F127 Why Do People Go Bankrupt Due To Medical Costs In The US? (Ric Sinclair)
Two-thirds of people who file for bankruptcy in the US, cite medical issues as one of the main factors to their financial downfall. Part of the reason is the healthcare costs structure that has shifted towards patients, says Ric Sinclair, the Chief Strategy and Product Officer of Waystar.
“What happened in the United States over the last plus or minus 30 years was that processes were built based on a system and a payment system in the 80s and 90s. Initially, healthcare providers and insurance companies were exchanging funds between each other. Patients carried a very low portion of the financial responsibility. Now 30 to 40% of the overall cost structure is shifting to patients,” says Ric Sinclair.
Waystar is a health tech platform helping streamline payments for over half a million healthcare providers across the US. The company helps healthcare providers avoid claim denials, which can happen due to small issues such as typing errors.
How do claims get denied
Ric Sinclair.
“Healthcare providers, particularly those that haven't moved to newer processes are oftentimes denied 3-8% of everything they're submitting to an insurance company. Our data shows that nearly 90% of those claims are preventable from being denied. We've started to innovate and invest in artificial intelligence and technology that will automatically catch those errors,” Ric Sinclair says.
The challenge with denied claims is that a huge cost burden can fall to patients. With various insurance plans, high deductibles, being seen by a doctor that is out of the network of providers the insurance company reimburses, it is very difficult for patients to assess medical bills and if they are being fairly charged.
Ric Sinclair explains the complexity: “The majority, if not all healthcare providers truly want what's best for the patient, both clinically and financially. But the US healthcare billing process is complex because private insurance companies and public insurance companies, each have their own payment and reporting requirements. And so you could be managing hundreds, if not thousands of different contracts, fee schedules, and payment arrangements as a hospital. The basic steps though, which is typically called the revenue cycle or the healthcare payments process in the United States, sound pretty straightforward. When a patient arrives, the healthcare provider will collect their information. Charges are then documented, put into technical systems, and electronically sent to an insurance company or a payer. The payer then analyzes that claim, and either accepts it or denies it. It can take a private insurance company and the provider 30, 45, 60 plus days to agree on what should be paid at that point in time, and oftentimes there is a remaining balance that is then sent to a patient.”
Transparency of billing
Various startups are trying to address the affordability of health insurance or price transparency through innovative subscription-based business models for healthcare services.
Ric Siclair believes the situation will improve with new analytics and business technologies for healthcare providers. “Patients have the right to ask how much something is going to cost. We need a behavior shift where patients should be empowered to ask how much their care is going to be. Providers are starting to invest in technology and tools and better processes that enable them to do have an upfront dialogue about the cost. In fact, there was recent regulation passed in the United States that, in some cases is mandated that healthcare providers post price, transparency charges.”
Some patients also get creative. Stacey Richter is the host of the Relentless health value podcast, where she has been interviewing US healthcare executive for many years - over 300 episodes have been published by today. When her husband landed in a New Jersey emergency room, she did something bold. Instead of simply signing the hospital’s financial and treatment consent form, she first crossed out sections calling for her to pay whatever amount the hospital charged. Instead, she wrote that she would only pay a rate of a “maximum of two times” what the federal government would pay under Medicare. You can read the full story in New York Times.
Tune in for the full discussion.
Some questions addressed:
Since more than 50% of the audience comes outside the US. Can you describe the healthcare billing process in the US? From the moment the patient gets admitted to the hospital. Forms he has to sign (the right to billing) etc?
You help hospitals reduce payment denials. Can you explain what these are and why they happen?
According to the Kaiser Family Foundation The number of uninsured nonelderly Americans is increasing it went from 26.7 million in 2016 to 28.9 million in 2019. The uninsured rate increased from 10.0% in 2016 to 10.9% in 2019. How does that impact your clients?
Billing is a huge issue and burden in US healthcare - patients are not insured, underinsured, or have high deductibles which result in high out-of-pocket bills that don’t get paid and cause the hospital’s revenue challenges. What do you see as potential solutions to this?
Because of COVID, many healthcare providers struggled financially since the procedures were put to a halt, postponed etc. How did 2020 look through your eyes? You provide hospitals with a platform to ease billing. What challenges did you come across?
In the United States, there are currently more than 900 health insurance companies that offer medical coverage. Each insurance company has a network of healthcare providers. As a patient, you can only go to the providers in the network if you want to be reimbursed by the insurance company. However, how is it possible, that you go to a healthcare institution that’s in the network, but are seen by a doctor that’s not in the network? This is where surprise bills come from. How can patients avoid surprise bills? How can doctors cope with questions about costs? What’s being done to increase transparency in US healthcare billing?