Stuart M. Hanson on How Medical Consumerism and Medical Banking Align to Create Value
Presentation of White Paper: The Impact of Consumer Directed Healthcare on Providers
Consumer Directed Healthcare (CDH) typically combines a high deductible health insurance plan (HDHP) with a personal saving/spending account, from which medical expenses can be paid directly. Most common spending account plans are Health Savings Accounts and Health Reimbursement Arrangements.
Consumer Directed Healthcare Research Study
- Gain thorough understanding of impact of Consumer Directed Healthcare (CDH) trends on healthcare providers, financially & operationally
- Ensure that feedback & findings were unbiased and broadly based
- Fifth Third engaged the Boundary Information Group
- The research was conducted over a two month period: July – August 2008
- The methodology consisted of a detailed one hour interview with CFOs, Patient
- Accounting Directors and selected thought leaders from hospitals and physician groups from across the nation
- Key findings of the research were compiled into a white paper “Impact of Consumer Directed Healthcare on Providers”
- Are providers seeing an impact on cash flow and operations from CDH?
- What Best Practices are providers pursuing to handle CDH?
Key areas of focus
CDH is a Growing Portion of $2 Trillion Market*
- CDH plans grew by 43% in 2008. CDH plans will reach 14.9M accounts by January 2009
- There is $5.3B value held in Health Savings Accounts which is expected to grow to $16B by 2010
- Consumers spent over $250B on out of pocket healthcare expenses in 2008. $242B paid for by cash, check, credit, debit. The remaining $8B was paid by some form of Healthcare card
- According to the US Census Bureau consumers will pay over $1000 annually in out-of-pocket healthcare related expenses by 2012 up from $800 today. The proportion of patient payments is projected to rise over the next few years from 15% to 21%
*Source: Consumer Driven Market Report, US Census, Celent, Forrester Research
- Consumers: Provides economic incentives to manage their own care. Ability to build a medical nest egg.
- Employers: Reduce benefit costs from lower premiums and FICA tax savings
- Government: Proponents hope to drive down healthcare costs by stimulating market competition
- Payers: Deliver high deductible health plans along with consumer tools such as quality and health information
- Banks: Deliver Health Savings Accounts linked to a debit card. Offer online payment tools.
- Providers: Must manage rising patient payment portion resulting from higher co-pays and deductibles. Less predictability in collections as responsible party becomes blurred further
What Does CDH Growth Mean for Providers?
As responsibility for payment shifts more to patients…
- Importance of financial arrangements at or before time of service increases Predictability of collections becomes less certain
- New set of tools and processes are required to minimize negative financial impact of CDHP growth
- POS Collection methods are stretched
According to a recent interview with a well respected industry expert: "In a nutshell, healthcare providers need to recognize that the tools they need today are not the tools they have from yesterday…they have to realize that they’re at a severe disadvantage unless they re-tool for this new patient responsibility paradigm … today many providers are basically bringing knives to a gunfight"
CDH Research Study: Key Findings
- CDH Impact
- Geographic Variability – but momentum building across all geographies
- Providers Lack Processes, Tools, Resources
- CDH Impact Far Greater Than Prior Experience with Self Pays
- Result Could Include Higher Costs and Lower Revenues
- Process Challenges
- Negative Public Relations Impact
- Lack of Price Transparency
- Financial Complexity Demands More Experienced Staff
- Technical Challenges
- Legacy Systems are Challenged with “Consumer Debt” Issues
- New Vendors are Emerging
- Providers Struggle with Limited IT Budgets
- Providers Seeking Single Vendor Solutions
Recommendations for Providers
- Assemble project team for examining current practices, evaluating options, making recommendations, and implementing new programs to adapt to CDHP growth trends and impact on your organization
- Evaluate existing processes and tools in place today, especially against best practice conclusions from this analysis
- Analyze method for managing commercial and governmental posting of EOB, ERA to speed posting process and potentially free up resources
- Work with strategic banking partner to streamline revenue cycle activities as much as possible and to understand financial tools and options that are available
- Determine suitability for new processes, tools, and/or possible upgrades to existing systems and capabilities
- Prepare to implement new tools, software, staffing model, training programs, financial tools as needed
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