Posted by Wayne Brown on 20 Jan 2016
Historically, one of the ways banks have made money is by lending and charging fees to their clients. This model has expanded in recent years as banks have partnered with healthcare clients to insert themselves in the revenue cycle management process. Meanwhile, the healthcare industry is undergoing consolidations as hospitals merge or go bankrupt. Positive cash flow continues to be a problem while services and liquidity are impacted by insurance reimbursement delays. The cost of healthcare is soaring, and for many, borrowing from banks to stay afloat is the only option.
Banks realize the challenges faced by the healthcare industry and in recent years have been offering additional services to provide automation and help providers to maintain a healthy revenue cycle. For example, some banks have formed new initiatives and divisions focusing on healthcare (i.e.: medical lending) and carved out new business units to target providers to improve their revenue cycle management.
However, healthcare is a new space for banks. Many banks are finding it beneficial to partner with payment technology companies with healthcare payment expertise to deliver these specialized services. Through an outsourced model, banks can leverage their technology partner’s high degree of technological skill, speed, and expertise to capture additional revenue. Moreover, a number of large Treasury Management banks are hiring experienced healthcare professionals to increase credibility within the industry and establish a leadership position, but many others are failing to evaluate the market opportunity and remain on the sidelines as a result.
While some banks have built successful business divisions around medical banking and have sizable loans on their books, bad debt is still one of the largest problems plaguing providers. One reason why bad debt remains high in healthcare is that medical services are often completed before the provider is reimbursed. Furthermore, any amount that remains patient’s responsibility is usually delayed or becomes bad debt if not paid at the time of service.
I recall a conversation with a small two-doctor medical practice that had over $300,000 in outstanding collections, a significant amount for a small practice. While an extreme case, many healthcare providers are in similar situations. However, providers agree that the right patient payment product can help reduce bad debt. Below are some of the benefits of patient payment solution for a provider based on industry data:
Lower days sales outstanding and improved cash flow
Enhanced customer service and improved customer retention
Streamlined financial processes including collection, payment and settlement
Access to an online payment portal gives patients more control over the payments process, allowing them to set up payments based on their own preferences until the debt is paid. This enables healthcare providers to better manage cash flow and collections. Banks also benefit by providing their healthcare clients with tools to improve overall business processes as it results in closer and stronger business relationships over time.
Healthcare will remain a strong focus for banks in 2016:
Banks will continue to expand solutions to develop deeper relationships with their healthcare clients.
The volume of payments made via digital channels will increase as patients migrate from paper to digital remittances.
Healthcare organizations will continue to invest in technology, resulting in greater opportunities to help clients improve cash flow.
Patients will have more control over their healthcare management, making it more challenging for providers to build relationships with them.
Out-of-pocket patient expenses will increase and providers will have to develop new ways to maintain revenues and decrease bad debt.
Vendors will compete with banks and build stronger relationships with their healthcare clients for patient payment portal solutions.
Although 2016 represents a period of growth and transformation for healthcare, it also presents challenges. Providers will have to identify opportunities to improve cash flow and insurance reimbursement management in order to stay liquid. Meanwhile, banks should continue to seek new ways to innovate and offer clients enhanced payments services. Outsourcing payments to an organization that is a strategic fit maintains high standards of quality, and consistently meets industry compliance standards is one route to achieving a long list of mutually-beneficial business objectives.