What Is Patient Financial Health Literacy, Why Is It Important?

March 22, 2021 - As medical organizations face competing demands for increasing patient collections and creating a good patient financial experience, they must focus on patient financial health literacy.

Financial health literacy is one’s ability to navigate healthcare billing and financial responsibility. Patients with high financial health literacy will be able to make sense of their medical bills, determine what they owe and when they owe it, and will have the empowerment to negotiate their medical bills or enroll in a payment plan.

But like regular health literacy—which measures one’s ability to make sense of and use health information—financial health literacy is left wanting. According to 2019 polling from Waystar, 38 percent of healthcare consumers did not know the cost of their healthcare could vary across different facilities.

About a quarter (24 percent) said understanding a chargemaster list—or the list of the raw prices for a healthcare services—was too complex, and 23 percent said they did not know how to price shop. Both of these results come as hospitals face requirements from the Centers for Medicare & Medicaid Services (CMS) to make data about 300 shoppable services available online.

Healthcare organizations can and should do their part in supporting better patient financial health literacy. Doing so will not only support a better patient financial experience, but it could yield better and more timely patient payments, which could allow organizations to meet their financial bottom lines.

Employing patient navigators

Healthcare organizations can foremost begin efforts to improve patient financial health literacy by hiring patient navigation staff. These employees can help explain medical bills, to whom patients owe money, and when that money is due.

Currently, most healthcare organizations are falling short of this. In the Waystar survey, only 28 percent of respondents said a hospital representative had discussed costs with them before accessing care. Investment in patient navigators or training for front office staff could close this gap.

In a 2019 assessment published in Annals of Internal Medicine, researchers also found few clinicians are discussing cost of care with patients. Observation sessions and interviews with 67 patients and 9 clinicians revealed that cost of care conversations happen in just under half (46 percent) of patient encounters.

Organizations may consider specific training for existing staff about how to discuss price transparency or medical bills after those bills have been issued. Conversely, specific billing navigation staff may help address this issue.

A separate, unrelated Annals study published around the same time found that training could help reverse that trend. The research team offered training to clinicians about how to best discuss cost of medication with patients and conducted pre- and post-intervention surveys with healthcare consumers.

The training resulted in a 15 percentage-point increase in the frequency of medication cost discussions.

Organizations need to be judicious when designing cost of care communication efforts, with the researchers recommending these conversations happen during medication reconciliation. Organizations should also carefully consider the populations who will receive this intervention.

Issuing patient-centered billing

Patient-centered billing is the idea that a medical bill will be understandable to a layperson, according to Leah Binder, the president and CEO of patient safety ranking firm The Leapfrog Group. And being that patients are increasingly responsible for their healthcare costs, and those costs are rising, it is essential organizations deliver a patient-centered bill.

“Hospitals and health systems have to financially survive, we understand that, but they also need to respect their patients at every stage and every moment of their lives, and that includes how patients pay for their care. There needs to be the ultimate highest level of respect for them,” Binder said in an interview with PatientEngagementHIT.

“Right now, according to our research, what we think are best practices for billing is issuing a bill that a layperson can understand,” Binder added. “Most people are not experts in healthcare, and they need to be able to read the bill. It needs to be written in language they understand, so that's the first principle.”

But in November 2020, research from Market Cube and Waystar found that poor patient-centered billing was hampering the patient financial experience. Thirty-seven percent of patients said a medical bill that was not patient-centered left them paying that bill late. One in five patients said it was unclear how much they owed.

Patients said patient-centered bills would include explanations of what payers will and will not pay for, only important information, explanation of benefits, and online resources to further help them parse through their financial responsibility.

Offering price transparency

Although most patients and industry experts agree healthcare price transparency is important for improving the patient financial experience, organizations need to be judicious in how they deploy it.

After all, numerous studies have indicated that even when price transparency tools are available, they don’t usually generate meaningful patient use. Most recently, a Health Affairs article showed that even after a marketing campaign increased the number of patients using a price transparency tool, those patients still picked the same, potentially more costly, doctors.

Price transparency tools are more successful when they offer meaningful information to patients, like the cost of care after insurance kicks in.

Patients also need more information about the relationship between cost and quality. Most industry experts agree that high cost does not necessarily mean high quality, and vice versa. The Health Affairs researchers said that explaining relationship to patients will be important for yielding positive outcomes from price transparency tools.

Opening payment plans

Healthcare payment plans allow patients to break down their medical debt into smaller, more manageable chunks. This is essential as an increasing number of healthcare consumers fall into medical debt.

The 2019 Waystar report showed that 42 percent of consumers believe a payment plan would improve the patient billing process. The November 2020 survey from Waystar showed another 38 percent of consumers felt the same.

At Excelsior Springs Hospital, payment plans successfully yielded 500 enrolled patients and some $450,000 in patient payments, according to Cameron Meyer, ESH CFO.

Meyer told PatientEngagementHIT in 2019 that the payment plan includes automatic withdrawal and feasible payments. But more importantly, success has hinged on up-front communication with patients, he said.

“It’s important to focus on patient financial customer service and we educate our staff on how to speak with patients about having a proactive approach to paying their medical bills,” Meyer said.

“During implementation we identified the need to improve the quality and timing of our communication with patients,” he continued. “We never want our patients to be surprised when they receive a medical bill. Our staff has been transitioning to an up-front communication model, focused on helping our patients understand their insurance coverage and estimated financial responsibility.”

Understanding how to best navigate patients through the financial experience will be critical, as reports continue to indicate that patient financial responsibility is growing. That, coupled with the rise of healthcare consumerism, will bring these elements of patient financial health literacy to the forefront.