Bill Marvin is president, CEO, and co-founder of InstaMed of Philadelphia, PA.
Tell me about yourself and the company.
I started in healthcare in 1993, when I founded a company that was called CareWide. We did electronic claims and practice management software that we wrote to allow small physician offices to submit claims electronically. I grew that out of my parents’ attic into a business that eventually got bought, and then got bought by another company, and then eventually became part of Allscripts.
After that, I went to Andersen Consulting, where I landed in the health and life sciences practice focused on health plans, so now on the other side of the fence. I met my co-founder and partner Chris Seib at my first engagement in Minneapolis at UnitedHealthcare in April 2001. We’ve been working together ever since.
Andersen Consulting became Accenture. The Medicare Modernization Act was signed in August 2003. By 2004, I was consumed with thinking about how high deductibles and HSAs were going to change the revenue cycle. That’s when I asked Chris to join me and start InstaMed.
We started InstaMed in 2004. I was in Philadelphia and Chris was in Newport Beach, California. He had been working out of the El Segundo Accenture office. He would take technology and I would take everything else.
Other than that, I’ve got a wife and one son, who is nine years old. We live in the suburbs of Philadelphia. I travel a lot, but I love what I do. I love technology and I’m passionate about solving healthcare payments.
How have patient payments changed in the past couple of years and how do you think they’ll change in the future?
Health savings accounts first came around in January 2004. For the first four or five years, they were seen as an immediate tax haven for high net worth people. There were some other regions where employers adopted them, some states where HSAs popped up pretty quickly, but in the Northeast where I live, HSAs were really nascent. Companies like Bank of New York Mellon, which also have big wealth management businesses, were some of the first pioneers into HSAs.
When the Affordable Care Act came about, I think everyone in the industry took a big pause and held their breath because they weren’t sure what was going happen to HSAs. HSAs were put into legislation by the Republican Bush administration and here comes the Obama administration with the Affordable Care Act. You thought, maybe this is going to cut the opposite way. But in fact, when the products came out on the exchanges, everyone saw these high deductibles. Even higher deductibles than we had seen when HSAs and high-deductible plans were first launched.
People in the industry, at least on the banking side and the payment side, breathed a sigh of relief. They said, it looks like this train is going to keep rolling and deductibles are going to continue to rise. That’s in fact what has happened.
Costs out of pocket for consumers is a trend that I’ve seen rising since the mid-1990s, when co-pays effectively went to zero with HMOs. There was a competitive phase in the first half of the 1990s when HMOs were competing on price, dropping co-pays, and trying to make it more and more attractive. They went to a $10 co-pay, then a $5 co-pay, and then some HMOs went to $0 co-pays. Of course, we didn’t have high deductibles back then. The insurance picked up the tab for everything after that.
It was the mid-1990s when a lot of those HMOs went belly up, bankrupt, and got rolled up into UnitedHealthcare or others that grew rapidly at the time. That was the beginning of the increase that we’ve seen in consumer out-of-pocket spend. Since the mid-1990s, we’ve been on an upward trajectory, with some pause for the Affordable Care Act. But really, The Affordable Care Act has kept healthcare payments increasing. We see that continuing to increase.
What can a provider do to raise the consumer’s urgency of paying a medical bill to the same level as their unpaid cell or cable bill?
A lot of people use a lot of different excuses as to why payment experiences and bad debt in healthcare are different from other industries. We’re all the same population in the United States. We all have the same FICO scores that we go and get underwritten for mortgages and apartments. Yet somehow, we see such a different loss rate in healthcare than other industries.
The number one thing that we see is that you have to make it a consumer-centric experience, where the consumer is first in the experience. That starts with setting an expectation. When we check into a hotel, we know that if we buy a movie, it’s going to $15, or if we go to the minibar and get a soda, it’s going to be $5 or $10. No one knows exactly what they’re going spend when they check into a hotel, but somehow when they check out, the hotel gets the right amount billed to your credit card every time. You accept that amount. You don’t dispute it. Everything goes through a happy path.
In healthcare, it’s very similar. We don’t know what we’re going to need. We don’t know exactly how much things are going cost. Providers need to do a much better job of setting expectations. With one of our solutions called Estimator, which combines with our patient payment solution, you can set an expectation upfront and secure a card. Your bad debt goes down dramatically.
After you set an expectation, if you just ask the question, "Can I have a card to secure a payment method?" what we find is that about 85 out of 100 times, you’ll get a card. You’re not going to get a card all the time, but you will get a card. With InstaMed Estimator and with the InstaMed Payment Plan solution, we securely store that credit card, that bank account, or any payment method in our InstaMed digital wallet. Then, charge that card later when we know the exact amount.
That’s the direction that healthcare payments need to go in, but it’s not all solved with technology. It’s also solved with the expectation-setting by the provider.
Dental practices give you an accurate, upfront estimate and you then decide whether to proceed knowing the cost. Why is it different with physician practices and hospitals?
Two things in healthcare make it difficult. One is that the healthcare provider has given up the control of pricing by contracting with various health plans. They are accepting the rates that their local health plans are writing up for their members. If I’m coming in through Aetna for an office visit, I’m going to get a different reimbursement than if I’m coming in through UnitedHealthcare or the local Blues plan.
To further complicate things, in dealing with a health plan like Aetna or United, you may have multiple health plans within that entity. An employer that is self-funded may have different rates for their patients than an employer that is not self-funded.
The rates are unknown to the provider. The provider knows what they’ll charge you if they take cash right then and there for the visit, but they don’t exactly what you’re going to owe based on what insurance company you have.
The second thing that they don’t know is where you are in your benefit structure when it comes to co-pays and deductibles. Some benefit structures have $50 co-pays for an ER, or for an OR visit, some can be $200 to $500 for a co-pay. Then, there’s co-insurance or there’s a deductible on top of that.
In order to understand this, you need to have some kind of a data feed, like what we do with our real-time Estimator and Eligibility Network, where you can reach into the benefit structure that the health plan has for that patient. Understand where they are in their deductible. Understand what kind of benefit they have, whether it’s co-pay, co-insurance, deductible, or a combination. Then, understand what the services are going be adjudicated for at the fee rate that you’ve contracted with that health plan.
It’s a lot that I just said right there. [laughs] It’s complicated. It all comes from healthcare providers having entered into these contractual relationships, versus when you go into a store and they say, "All the watermelons are half off today." It’s your store. It’s your inventory. You decide that today, we’re going to sell watermelons at half price. You know how much it is and you’re done.
Pricing is a pretty basic business thing, but in healthcare, pricing is something that healthcare providers outsource to health plans.
How many patients participate in payment plans and what are the collection implications?
I look at things at a pretty macro level with InstaMed and what’s happening on our platform. We continue to see payment plans increase. We track on our platform how many payment plans exist at any one time and the value of those payment plans if they were all to be paid right at this time. It’s sort of like how a bank would track a loan portfolio — how many loans do I have outstanding and what’s the total asset base of all of those loans? That number continues to go up and up.
All of us today, when we’re seeing the larger charges in our healthcare lives, are in a situation where we didn’t plan to blow out a knee on a ski slope. We didn’t plan for that $2,000 worth of physical therapy. Unplanned events, for most of us in the United States, are events for which we don’t have cash readily available to tap. We may have to move money around or we may just not have the money.
More and more payment plans, when offered by the healthcare provider, will see immediate demand. Payment plans are a way for a healthcare providers to self-finance and increase the probability that they’re going get paid something rather than nothing. When you think about it, if you don’t offer a payment plan, you’re basically creating a binary outcome. You’re either going to get paid or you’re not.
When you create a payment plan, you take that binary outcome and create multiple outcomes. The probability of you getting nothing goes down, because you increase the probability of you getting one payment, or two payments, or three payments. That’s a good thing when it comes to reducing bad debt and a tool that I think every healthcare provider should have and should think about what kind of business rules and policies they want to put in place when deploying a payment plan.
Do you have any final thoughts?
In healthcare payments today, a lot of hospitals and large healthcare provider groups who are favoring their banking relationship for payments are doing a disservice to their patients in delivering a consumer-friendly healthcare payment solution as well as a secure and fully point-to-point encrypted payment solution. It’s important to understand how payments have evolved technologically across all industries, but also, how healthcare is this unique industry where the consumer is becoming more and more and more a part of the payment equation. You need to think about the consumer experience and think about the security that’s involved in point-to-point encryption when delivering a healthcare payment solution for patients.