The provider landscape has become quite tumultuous in recent years. Hospital systems are under increasing financial pressure, with small providers leaving medicine or declaring bankruptcy, and one in three large hospitals expected to close by 2020 (according to Becker’s Hospital Review).
In parallel, employers are shifting costs on to patients via high deductible health plans (HDHPs) that drive employees to become more cost conscious healthcare consumers. This trend is growing over time according to the Kaiser Family Foundation with 17% of workers in 2011 enrolled in HDHPs, up from 13% in 2010 and 8% in 2009. The growth rate suggests high deductible plans will affect nearly 40% of workers by 2014.
The implications for providers are:
1. Patient collection is no longer a back office function
With a rise of HDHPs, providers must transition collections to a front office function. POS collections are needed to collect co-pays, deductibles, and non-covered services. Providers that fail to take action risk massive increases in account receivables and decreases in cash flow.
2. Rising patient payments bring rising merchant costs
As patients take on more financial burden, payment forms are shifting away from traditional payment methods (e.g., cash and checks) toward electronic methods. This increase in use of credit/debit cards by patients enables them to gain access to financing indirectly. However, this also increase the merchant fees paid by the hospital.
Hospitals often have negotiated merchant agreements under legacy financial environments which assumed a certain amount charged per transaction (known as “average ticket”). As patient contributions increase due to HDHPs so have the average tickets, yet providers that do not update their merchant agreements to reflect these new values will end up paying disproportionately higher merchant fees.
Summary
Providers are entering a new paradigm in revenue management, and it will serve them well to keep up with new developments in POS collections and revisit their relationships with merchant processors. Providers should also consider newer innovative external solutions that combine and manage both POS collections as well as card processing for a more cost effective and convenient end result.
To see the full article in Becker’s Hospital Review see here.