Healthcare payment collection is a costly and complex paradigm that’s a source of abrasion for both providers and patients. Providers struggle with uncollected patient responsibility, while patients face billing confusion that delays payments and increases administrative inefficiencies. These challenges leave billions of dollars in unpaid balances, straining financial stability across the industry.
Milliman’s analysis of healthcare payment and collection solution models identified inefficiencies that increase costs and reduce provider revenue. Their research evaluated how ECHO’s Simplicity — a payment solution designed to streamline patient out-of-pocket collection — addresses these issues with a consolidated, automated process that benefits providers, payers, and patients alike.
The Friction in Healthcare Payments and Collections
Rising deductibles and coinsurance obligations introduce significant friction in healthcare payments. When patients are responsible for a greater share of costs, providers face a growing challenge in securing timely reimbursement. Payment delays and non-payment erode revenue, forcing providers to invest heavily in collection efforts.
Administrative complexity further compounds the issue. Patients receive multiple explanations of benefits (EOBs) and bills from various providers, each requiring reconciliation and follow-up. Providers must dedicate staff time to payment reconciliation, billing inquiries, and collections — driving up operational costs without guaranteeing improved payment success. Milliman identified three primary challenges in the healthcare payment ecosystem that contribute to these longstanding inefficiencies.
Patient Impacts: A Confusing and Complex Experience
Patients often receive multiple EOBs and bills from different providers and facilities for a single visit, each arriving separately and at different times, full of insurance jargon, poor explanations, varying payment instructions, and timelines. This fragmented approach makes it difficult for patients to understand their total financial obligation, leading to delayed or missed payments. Without a single, consolidated billing statement, many patients struggle to manage their medical expenses effectively.
Provider Impacts: Quantifying the Revenue Shortfall
Uncollected patient balances directly impact provider revenue and add to the financial friction that already exists between providers and payers. Milliman estimates that the average provider collects only 91% of their contracted rates, with the remaining 9% lost to outstanding patient payments. This collection gap forces providers to negotiate higher rates with payers, increasing healthcare costs across the system.
When it comes to the patient responsibility, providers successfully collect only 67%, writing off the remaining one-third as patient bad debt. The cost of collection efforts — including repeated billing cycles, staff time, and third-party collections — further reduce net revenue. These inefficiencies contribute to financial instability and increase the likelihood of providers writing off unpaid balances as bad debt.
Milliman’s Analysis of Simplicity
In the current healthcare payment model, providers, patients and payers all share a heavy burden. To solve for this, Milliman identified seven essential capabilities for a comprehensive healthcare payment solution:
- Consolidated financial statement
- Pay the provider a complete payment, including patient responsibility
- Financing options
- Reduce administrative complexity
- Simple to implement
- Scalability
- Long-term economic viability
Milliman reviewed Simplicity’s approach, “which is designed to make it easier for patients to understand their share of their providers’ fees, while combining the payer payment and the patient amount owed into a single payment to the provider. It includes a way for patients to consolidate their financial responsibilities across all providers so they can pay it over time. The solution is designed to work within the current administrative framework and cost structure of the commercial health care and insurance system.”
They compared the solution’s process to the seven capabilities above and analyzed how it operates between the payer, patient, and providers to transform the payment collection process by centralizing payments and automating provider reimbursement. Milliman noted that Simplicity addresses the first five key aspects and developed a financial model to study the conditions required to achieve the remaining two aspects, scalability and long-term economic viability. Specifically, Milliman highlighted these key features of the Simplicity solution:
Consolidated Member Statements
Instead of fragmented billing, Simplicity consolidates the patient’s EOBs and financial responsibilities into a single, easy-to-understand statement. This approach greatly reduces billing administration for providers, eliminates billing confusion for patients, and reduces patient inquiries by improving payment transparency.
Adding Liquidity with Provider Reimbursement in Full
Under traditional models, providers wait weeks or months to receive patient payments. Simplicity removes this delay by paying providers upfront for both the insurer’s and the patient’s portions of the claim. This eliminates bad debt, improves cash flow, and ensures providers receive their full contracted amount without relying on unpredictable patient payments. Simplicity will fund the patient cost shares and make most providers’ patient collection activities unnecessary. This increases provider net yields and reduces or eliminates their collection expenses.
Patient Clarity
With a solution that removes the administrative and financial friction, the actual amount owned by patients remains the same. However, they gain visibility into their total financial responsibility through a single statement that explains who they owe and how much they owe for their care. This structure reduces missed payments, simplifies financial planning, and increases payment efficiency compared to traditional multi-bill approaches.
Financial Impact for Providers and Payers
Organized information and cash flow removes much of the administrative and financial friction that has long hindered healthcare payments and collections. Milliman’s financial modeling demonstrated measurable benefits for all stakeholders in the healthcare payment ecosystem, including:
- Improved net yield for provider – Providers receive full payment for claims, eliminating revenue leakage from uncollected patient balances.
- Lower administrative overhead – Automated payment processing reduces billing, reconciliation, and collection costs.
- Enhanced member retention for payers – Simplified billing improves patient satisfaction, reducing churn and increasing plan loyalty. The same is true for provider satisfaction and retention by reducing or eliminating the burden of patient billing and collections.
- Potential compliance advantages – In tandem with payment administration, payment automation can align with regulatory requirements for transparency and consumer protection.
Moving Forward with a Modern Approach
“A true solution must approach the problem in a holistic way with an eye toward long-term value. Although the financial process and risks may seem complex, it is worth pursuing. The status quo is a poor approach from a consumer perspective, and it seems to exacerbate the underlying cost pressures inherent in the health care system. With today’s technology and industry “know how”, operationalizing a solution [like Simplicity] is plausible if providers and payers can commit to it and are willing to share their knowledge and expertise with other experts who understand how to implement the financing aspects of the solution.”
They market that they have an easily accessible summary of all obligations owed by the patient for all the services they received. They also have a financial instrument to fund immediate payment to providers for the patient cost share amounts owed. This financing solution will increase provider cash flow and net fee yields. This should also eliminate the providers’ administrative burden of billing and collections because Simplicity arranges and administrates payment plans for a patient’s total obligation.
Even with the best intentions, the experience of paying a medical claim — from billing to collecting the patient’s share — has long been complex and not designed with the patient in mind. Simplicity offers a new way to pay for healthcare. With Simplicity, health plans can improve the member experience, providers can protect their bottom lines and members can finally make sense of what they owe and why, in one simple format.
Download the full analysis here*
*ECHO Health commissioned Milliman to write this whitepaper to discuss the current industry challenges stemming from how patient deductibles and coinsurances are billed for, paid, and collected, and to contrast alternative approaches for this process. The findings and conclusions reflect the opinion of the authors; Milliman does not endorse any product or organization.
