Why Some Patients Don’t Pay Their Bills — and How Psychographic Segmentation Can Help
Nearly 43 million Americans face medical debt, but are they all uninsured? Not quite. One in five patients with health insurance admit that medical bills put a strain on their finances. This data is close to what c2b solutions’ market research study illustrates with 27 percent of the general population agreeing with the statement “I have a hard time paying my healthcare bills”.
These aren’t the sickest patients either. Nearly 70 percent of patients struggle to pay off hospital bills of $500 or less within a year and the challenge isn’t going away. The Centers for Medicare & Medicaid Services projects national health spending will grow by 5.5 percent annually for the foreseeable future, reaching a staggering $5.7 trillion by 2026. But by using psychographic segmentation to gain insights on healthcare consumers, hospitals can boost patient payment collections even as healthcare costs continue to grow.
Non-payment trend demands proactive revenue cycle management
The Affordable Care Act (ACA) has decreased the number of uninsured Americans, with an estimated 20 million individuals gaining health insurance coverage in recent years. However, the decline in uninsured patients may be reversing. The Kaiser Family Foundation reports that “… for the first time since the implementation of the ACA, the number of uninsured increased by more than half a million in 2017.”
“There are many reasons why more patients are struggling to make their healthcare payments in full, the most prominent of which are higher deductibles and the increase in patient responsibility from 10 percent to 30 percent over the last few years.”
Even insured patients are experiencing an ACA side effect: High deductible plans. With more “skin in the game,” healthcare consumers are more price conscious than ever—and that includes shopping for insurance. Health insurance providers have met market demands, offering more high-deductible plans. But while such plans are more economical on monthly budgets, out-of-pocket medical expenses have climbed to more than $63 billion annually—and approximately $7.5 billion of those costs go unpaid each year.
Analysis of payment data from 2014 through 2016 revealed a worrying trend for hospitals—a 19 percent increase in the number of patients with hospital bills of $500 or less who did not pay off the full balance within a year. TransUnion Healthcare’s Jonathan Wiik notes, “There are many reasons why more patients are struggling to make their healthcare payments in full, the most prominent of which are higher deductibles and the increase in patient responsibility from 10 percent to 30 percent over the last few years.” What else did the analysis uncover? Failure to pay in full within 12 months increases as costs climb:
- 68 percent for bills $500 or less
- 85 percent for bills $500 to $1,000
- 99 percent for bills $3,000 or more
Due to the combination of rising healthcare costs, high-deductible insurance plans and declines in coverage for vulnerable populations, TransUnion projects that by next year, the average percentage of patients not paying their bills in full could climb to 95 percent.
Improving patient payment collections with psychographic segmentation
Given the likelihood of on-going revenue cycle management challenges, hospitals need to address the issue on multiple fronts. Black Book managing partner Doug Brown notes, “Emerging healthcare pay trends reveal the opportunity to help patients better anticipate, manage and track the cost of their care.”
Cost transparency expectations have grown now that consumers are taking on more of the cost burden. Since 2015, patients have seen a nearly 30 percent increase in deductible and out-of-pocket maximum costs and expect to comparison shop for surgery the way they do for major household expenses. Of course, price lists are easier said than done given the complexity of individual healthcare and variations in the costs of care.
“Emerging healthcare pay trends reveal the opportunity to help patients better anticipate, manage and track the cost of their care.”
What else do today’s healthcare consumers want? Convenience—and not just for healthcare access. A Black Book patient survey found that 95 percent of healthcare consumers would use online payment systems. Other patient payment features that are important to healthcare consumers include:
- 91 percent want insurance eligibility verification
- 85 percent want cost estimation
- 87 percent want more convenient payment options
How can healthcare organizations improve revenue cycle management? Let’s start with the hardest part—understanding what makes individual patients tick. The c2b solutions approach to psychographic segmentation breaks down healthcare consumers into five distinct types—ranging from proactive Self-Achievers to reactive Willful Endurers—based on their beliefs, motivations and preferences.
When combined with digital engagement technology like PatientBond, psychographic segmentation enables hospitals and other healthcare providers to enhance revenue cycle management by motivating positive behaviors, both in respect to health and wellness AND patient payment collections. Automated patient reminders with customized messages are sent via a patient’s preferred channel—email or text, for example—to help reduce accounts receivables. So a Self Achiever, who stays on top of health issues, might get an annual check-up reminder via email since 58 percent of them prefer that format. On the other hand, a Willful Endurer, who lives in the moment, might get a printed brochure to remind them about their annual check-up, which they are statistically more likely to prefer more than any segment.
The results are impressive: In one case study, the healthcare organization achieved a quadruple increase in daily collections and a 55 percent engagement rate. The benefit isn't restricted to patient payment collections either. Using a digital engagement platform is three times more effective at engagement than manual phone calls, while also freeing up internal resources to focus on other tasks critical to healthcare organizations.
By combining patient-friendly automated payment reminders with deep insights into individual attitudes through psychographic segmentation, hospitals can better manage their revenue cycles and deliver on those expectations.
For more information on psychographic segmentation and how it can be applied to healthcare, download the Psychographic Segmentation and the Healthcare Consumer whitepaper.