How financial institutions are helping healthcare providers mitigate the burden of patient high deductibles

Written by Mitch Lucas Head, Lending, Product Management & Compliance
How Financial Institutions Are Helping Healthcare Providers Mitigate the Burden of Patient High Deductibles

Consumers can expect to shoulder a higher burden of healthcare costs in the years ahead as more individuals adopt high deductible health plans (HDHP). According to The Employer Health Benefits Annual Survey conducted by Kaiser, the number of individuals with an annual deductible over $2,000 has grown from 18% in 2014 to 28% in 2019.i   Higher deductibles equate to an increase in out of pocket expenses, and many Americans are not prepared to shoulder the cost.

Unfortunately, consumers, are not the only ones who face financial risk when it comes to the high cost of healthcare. Providers are under an increasing threat for non-payment from patients with high deductibles.

The Consumer Financial Protection Bureau reports that 58 percent of debts sent to third-party collection result from unpaid medical bills.ii Even worse, 55 percentiii of the $63.7 billioniv owed in out-of-pocket medical expenses is never recovered by the provider.v 

Attempting to assist patients in paying out of pocket charges, many providers offer payment plans to recover the cost of services rendered. However, healthcare professionals and facilities must then carry the debt for months or years, incurring additional administration and billing expenses that reduce the overall revenue generated for their services.

To make it possible for providers to focus on delivering quality care while reducing concerns over non-payment, banks are now offering financing solutions to healthcare professionals and facilities, allowing them to offer payment plans to their patients without risking profitability by carrying long-term debt. Commercial banks win as well by tapping into a quality source of commercial lending clients.

Understanding the Need for Patient Financing and How to Meet Provider Needs

Over 137.1 million Americans have faced a personal financial crisis due to out-of-pocket medical expenses they could not afford to Medical debt is the leading cause of early 401K withdrawalsvii and the oft unspoken cause behind 66.5% of all personal bankruptcies.viii  It is no surprise then that over 92% of individuals responding to a recent survey expressed a desire for financing solutions when taking on medical expenses.ix 

Patient and provider need equal opportunity for commercial banks by providing entry into the healthcare specialty lending niche, but it is important to understand the subtle nuances of the market before diving in:

  • Fifty-seven percent of patients responding to a recent survey indicate that they would like to have payment plans offered before or at the time services are rendered.x  However, only 6.5% of patients responding to a recent survey would call to ask about a payment plan once they have received a bill.xi
  • Eliminating the lengthy wait for full payment is one of the biggest benefits providers will realize from partnering with a financing provider, so they expect to receive 100% of the patient payment up front. Collecting full payment at the time financing is secured allows them to decrease accounts receivable days and accelerate cash flow.
  • Since the average monthly household income for medical bankruptcy filers is under $3,000 a month,xii  professionals and facilities want to work with a solution provider that offers 100% patient approval and no credit check to ensure that all of their patients are eligible to take advantage of medical payments.
  • Forty percent of Americans are unable to cover a $400 emergency expense, according to the Federal Reserve’s 2018 report on the economic well-being of U.S. households.xiii  So, providers are looking for partners that can offer zero or low interest rates and monthly payments that are adjusted to the financial budgets of each individual.
  • According to a recent survey, 39% of consumer respondents were unwilling to take out a payment plan that incurred additional fees.xiv  Here again, financial institutions need flexibility to engage each provider’s patient population.

Finally, consider offering other payment related services to improve the provider revenue cycle. Approximately half of provider administration costs can be attributed to billing processes, adding up to $282 billion annually according to an  issue brief from the independent policy institute, Center for American Progress.xv  However, research reveals that costs drop to 12% of expenditures for hospitals that turn over responsibility for financing and reduce the complexity of reimbursement systems.xvi 

Turning billing services over to professionals can increase efficiencies for healthcare providers, accelerating days to payment and decreasing the overall cost associated with billing.

Stepping into the World of Patient Financing

Community banks and credit unions are well-known for being local advocates, supporting resident consumer and business populations. Offering patient financing solutions to healthcare providers is a way to support both, facilitating profitability for community medical practitioners while helping consumers pay for their rising share of medical expenses.

However, patient financing requires flexibility and digital prowess to streamline billing and collections to keep costs down. Given the demands, and the fact that healthcare is a new space for many community financial institutions, banks and credit unions may find it beneficial to work with a payments partner, one that is well-versed in the space and can provide them with the digital tools they need to be successful.

  i “The Kaiser Family Foundation Employer Health Benefits 2019 Annual Survey.” The Kaiser Family Foundation, 2019. Web.
  ii David U. Himmelstein, M.D. et al. “Medical Bankruptcy in the United States, 2007: Results of a National Study.” The American Journal of Medicine, Vol. 122, Iss. 8, Pages 741-746. Aug. 2009. Web.
  iii “Get Paid Now on All Patient Balances.” Epic River, 2019. Retrieved from
  iv “How Payment Plans Can Cure Healthcare Payments’ Biggest Problem.”, Feb. 14, 2019. Web.
  v “Get Paid Now on All Patient Balances.” Epic River, 2019. Retrieved from:
  vi K. Robin Yabroff, et al. “Prevalence and Correlates of Medical Financial Hardship in the USA. Springer Link. Journal of Internal Medicine, May 1, 2019. Web.
  vii Lorie Konish. “137 Million Americans Are Struggling with Medical Debt. Here’s What to Know if You Need Some Relief.” CNBC, Nov. 10, 2019. Web.
  viii Lorie Konish. “This Is the Real Reason Most Americans File for Bankruptcy.” CNBC, Feb. 11, 2019. Web.
  ix “The Changing Landscape of Healthcare Payment Plans.”, 2019. Web.
  x “How Payment Plans Can Cure Healthcare Payments’ Biggest Problem.”, Feb. 14, 2019. Web.

  xi Ibid.
  xii David U. Himmelstein, M.D. et al. “Medical Bankruptcy in the United States, 2007: Results of a National Study.” The American Journal of Medicine, Vol. 122, Iss. 8, Pages 741-746. Aug. 2009. Web.
  xiii “Report on the Economic Well-Being of U.S. Households in 2018.” Board of Governors of the Federal Reserve System, May 2019. Web.
  xiv “The Changing Landscape of Healthcare Payment Plans.”, 2019. Web.
  xv Emily Gee and Topher Spiro.  “Excess Administrative Costs Burden the U.S. Health Care System.” Center for American Progress, Apr. 8, 2019. Web.
  xvi Jacqueline LaPointe. “Insurance and Medical Billing Costs for Providers Reaches $282B.” xtelligent Healthcare Media. Revcycle Intelligence, Apr. 11, 2019. Web.

Written by

Mitch Lucas

Head, Lending, Product Management & Compliance

As Head, Lending, Product Management & Compliance, Mitch is responsible for driving the direction and strategy of Finastra’s consumer lending and loan compliance solutions.

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