What to Consider When Weighing the Value of Self-pay Discounts

What to Consider When Weighing the Value of Self-pay Discounts

As patient financial responsibility increases with out-of-pocket costs and high-deductible health plans, it’s important for hospitals and healthcare systems to identify more ways to make it convenient for patients to pay their bills. For instance, in 2017, patients saw their average out-of-pocket costs increase more than 10 percent.

Similarly, hospitals’ nationwide uncompensated care costs increased from $35.7 billion in 2015 to $38.3 billion in 2016, according to the American Hospital Association. As this trend continues, providers risk leaving revenue on the table if they don’t craft patient-friendly, self-pay strategies.

Because hospital and health systems fear the long-term effect that high-deductible health plans will have on their reimbursement rates, more providers are revisiting traditional collection practices by offering discounts for self-pay patients who pay upfront on the day of their healthcare service. Specifically, more hospitals are identifying aggressive self-pay discounts on the front end of the revenue cycle to encourage payments on the high-dollar accounts that traditionally may be less likely to be paid because the higher discount has made the balance more affordable.

For providers, the notion that patients paying out-of-pocket be charged less is a major shift from historical pricing practices; in years past, patients who paid out-of-pocket were often charged the highest rates. However, new state and federal regulations now exist that are designed to protect uninsured patients from steep prices.

For hospitals looking to drive down bad debt and encourage upfront collections, deploying self-pay discounts could be a viable solution. Here are some important points to consider:

  1. Patient satisfaction. Many in the industry see discounted pricing for self-pay patients as a strong practice to drive greater patient engagement and satisfaction. Plus, in a time when a patient’s financial responsibility should be encouraged, what better way than for providers to extend financial incentives than reward upfront payers with discounted rates? 
  2. Administrative benefits. On the administrative side, hospitals and healthcare providers should also consider that accepting upfront payments from self-pay patients is a win for administrative staff. In addition to cutting down on the timeframe it takes to collect, accepting upfront payments can significantly reduce the provider’s administrative and billing costs, too.
  3. Price transparency. Though some providers keep their cash rates quiet, others see the ability to offer lower cash rates as an opportunity to drive business to patients who otherwise would have been unable to afford services. Some providers also choose to publicize their discounted prices as a competitive approach to stand out in the marketplace, drive customer loyalty and attract new patients.
  4. How much to discount. Reduced fees tend to be more common when charging for diagnostic procedures like X-rays, CAT scans and ultrasounds, but payers see the best deals on outpatient surgeries, therapeutic services, prescription drug prices or some types of lab work. Consult your organization’s master fee schedule before settling on a discounted rate.
  5. Leveraging analytics. With the blending of the financial classes, hospitals need better data and analytics programs in place to drive collections and segment patients based on their ability to pay and to determine the best approach to interacting with different patients (such as their previous use of self-serve technology). Sophisticated health information technology can help predict your hospital’s bottom line and provide essential information on how to best assist patients in resolving their accounts. Plus, as more consumers choose high-deductible accounts, this will mean higher residual balances. Hospitals need analytics that will measure the likelihood of payment for these higher balances. For example, what is a person's likelihood of paying a $2,500 deductible as opposed to a bill that’s deeply discounted?

Offering self-pay discounts may be beneficial for certain situations, and there are many key factors to look into.