Patient payment plans leave much to be desired

Patient payment plans help healthcare organizations collect a growing portion of patient financial responsibility. However, new survey data shows that the collections strategy is tying up a significant portion of revenue while missing the mark with the current state of healthcare affordability.

PayZen's new report, "State of Healthcare Affordability: The Provider Perspective 2025," provides findings from a national survey conducted in partnership with the Healthcare Financial Management Association. They surveyed respondents from 213 healthcare systems ranging from $50 million to over $25 billion in net patient revenue.

The survey found that 30% of annual patient collections are in open payment plans, representing outstanding patient financial responsibility balances.

These payment plans are designed to manage growing patient balances due to the increasing popularity of high-deductible health plans and the growth in the coinsurance rate. More working-age adults are also considered underinsured compared to ten years ago, according to data from the Commonwealth Fund.

Patient payment plans can help break down larger medical bills into affordable chunks. Still, Americans can only spend about $97 per month on medical expenses, according to PayZen's "2024 Healthcare Affordability Patient Survey." That monthly amount only works for a bill of less than $1,200 under a common 12-month payment plan, researchers explained. For a 24-month plan, that amount covers a bill of less than $2,350.

About 28% of healthcare organizations cap in-house payment plans at 12 months, the latest survey data showed. Even more -- 58%  -- cap in-house payment plans at 24 months.

Additionally, 7% of organizations represented in the survey do not offer in-house payment plans at all.

Patient revenue cycle strategies are not aligning with healthcare affordability challenges, the survey indicated. Providers are also feeling the pressure as uncompensated care costs increase and more revenue is tied up in payment plans. Researchers pointed out that a $1 billion health system offering a 12-month, in-house payment plan would have nearly $6 million in extended balances.

What's more, the likelihood of non-payment increases as payment plan periods grow. Default rates on internal plans longer than 12 months are between 20% and 30%, the survey revealed.

Researchers said that patients generally want to pay their medical bills and don't usually refuse to pay providers what is owed because of an unwillingness to pay. Instead, patients need more flexible payment options, whichmany healthcare organizations cannot offer in-house.

Yet, 62% of respondents do not work with a third-party financing partner to offer extended-term payment plans, according to the survey. Third-party financing partners can take the burden of collections off providers while offering patients payment plans up to 60 months, often without interest for promotional periods.

But buyer beware; medical credit cards and payment plans have been scrutinized for exploiting loopholes in medical debt collection practices. A recent KFF report also found that about a quarter of patients who financed through a medical credit card did not pay off their balance before the end of the promotional period.

Alternatively, improving pre-service collections could also yield positive collection results, the survey suggested. Organizations that require or promote pre-service payments, or require a payment method on file, have a 20% higher overall collection rate.

Jacqueline LaPointe is a graduate of Brandeis University and King's College London. She has been writing about healthcare finance and revenue cycle management since 2016.