Data and Dollars: How CDHC Is Driving the Convergence of Banking and Health Care

"Consumerism that is engaging consumers in their health and medical decisions may encourage improved health status of the people we serve while potentially controlling rising costs."

--Consumerism in Health Care: An Initiative of the PATIENT FRIENDLY BILLING[R] Project

Consumer-directed

health care is the most recent in a years-long series of healthcare cost shifts. Responsibility to pay for healthcare services has gradually moved from insurance companies, health plans, and employers to a not-surprising destination--patients, who could reasonably be termed the true consumers of health care.

This shift is already beginning to change the way patients think about healthcare services. Some have embraced their status as consumers by seeking to know the true cost of services. They understand that, armed with this information, they can begin to make prudent decisions about where they spend their healthcare dollars.

A Harris Interactive survey in December 2005 reported that about 10 percent of survey respondents said that they have negotiated with hospitals on price. Other surveys have found numbers ranging as low as 9 percent to as high as 20 percent.

A Rising Challenge for Providers

The CDHC revolution is also changing the way providers--both hospitals and physicians--must interact with these new, more-empowered customers. This trend presents both opportunity and danger for providers. They need to weigh the prospect of faster payments against that of more-difficult collections. This trade-off should prompt providers to reflect and decide how they are going to address this changed landscape.

"Since 2004, some hospitals have seen their patient accounts receivable go up to 10 percent, or even 14 percent of their receivables--which for a hospital is huge," reports Catherine Warren, senior vice president and healthcare industry strategist for Bank of America Global Treasury Services. "Their ability to collect on that A/R is much more difficult and expensive. Bad debt is much higher with self-pay than with a commercial payer."

As challenging as it may be for providers to deal with third-party claims, insurance companies, Medicare, and Medicaid provide a relatively consistent stream of cash as long as providers submit claims in good time and manage claim denials effectively. When a healthcare receivable becomes a consumer debt, however, it can become an expensive and messy collection problem.