicare & Medicaid Services. “Sub-Site Menu: Hospital Price Transparency.” CMS, 1 December 2021, https://www.cms.gov/hospital-price-transparency. Accessed 30 March 2022.

12.  Center for Medicare & Medicaid Services. “Sub-Site Menu: No Surprises Act.” CMS, 16 February 2022, https://www.cms.gov/nosurprises. Accessed 30 March 2022.

13.  Granderson, Daniel. “US Out-Of-Pocket Healthcare Spending Swells to $491 Billion, Up 10%.” Kalorama Information, 2 August 2021, https://kaloramainformation.com/blog/u-s-out-of-pocket-healthcare-spending-swells-to-491-billion-up-10/. Accessed 30 March 2022.

14.  Medical Group Management Association. 2019 Conference.

15.  Cattanach, Jamie. “High-Deductible Health Plans Continue to Grow in Popularity, but Are They Right for You?” ValuePenguin, 24 January 2022, https://www.valuepenguin.com/high-deductible-health-plan-study. Accessed 30 March 2022.

16.  Millenia. 5 Key Steps to Driving Patient Payments and Satisfaction for Hospitals or Healthcare Providers. 27 January 2022. Webinar.

17.  American Hospital Association. “COVID-19 Didn’t Stop Health Care Disruptors from Moving Forward | AHA.” American Hospital Association, 12 January 2021, https://www.aha.org/aha-center-health-innovation-market-scan/2021-01-12-covid-19-didnt-stop-health-care-disruptors. Accessed 30 March 2022.

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