Prepaid Discounts for Healthcare 

Healthcare providers are in a changing landscape where patients are responsible for a much larger portion of their healthcare expenses. That has inspired unique strategies to accelerate the revenue cycle and reduce the cost and burden of collections. One strategy gaining popularity is to give the patient an attractive discount in exchange for prepayment.

The Way it Works

St. Luke’s hospital has been offering prepaid options since 2015. The hospital will display two prices on its online payment portal, so that patients can do comparison shopping. One price is the prepaid price that includes a discount. The other is what the patient will be charged if they wait to pay until after their health insurance company has paid its share of the bill.

St. Luke’s also uses a bundled pricing strategy, so that the patient’s upfront payment covers everything such as the physician’s fee, the lab tests, and the hospital stay. Using a HIPAA-compliant and secure online payment platform makes the prepaid discount process both easy for providers and intuitive and transparent for patients.

A Strategic Trade-Off

For centuries the saying “a bird in the hand is worth two in the bush” has made practical sense in terms of balancing financial rewards and risks. That’s especially relevant at time when healthcare is challenged by high costs and the increasing frequency of delinquent payment or defaults.

Advance payment preempts the need, the effort, and the cost of collections, while dramatically shortening the revenue cycle. Providers who are using the prepaid discount concept often find that it more than pays for itself on the back end. The typical discount for prepayment is around 20 percent. But the cost of payment delays, payment reminders, and collections can be much greater than that.

Payment Request Friction

Health insurance is more expensive and the deductibles are higher, so hospitals now collect 30 percent or more of their revenue directly from patients. That’s why most of them request advance payment for procedures, according to Consumer Reports and the Healthcare Financial Management Association (HFMA). But asking doesn’t mean that patients will actually agree to pay in advance.

Instead it can mean that patients feel pressured. They may think that providers care more about money than about delivering compassionate quality care. That creates unnecessary, unwanted friction. The patient may avoid having a procedure because they are afraid they can’t pay. Or they may shop for a different provider who offers more payment flexibility.

The Upside of Discounted Prepay

But providers who use the discounted prepay approach usually find that patients love the idea. They like having an alternative way to pay that requires the hospital to provide them with greater upfront pricing transparency. If they elect to prepay, they know they won’t be charged over and above that amount.

It is also a good idea to provide all patients, in advance, access to an insurance eligibility verification and price estimate tool. Some hospitals are also partnering with lenders willing to provide low interest loans to patients. Providers can additionally offer patient-oriented financial solutions such as the ability to make installment payments over time and conveniently manage those online.