We were not able to get to ETA's TRANSACT show last week, but because we miss Las Vegas so much, we will be at HFMA's annual conference in June! We would love to say hello in person, so please drop us a note at info@finmedpartners.com if you'll be attending too.
Let's get right to this issue's topics, including Optum's RCM services, great data showing how little providers actually collect from patient balances, an explanation of credit card fees, some patient financing perspectives, and our usual dose of AI in healthcare payments.
RCM SERVICES
Optum's move into outsourced RCM services
All the news about Change Healthcare's ransomware attack got us thinking about other parts of UnitedHealth Group/ Optum. Specifically, Optum's RCM business.
When most people think of hospitals outsourcing revenue cycle operations to a third-party, the names that usually come to mind include R1 RCM (originally Accretive Health, and owned in part by Ascension Health since 2015), Parallon (part of HCA), Conifer (owned by Tenet and CommonSpirit), and more recently Ensemble (spun out of Bon Secours Mercy Health in 2019). What many people don't realize is that UnitedHealth Group's Optum unit also offers a service for large provider organizations to outsource their RCM operations. (This post from Recon Strategy gives a good overview of Optum's RCM outsourcing approach.)
Here are Optum's RCM outsourcing customers, as of February 2024 (list excludes SSM Health, which recently terminated its contract with Optum):
BONUS read: click here for a Steward Medical Group (SMG) physician's perspective on the proposed Optum takeover of SMG. Not payments exactly but still timely and some interesting payer contracting tidbits.
PATIENT COLLECTIONS
Data shows providers collect less than 50% of patient balances
We have long suspected that provider collection rates, while obviously varying from one practice and one hospital to the next, are on average less than 50%. Based on anecdotal evidence, provider and vendor interviews, and our own analysis of claims data, we believed the average yield on patient balances to be somewhere around 45% for hospitals and health systems, and somewhat higher for independent medical groups. Now we have data to land on a more accurate, blended number.
Kodiak Solutions, formerly part of Crowe LLP, publishes quarterly benchmarking reports on revenue cycle performance. In the February 2024 report, Kodiak published an analysis of 3 million fully resolved commercial medical claims from 2022-23. Part of the study looked at how much patients paid of the balances they owed to providers. According to the report, "the collection rate on the patient responsibility portion of payments owed showed that providers collected less than half – 47.6% – of what patients owed them for care in 2022 and 2023."
Source: Kodiak Solutions February 2024 KPI Benchmarking Report
The Kodiak analysis also showed - perhaps not surprisingly - that collection rates drop off considerably as patient balances get larger (see graphic).
Explanation of credit/ debit fees added by merchants
The HISTalk health IT blog, which we've mentioned before, allows guest posts as a feature called "Readers Write". Recently, the Chief Compliance Officer of TrustCommerce, Heather Randall, published a piece covering fees that are sometimes added by merchants (in this case providers) to card charges. As cash and check continue to disappear, credit and debit-based transactions will make up closer to 100% of payments. As more patients use cards, they will be subjected increasingly to fees that are allowed as a way to help providers cover operational costs. The author covers the difference between Convenience, Transaction and Surcharge Fees, the importance of state-level laws and regulations, and the recent settlement between Visa/ Mastercard and a merchant group that includes provisions relating to these fees.
CoFi adds CareCredit following Synchrony investment
It's hard to call a company which already has 5,000 providers on its platform a start up, but since CoFi took a $3.5 million seed round last June, it's probably still appropriate. The Boston-based company has been in business for three years, focusing on eye care, and describes itself as "the first multi-party payment platform for premium elective procedures." Essentially the patient pays just once even though the procedure might have charges from multiple parties including the surgeon, co-managing provider, facility, and an anesthesiologist.
Given the company's focus on elective eye care, it makes sense that Synchrony Ventures would participate in the seed round, and then integrate CareCredit patient financing with CoFi's platform. CoFi already has a relationship with Alphaeon for patient financing. Given the investment from Synchrony, it's possible that CareCredit has displaced Alphaeon, though CoFi's website still has Alphaeon listed as its patient financing partner.
PayZen, a player in the non-recourse patient financing market, just published the results of a study with 1,007 consumers who had a hospital visit or surgical procedure for themselves (or a dependent) in the prior 24 months. The study found that medical debts "don’t persist because patients are unwilling to pay. They simply can’t afford them. Given some hypothetical situations, the survey respondents made clear that - for most of them - paying for their healthcare is a priority." (See data from graphic.)
Source: PayZen, "The High Cost of Health: Analyzing America’s Healthcare Affordability Crisis", 2024.
The report summarizes additional survey data looking at implications of the lack of healthcare affordability:
36% of people said they’ve postponed needed care to avoid medical bills
Of those who skipped or postponed care, 49% said that they skipped preventative care visits, and 49% said that their health problems worsened as a result
Revenue cycle advances and changing physician opinion
Thanks to HISTalk for flagging an HFMA piece which examines how healthcare organizations are starting to use AI to push back against claims denials by payers (which have invested in their own technology to automate claims processing and more easily deny claims). A couple examples summarized by HISTalk:
Reducing RCM headcount by 30 FTEs by using AI bots (Mayo Clinic)
Reducing authorization-related denials by using bots to notify payers when patients are admitted (Care New England)
FinMed Partners is a management consulting and advisory business focusing at the intersection of payments/ fintech and healthcare. Our founders have developed deep expertise from decades of experience with health IT companies, healthcare providers and many players within the payments ecosystem. Investors, boards and executive teams work with us to maximize business value through strategic input and tactical execution.
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