2016 has been dubbed the year of mobile payments. From Venmo to Samsung Pay, the phone is replacing the wallet. Spending money, whether to buy a latte or to split a check, has never been easier. 2016 is also the year many legislative healthcare reforms solidify their effect, modernizing everything from how hospitals store records to which models we use to fund health care.
The changing nature of health care is fueling innovation. Tech companies and start-ups are beginning to develop payment solutions to meet the evolving needs of healthcare payers and providers, driven in part by legislation but also by rapidly accelerating consumerization trends. Just in time: enjoying how simple it's become to pay for everything else, consumers are growing frustrated by the difficulty of navigating healthcare payments. Healthcare providers who make the switch to electronic payments early can gain a competitive edge.
The race to become the leading payment system for the healthcare industry is on.
Mobile payments hit their stride
Before we talk health care, let's talk mobile payments. Venmo, a peer-to-peer mobile payment platform, is effectively eliminating the need for personal checks and cash. The mobile platform connects social media profiles, bank accounts, and credit cards, allowing friends to settle rent and split lunch with the tap of a screen. Over $1 billion payments were made through the app in January of 2016 alone. Venmo has also announced its intention to allow vendors onto its platform. Like Google and Uber, Venmo has become a verb: “Just Venmo me!”
Competition is heating up. Square Cash, also founded in 2009, is surging in popularity due to its instantaneous bank-to-bank transfer capabilities. Google Wallet entered peer-to-peer payments in 2015, and Apple Pay is reportedly eyeing the space as well. With mobile payment transactions expected to grow 210 percent in value this year, the anxiety of leaving your wallet at home may soon be a thing of the past.
Current healthcare payment systems are archaic and bad for everyone
In contrast, the current state of healthcare payments is dreadful. Twenty percent of insured, working-age Americans have unpaid medical bills, according to a survey released by the New York Times. Further, a TransUnion survey concludes 55 percent of consumers were "either sometimes or always" confused by bills they received from their provider in 2015. Not only does this model create a disconnect between patient expectations and reality, but complaints to the Consumer Financial Protection Bureau indicate that many consumers do not know they owe medical debt at all until they get a call from the collections agency or they discover it on their credit report. In an age of instant information, this is a disorienting phenomenon.
Unpaid bills due to chaotic and fragmented invoicing is bad for patients, and it also means providers aren't being paid for their services. In fact, the American Hospital Association (AHA) calculates that hospitals provided $42.8 billion in uncompensated care in 2014. An analysis on the second quarter of that year suggests that more than half of this is "bad debt" – services for which hospitals anticipated but did not receive payment – as opposed to charity care.
Balancing care with profitability
Of course, there are reasons why the medical payment model is so different. As much as healthcare providers are running a business, the Hippocratic Oath (and more practically, avoiding liability) takes precedence over the bottom line. Both public and private hospital emergency rooms rightfully have a “treat first, ask questions later” policy under the Emergency Medical Treatment and Labor Act.
Private practices are likewise hesitant to deny treatment. "What if that patient has a seizure or other medical emergency between the time you turned them away and the time of their rescheduled appointment?" asks Leann DiDomenico McAllister, administrative director of a primary care micro-practice in Plymouth, MA. Understandably patient-focused and perhaps risk-averse, she adds, "Providing timely medical care is not the same thing as selling someone a loaf of bread."
Healthy demand creates competitive opportunity
All valid. A "menu" of each and every anticipated cost via mobile app prior to appointments won't ever be feasible. Providers aren't omniscient. They won't know which tests are necessary until seeing the patient. But for payments that can be predicted, a simple email co-pay reminder would do wonders for patient payment accountability. And mobile payment systems could shorten that lag time between treatment and charge, keeping everyone on the same page.
On the patient side, satisfaction is an unequivocal advantage. Habituated to the ease of cutting edge services offered by companies like Airbnb, Amazon and Uber, younger patients will only grow increasingly frustrated when continually confronted with archaic health care billing. Providers that modernize payments and provide online mobile options more quickly will gain a competitive edge.
The conduit and infrastructure for consumers to make mobile payments is already in place. Instamed, one of the top contenders offering providers health care clearinghouse and payment transaction solutions, released a 2014 survey in which 9 out of 10 consumers wanted online bill pay available for their medical bills. By the end of 2017, there will be 2 billion smartphone or tablet users engaging in some form of mobile commerce transactions. Patient side demand is here to stay.
Payers and providers are screaming for solutions as well. Consider the efficiency gained through something as simple as an online mobile billing system. Wages account for 56 percent of all healthcare provider spending. Improvements in labor productivity could generate enormous value beyond just increasing payment collection. Simply reducing administrative costs could yield an estimated $250 billion in savings per year. Observers are already expecting an industry-wide payer and provider effort to outsource revenue cycle functions (claim coding, billing, and collections) over the next three years.
Enter tech companies... Ready, set, innovate!
Software solutions for the medical payment conundrum are being coded and tested as you read this. It's no wonder: the U.S. healthcare payments market is expected to reach an estimated $5 trillion by 2022. Virtual payment systems are an irresistibly lucrative challenge.
Availity, a national health information network which offers revenue cycle management services, rolled out a set of application programming interfaces (APIs) for rapid integration with novel platforms in February. The APIs provide code for exchanging clinical and administrative information between hospital systems and sending transactions (such as patient eligibility, claims, and authorizations) to health plans. This allow developers to kick start health care products without having to build complex healthcare data exchange systems from scratch.
New market entrants can also take advantage of investment funds earmarked for healthcare innovation. Alphabet/Google has been increasingly active in supporting cutting edge healthcare software.
Companies like Health Payments Systems (HPS) already have mobile-friendly systems up and running with the potential to gain a significant market share. HPS is a partner to all major health plans and practitioners in Wisconsin. Giants like Apple are starting to take notice and are taking steps to enter this space. As of April 2015, Instamed allows patients to settle their co-pay with Apple Pay. In the future, Instamed plans on allowing patients to use Apple Pay for all of their medical bill payments.
StartUp Health, a venture capital matchmaking service, recently partnered with GE Ventures to launch an entrepreneurial program specifically geared towards innovation in health payment and virtual solutions. Participants are eligible for investment and access to GE Venture's customers.
In a recent Forbes article, StartUp Health co-founder Unity Stoakes named next generation healthcare payment systems – in his words, a "Venmo for health care" – first on the list of innovations CEOs and investors are asking for, beating out virtual health (telemedicine), health dashboards, digital nutritionists, and affordable "RobotDocs." By handling all bill payments in a consolidated portal, Stoakes hopes patients, insurance providers, employers, labs, and doctors could "communicate simply and resolve disputes virtually, without waiting for months for snail mail and losing track of paperwork. In addition, [consumers] would have a perfect record of [their] healthcare payments, instead of relying on a paper-based system."
Slowly but steadily, a revolution is overtaking the healthcare payments space. As consumer demand and federal regulations mandate more modernization, technology and healthcare providers must partner to develop consumer-preferred interfaces for more intuitive and accessible online payments.
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