Throughout the healthcare industry, a growing number of patients are shouldering more financial responsibility than in decades past. The number of patients with high-deductible health plans (HDHPs) alone is striking. Consider that in 2017, according to the Centers for Disease Control and Prevention, only 14.8% of Americans were insured with a HDHP; in 2017, that number ballooned to 43.4%.
Consequently, the prevalence of high-deductibles has spurred a rise in out-of-pocket costs for patients. In fact, patient responsibility for healthcare payments has increased 29.4% since 2015, with deductibles now averaging $1,820 and out-of-pocket costs now reaching more than $4,400.
With this new normal in mind, it’s critical that hospitals and healthcare providers prevent reimbursements from decreasing. This means these organizations have little choice but to optimize their revenue cycle strategy for the growing number of self-pay patients; otherwise, those providers risk the possibility of incurring additional bad debt and finding themselves unable to maintain a positive margin.
A core component of this strategy centers around financial health literacy—specifically the ability of hospitals to help patients manage, track and anticipate their costs of care.
The Department of Health and Human Services (HHS) broadly defines health literacy as having the “capacity to obtain, process and understand basic health information and services needed to make appropriate health decisions.” A recent report in Modern Healthcare emphasized that health literacy is not only associated with the better management of chronic conditions and lower rates of preventable hospitalizations, but also lower healthcare costs.
However, only an estimated 12% of Americans are considered to have a proficient level of health literacy.
The cost of low literacy rates is also trending upward. In fact, according to the National Institutes of Health, low health literacy cost the U.S. healthcare system between $106 billion and $238 billion in 2003, accounting for as much as 17% of all personal healthcare expenses. By 2015, healthcare researchers at George Washington University estimated that the cost of low health literacy was between $1.6 and $3.6 trillion dollars.
There are clear benefits to implementing an organization-wide strategy to promote financial health literacy, chief among them being a speedier cash flow, improved efficiency and an enhanced patient experience. Offering flexible payment plans based on a patient’s financial realities, improving front-end collections and more effectively managing self-pay accounts are all solid strategies in creating more patient-centered billing and collections processes.
Financial health literacy is a key ingredient in creating a positive experience for self-pay patients. Enabling a patient-friendly process can improve up-front collections, encourage patient engagement and boost overall satisfaction. Specifically, initial communication with patients paired with savvy, well-trained billing and collections administrators is imperative. Moreover, hospitals and healthcare systems should create health literacy forums that empower patients to ask questions about their coverage to better manage their self-pay accounts.
Unsure of where to start? The self-pay experts at Parallon are here to help.