When it comes to payments for health care related services, everyone seems to agree on three things: it’s a massive market (and opportunity), it’s a market which formerly resembled B2B payments but now increasingly resembles a consumer payments market, and it’s woefully behind the times in technology and customer experience.
Payments for health care related services in the United States are estimated to total over $3 trillion annually, or almost 18% of gross domestic product. The reasons are familiar: the U.S. population is aging, most Americans lead unhealthy lifestyles, and hospital consolidations are leading to higher fees and costs. Physician and clinical care costs are also rising, and waste is endemic in the health care system. For such a massive market growing in importance, and taking center stage politically, health care payments don’t receive an equal share of discussion.
So PaymentsJournal sat down with an innovative fintech Paya, formerly Sage Payments, and its VP of Business Development ISV Channel Mike Ermi to discuss the intersection of health care, payments, and the transaction challenges facing both consumers and physicians. Ermi opened the discussion with some background on the origins of consumer engagement in the health care space:
“In 2009, you had the HITECH Act that made it necessary for physicians to digitize records so patients could access them from anywhere. And you had a lot of companies pop up out of the woodwork to do it, and there was incentive for [physicians] to do it. The incentive was they could get reimbursed a percentage of their build out costs—and if they didn’t do it, they could lose up to 10% of their Medicare & Medicaid payments. So although you had a lot of early adopters, you still don’t see a lot of good portals so patients can go online and view their records.”
Patient engagement, it seems, has been lacking in healthcare since the dawn of digitization. At the same time that consumer engagement goes unfulfilled, the market is transitioning towards greater consumer ownership of payment. Mercator Advisory’s credit analyst Brian Riley explains, “There’s a growing trend in the [health care] payments industry where a lot more payments and requirements for payments are being pushed to the consumer.”
The shift is from a B2B to B2C model. In the business-to-business environment, the payers, the insurance companies, and government entities settle with the providers. In the business-to-consumer environment, doctors seek to collect payment directly from their patients. This means that fewer transactions are settled between an employer or insurer (“payer”) and a growing portion of health care payments are now retail payments collected directly from the consumer.
Mercator’s Merchant Services Director Raymond Pucci states the challenge succinctly, “Physicians’ offices are not the leading edge of technology, even though we’re talking basic POS payments. These physicians need the ability to accept different types of payments from different issuers.”
This is where Paya has positioned itself as the conduit from physicians’ offices—historically set up for business payments— to consumers, whose expectations for retail payments have never been higher. “The technology we introduced in 2018 gives doctors not only the ability to accept payment in their office, but it allows them to take a payment online, allows them store credit cards safely and securely, allows them to set up recurring billing—and soon to add text to pay, the ability to remit a bill either via mobile via web or via email, to allow doctors all different touch points with their patients so they can collect money quickly.”
Ermi goes on to explain that rich opportunities are available with the convergence of new payments tech with the existing health care rails, “we’re seeing a lot of payments integration into software that doctors use to eliminate double data entry. It helps to eliminate errors. It gives [doctors] the ability to store tokens into the software and allows [doctors] to send out invoices and remittance for payments.”
But despite change on the horizon, Ermi admits that some pets’ health care might have better tech than their owners’: “It’s a lot of work to get good companies to integrate payments into practitioner’s software choice… [Health care payments] haven’t really caught up with other medical segments like dentistry or veterinarian and certain specialty medicines where insurance doesn’t cover as much of the payment.”
Ermi goes on to highlight one of the unique and most confounding elements of a consumer health care payment: no one— not the doctors, insurers, and, least of all, patients—knows what the cost will be until after the procedure is complete. Sarah Grotta, Mercator Advisory Group’s Debit & Alternative Payments specialist, describes the challenge:
“Quite frankly, it’s a crazy payment experience. Right? Let’s say you need surgery; you go in, and you have no idea what this is going to cost you. You may have an idea of how much your insurance will cover, maybe it’s 80%, maybe it’s 80% of some things but not other things. You have no idea what the total cost will be. And you know, I really can’t think of another interaction like that, where consumers are going to spend money, and we’re talking big money, for something that they have no control over what the end result is going to be!”
There’s little surprise that Mike Ermi cites the delay in billing adjudication as one of the biggest pain points for physicians as well: “A lot of our physicians are family doctors, people we’ve known for years, people we trust and their small businesses—this is where [Paya] wants to help these doctors, and give them tools that are simple to use for office managers to they can collect and not be out of pocket 30, 60, 90, some cases six months.” Paya’s goal is to provide a simple, non-intrusive way to collect payment from patients while they’re still in the doctor’s office.
On the patient side, Ermi notes the shift in expectations in consumer payments brought on by the convenience of frictionless payments in popular mobile services like Uber and DoorDash, and expects technology players like Paya will help bridge the gap in payment experiences between the forerunners in retail payments and the antiquated health care payment experience. Mercator’s Prepaid Director Sue Brown notes a similar parallel occurred with health care and prepaid: “The health care market is desperately in need of streamlining and it’ll soon be a fast follower.” She notes “this happened in the health care space with prepaid on the business-to-business side, where they basically took the lessons of consumer prepaid—how to streamline, how to make that work efficiently— and implemented [them] in the business arena.”
Asked about the future of health care payments, both Mike Ermi and Mercator analyst Raymond Pucci agreed that the future is mobile. “The frontier is going to be mobile,” Ermi explains, “once people feel that mobile is secure and their cards are secure stored online.”
All are also in agreement with Ermi’s closing sentiment: “We’re in the early innings—we’ve just scratched the surface.”