Harnessing the self-pay opportunity
A provider primer for navigating the new world of cash patients
Historically providers have been mixed on “cash-pay” or “self-pay” patients, with the benefits of treating them — ability to set prices, bill directly, shorter revenue cycle — sometimes offset by collections difficulty. Self-pay patients are becoming more common among all types of providers powered by trends in legislation, gig workers and the rise of insurtech companies focused on the efficiency of cash. For providers, now is a great time to rethink your approach to this growing opportunity.
What is self-pay?
PQ: Self-pay care is simply when patients pay their providers directly for healthcare. It is an increasingly common alternative to traditional insurance, which sits between the patient and the provider.
What is behind the increase in self-pay patients?
PQ: One of the biggest drivers of patients paying cash for care is high deductible health plans. In 2020, nearly a third of covered workers (29%) were in HDHPs with deductibles of $2,000 or more, compared to just 7% in 2009. Average median ACA plan deductibles are even higher, reaching $3,375 in 2021. For these patients, it can be more affordable and easier to pay cash directly to their providers for care since many won’t meet their deductibles, and often cash prices are lower than their insurance company’s negotiated rates. Additionally, there is a new breed of self-funded employers who encourage their employees to see highquality, fixed-price providers for care, even for complex surgeries. Another driver is the growth of gig economy workers, who often don’t have traditional insurance but do have disposable income to pay for care. And finally, innovative insurtech players built on a self-pay model are driving demand. Our company, Sidecar Health, for example, offers health plans with affordable insurance premiums, market-leading coverage and the ability to see any provider, all by harnessing the efficiency of cash-pay.
What is in it for health systems?
PQ: Providers, hospitals, and health systems may be among the biggest beneficiaries of self-pay. With self-pay, providers can set the price they want for their services and collect immediately when that service is delivered. This is effectively negative revenue cycle management — collection before a bill is even sent. For example, at Sidecar Health, our members are given a Sidecar Health VISA benefit card, which allows them to instantly pay at the point of care. As a result, there are no collection headaches or waiting for payment, which your CFO will love. Self-pay patients also don’t need pre-authorizations; patients make care decisions directly with their doctor. There is less administrative burden on health systems as providers don’t need to worry about coding and billing disputes with carriers.
How should providers manage self-pay patients?
PQ: Providers can think of these patients as consumers, shopping for healthcare like they would for anything else. Studies identify price as the number one driver for self-pay patients. So, providers should price health services simply and fairly, aligning cost with quality.
Academic studies suggest that cash-pay rates average 40% lower than typical insurance-negotiated rates for the same care. Providers price this way because it reflects the lower administrative costs of dealing with these patients, and the shortened revenue cycle resulting in better cash flow.
Setting cash prices for complex procedures may require estimating components for specific care episodes. Sometimes, there may be unknowns. That’s not a deterrent for self-pay patients if providers are clear upfront about price ranges. After setting prices, providers should make sure they are easy to find by patients, and that staff are well versed in cash pricing.
Once the service is complete, collect payment as soon as possible and provide a detailed medical invoice, or superbill. This will allow the patient to receive benefits from companies like Sidecar Health, which has specific Benefit Amounts; or to later file with their HDHP if they decide to.
Are there any providers doing it especially well?
PQ: Everyone is learning. There are a number of hospitals that now provide all-in, upfront pricing for complex surgeries, which has generated incremental business and appreciative patients knowing that there won’t be surprises. We have a team focused on working with providers to develop best practices and are happy to share our learnings as well.
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